• It is the spirit and not the form of law that keeps justice alive.
    Earl Warren

ACQUISITION OF REAL ESTATE BY FOREIGN LEGAL ENTITIES and TURKISH COMPANIES WITH FOREIGN CAPITAL

There are two alternatives regarding the acquisition of real estate by foreigners in Turkey, namely (a) direct investment and (b) indirect investment. Evaluations of the two different alternatives stated above are as follows:

(A) Direct Investment

Direct investment refers to the acquisition of real estate directly by a foreign real person or legal entity, without incorporating a Turkish entity.

Foreign legal entities incorporated in foreign countries in compliance with the laws of their respective jurisdictions with legal personality may directly acquire real estate and limited rights in rem in Turkey only within the framework of the provisions of special laws namely the Tourism Incentive Law, Petroleum Law and Industrial Zones Law. This implies that unless a specific Turkish law allows corporate legal entities to acquire real estate in Turkey, then such company will not be able to undertake such acquisition.

The above mentioned restrictions do not apply for establishing mortgages over an immovable in Turkey in favor of foreign legal entities with legal personality incorporated abroad in accordance with the laws of their countries. On the other hand, in case of establishing mortgages with foreign currency, such foreign legal entity is required to be a bank or credit institution and it must also be documented that such mortgages shall be established as security for a loan.

(B) Indirect Investment

The indirect investment option consists of the incorporation of a company in Turkey with foreign capital (such company to be referred to as the “Turkish Company”), in which case, such Turkish Company then acquires the desired real estate. Since the shareholders of the Turkish Company will not be directly acquiring the real estate, but will indirectly benefit from it through the title held by the Turkish Company, this option is referred to as the “indirect” investment option.

Legal entities incorporated in Turkey, fifty percent or more shares of which are possessed by international institutions, or the right to assign and release the majority of the persons with management rights therein have been granted to international institutions, may acquire and use immovable property or limited rights in rem in order to conduct the activities specified under their articles of associations. The same principles shall be valid in case those companies specified above directly or indirectly participate in other companies established in Turkey

Real estate acquisitions by Turkish Companies within prohibited military zones, military security zones and regions specified under the relevant Turkish legislation, are subject to the approval of the Turkish General Staff or the commanderships authorized by the Turkish General Staff, while real estate acquisitions by Turkish Companies within special security zones are subject to the approval of the governorship of the province in which such immovable is located.

Real estate and limited rights in rem acquired or utilized in a way that is contrary to foreign origin limitation explained above will result in the owner having to dispose of the real estate or the limited rights in rem within 6 months. This period may be extended for an additional 6 months provided that a valid reason is presented. Should the owner fail to dispose of the real estate or limited rights in rem within the given time period, the Ministry of Finance will proceed with the disposition and will deposit all proceeds into a bank account opened in the name of the owners.

Practice Areas:
#Real Estate Law
Other Articles