INTRODUCTION
Considering the acquisition of premises in Turkey by foreigners, Turkish laws had provided strict conditions and procedures until 2012. But with the amendments brought to Article 35 of the Deed Code numbered 2644, the conditions have been softened and in the last five years, and the amount of acquisition by foreigners have increased accordingly.
Pursuant to Article 35 of the Deed Code, reciprocity between the country which the acquirer is a national of and Turkey is not required. Therefore, even if a Turkish national cannot acquire premises in a country, a national of such country may be able to acquire premises in Turkey. However, the countries are determined by the Council of Ministers and the current list is not accessible for the common use due to confidentiality; but it is known in the public that citizens of 183 countries are permitted for acquisition of premises.
Besides the specific cases regulated under separate rules, which need careful counseling from attorneys, the acquirers regarding this topic can be grouped into three categories:
- Foreign natural persons
- Foreign corporations established duly with the laws of their own country
- Corporations established in Turkey and owned and/or controlled by foreigners
GENERAL RULES
Before explaining the rules regarding foreign corporations and corporations with foreign capital, we will examine the general rules which will be applied for all three of the aforementioned acquirer categories for acquisitions through sales and purchase, donation, inheritance and other means.
Firstly, total area of the acquirer’s premises and limited property rights, shall not exceed 30 hectares in Turkey; and the area of the specific premise or rights shall not exceed %10 of the land area of the province in which it is located. This limitation is only applied to premises and limited property rights, but not applied to hypothecs established in favor of foreign natural persons or corporations.
Another group of limitations is named collectively as “other legal limitations” which includes (i) the limitations with regard to the prohibited military zones and security zones, (ii) special regulations in connection with private education institutions and (iii) limitations applied to the nationals of the countries that are subject to retaliation in kind under the Code numbered 1062.
- The most significant legal limitation for the subject is the prohibited military zones and security zones which is regulated under Code of Military Forbidden Zones and Security Zones numbered 2565. According to the said regulation, it is prohibited for the foreigners to acquire premises in military zones and therefore an application has to be made to the official authorities in order to obtain permission. This procedure may take 2-3 months depending on the circumstances.
- Second limitation is concerned with the private education institutions with foreign elements. There are three categories of foreign private education institutions; (i) private international education institutions, (ii) foreign schools, (iii) schools of minorities. Procedures for acquisition of premises by these three categories are regulated under the Private Education Institutions Code numbered 5580 and include obtaining permissions several public authorities.
- Pursuant to the Code numbered 1062, the Cabinet may bring limitations against the nationals of the countries which adopt laws limiting Turkish nationals’ property rights. And the limitations and measures pursuant to this Code shall be adopted as a counter measure and retaliation in kind. Being a national of one of these countries is a direct reason for rejection of acquisition.
The premise acquired by a foreigner may be or may have a building or a structure on it; but in other cases where the premise is an uncultivated and plain land, the acquirer shall construct a project on the land. In that case, the acquirer shall make an application before the respective Ministry with the project within two (2) years and the Ministry provides a permission including the beginning and ending dates of the project.
ACQUISITION BY FOREIGN CORPORATIONS
Foreign commercial corporations established duly with the laws of their own country, may acquire premises only according to special laws which permit this acquisition. Currently, there are three codes permitting this situation: (i) Turkish Petroleum Code numbered 6491, (ii) Code of Tourism Incentives numbered 2634 and (iii) Industrial Regions Code numbered 4737. This limitation is not applied for the hypothecs established in favor of the foreign commercial corporations.
Other legal entities such as foundations, associations, cooperatives, guilds, etc. shall not acquire any sort of premise or limited property rights and hypothecs in favor of them cannot be established.
TURKISH CORPORATIONS WITH FOREIGN CAPITAL
The term “Turkish Corporations with Foreign Capital” refers to the commercial corporations with legal personality, which (i) more than fifty percent of its shares are owned by foreign natural persons, foreign corporations or international organizations, or (ii) which the majority of the members of its executive board are appointed and relieved by foreign natural persons, foreign corporations or international organizations. The limitations explained below are only applied to the corporations explained in this paragraph; in case Turkish corporations with foreign capital do not meet the aforementioned criteria, no limitation will be applied for the acquisition of premises.
The main limitation applied to the Turkish Corporations with Foreign Capital is that they can only acquire premises and limited property rights for the purposes stated in their respective Articles of Association. But the following aspects are excluded from this limitation:
- Establishing hypothec,
- Acquisitions of property with respect to liquidation of hypothecs and acquisition by banks with respect to collection of receivables under the special regulation of Banking Code numbered 5411
- Transfer of property on premises and limited property rights resulting from company mergers and divisions
- Acquisitions of property on premises and limited property rights in the special investment zones such as industrial zones, technology development zones and free zones.
NON-COMPLIANCE WITH THE LIMITATIONS
In case of non-compliance with the rules explained above, the main procedure to be applied is the liquidation of the premises or limited property rights. Upon the determination of non-compliance, the Ministry of Finance provides a peremptory term up to one year, in order for the proprietor to liquidate the premise or limited property right. If the proprietor does not complete the liquidation procedure, the Ministry of Finance shall execute and finalize the liquidation and a respective payment has to be done to the proprietor.