PAUL WOUTERS Counsel Bener Law Office
Uncertainty Put To An End The New “Real Estate For Foreigners” Law In Turkey
	When you were not a Turkish citizen and you planned to buy real estate in Turkey during the last 6 months, when you were a real estate developper buıilding to meet the needs of the more sophisticated, foreign investors or as a foreigner you simply got mixed up in an inheritance involving real estate in Turkey, during the last few months you got caught in administrative problems and legal uncertainty.
On July 3rd, 2003 the “old” Article 35 of the Turkish Land Registry Act (in force since 1934) was changed and the ownership of real estate by foreign people was liberalized. This initiative was part of a pro active scheme to attract more foreign investment and to boost local Turkish economy. When foreigners buy land, they erect buildings of different kinds, have them restored, install kitchens and bathrooms … This means business to local construction companies, more employment and makes the economy grow. The result was overwhelming. While during the whole 69 years of existence of the “old law” (restrictive: only natural persons could buy real estate and only inside of municipalities …) only 37.000 real estate properties were sold to foreigners (so at a rate of +/- 540 units per year), only in the two years of existence of the “new Article 35” (from the date of the approval of the amendment till the date of the annulment by the Constitutional Court) this amount reached 13.000 transfers (so at a staggering rate of 6.500 units per year). However, the new law got contested and was submitted to the Constitutional Court of the Turkish Republic. The latter decided to annul the new law on March 14th, 2005, which annulment came into force on July 26th, 2005. The Turkish Land Registry and Cadastre General Directorate then sent a Circular to the Registry (TAPU) Offices instructing them to execute the transaction of real properties by foreigners acquired before July 20, 2005 but also to suspend the registration of new acquisitions until a new regulation was set in place. Suddenly foreigners could no longer acquire real estate in Turkey. The effects were devastating. Since no agreement with respect to the transfer of property to a real estate could be registered at the TAPU-office, real estate transactions involving foreigners came to a complete standstill. Who wants to acquire (and pay for) a house when the real estate deed cannot be handed to him? For instance also all the inheritances where the inheritor of a part of some real estate was foreigner got blocked …. Real estate projects involving big amounts of money got stuck… The wealthier and better advised individuals sometimes found recourse in establishing a Turkish company that would own the real estate for them. All the other people just got frozen in their positions. Finally the Law voted on December 28, 2005 straightened that situation. Working back to July 26, 2005 roughly the following applies: • Subject to reciprocity, all foreign natural individuals can acquire real estate (or real rights thereon) in Turkey up to maximum 2.5 Ha (this limit can be majored by the Council of Ministers up to 30 Ha) • Foreign commercial companies can only acquire real estate subject to the conditions laid down in specific laws or regulations (for instance the “Petrol Act” No.6326 and Article 3/d of the “Foreign Direct Investment Law”) We remind you that – combined with the “mortgage law” (New Turkish Civil Law Art. 857/II) - it is allowed to take mortgage on such real estate when the underlying loan is granted by a (foreign or local Turkish) corporate lending institution and is landed in a foreign currency or in Turkish Lire tied to a foreign currency exchange rate. Still now, problems arisen in that period need close monitoring. I any case, get in touch with a good legal consultant and avoid set backs.