The previous article, Real Estate Acquisition, tackled the two essential questions, namely (I) what qualifications foreign real and legal persons must have in order to acquire real estate in Turkey, and (II) to what extent real properties are allowed to be acquired by foreign real and legal persons.
This article aims to provide an outlook on the steps to be taken before and during the title transfer process, including the necessary documentation, fees and taxes. The article particularly covers the title transfers where the buyer is a foreign individual or a foreign-invested Turkish company.
Initial Stage: Preliminary Approval
The prospective seller and the buyer are required to file an application to obtain approval prior to the actual title transfer. Basically, it is an evaluation of the buyer and the real estate by administrative authorities that determines whether the buyer qualifies for the acquisition and the real estate is eligible for the transfer.
Title Transfers to Foreign Individual Buyers
Where the buyer is a foreign real person, the application will be made directly to the land registry office. The application file should include a number of documents to be provided both by the seller and the buyer. In this regard,
A. The seller should provide the following documents;
► Title deed copy (or information regarding the village/district, map section/parcel, plot and independent section),
► Real Estate Value Statement obtained from the municipality,
► Tax Clearance Certificate obtained from the municipality, and
► Earthquake Insurance Policy (a.k.a. the DASK Certificate) in case the real estate is not a land but part of a building (e.g. a residence, office etc.).
If the seller is an individual;
► 1 Photo of the seller (4 x 6 cm), and
► ID Document (e.g. ID Card, passport etc.).
If the seller is a commercial company;
► Certificate of Authority obtained from the trade registry office,
► Tax Registration Certificate,
► Company Seal,
► Signature Circular, and
► ID Document of the authorised signatory.
B. The foreign buyer should provide the following documents;
► Tax ID, and
► 2 Photos (4 x 6 cm).
In cases where the parties are represented by agents such as realtors, lawyers, company staff or other third persons, the agent has to submit a Power of Attorney drawn up and attested in the form required by law.
Upon filing of the application, the land registry office will initially check whether;
a. the buyer is a citizen of a banned or restricted country,
b. the buyer has exhausted the personal acquisition limit (i.e. 30 hectares), and
c. the district has exhausted the limit of acquisition by foreigners (i.e. 10% of the private properties located in the concerning district).
If no impediment is detected, the land registry office further corresponds with the concerning army commandership to ascertain whether the location of the real estate in question falls within a military forbidden zone, military security zone, or a strategic zone.
In this frame, the land registry office sends the army commandership a copy of the cadastral map showing the exact spot where the real estate is located. Parties are required to pay a service fee for the issuance of such map.
If the army commandership returns a favourable reply, the land registry office grants preliminary approval for the transfer thereby allocates an appointment for the actual title transfer. Otherwise, the parties’ application for title transfer will be rejected.
The grant of preliminary approval may take up to 2 months due to the correspondence process between the land registry office and the army commandership.
However, the army commandership makes an assessment not for the specific real estate but for the map section/parcel within which the real estate lies. Moreover, once a positive assessment is given by the army commandership for a map section/parcel, the land registry office makes no more inquiries concerning any real estate that lies within that map section/parcel.
That is to say, the correspondence process will not be carried out if a positive assessment for the concerning map section/parcel has been previously received by the land registry office. In such case, the grant of preliminary approval takes no more than a couple of days.
Title Transfers to Foreign-invested Turkish Companies
Where the buyer is a Turkish company in which foreign investors hold not less than 50% of the outstanding shares, or have the power to appoint or remove the majority of persons in the management body, the initial application will be made to the concerning governorate by the buyer alone.
The application file should include the following documents;
► Letter of Application,
► A copy of the title deed (or an abstract of title obtained from the land registry office),
► Cadastral map showing the geographical coordinates,
► Letter of undertaking stating that the real estate will be acquired and used in accordance with the scope of activities and objectives stipulated in the AoA of the company,
► Certificate of Authority obtained from the trade registry office,
► Signature Circular,
► AoA of the company,
► Certificate regarding current foreign shareholders;
• obtained from the trade registry office if the company is privately-held, and
• obtained from the Central Securities Depository (Merkezi Kayıt Kuruluşu, MKK) if the company is stock-listed.
Following the lodgement of application file, the governorate corresponds with the concerning army commandership to ascertain whether the location of the real estate in question falls within a military forbidden zone, military security zone, or a strategic zone. If the army commandership returns a favourable reply or remains silent for a certain period, the governorate grants the approval for the projected transfer.
However, if the army commandership returns an unfavourable response, the governorate further requests from the army commandership to make an assessment on whether the acquisition would pose a threat in terms of national security. If the army commandership returns a favourable assessment or remains silent for a certain period, the governorate grants the approval for the projected transfer.
The exact process is simultaneously carried out between the governorate and the provincial police or gendarmerie department in terms of determining whether the real estate falls within a special security zone.
In case the governorate declines the application for any reason whatsoever, the applicant company may appeal against the decision on higher administrative levels and take the matter to the court as a last resort.
The grant of preliminary approval may take up to 2 months due to the correspondence process.
Following the completion of above examinations, the governorate notifies the company and the land registry office of its approval for the transfer. The approval is valid for 6 months. Hence, the seller and the buyer must apply to the land registry for execution of the title transfer within 6 months following the receipt of approval; otherwise the approval will be null and void.
Final Stage: Actual Title Transfer
Once the preliminary approval process is done, the buyer and the seller will be able to make the title transfer.
The parties or their representatives must be present at the land registry office for execution of the transaction. The land registry officer in charge draws up the transfer deed in the official form required by law. Meanwhile the parties are directed to pay the transfer tax and the service fee as calculated by the officer.
Following the payment, the parties are allowed to read the transfer deed in the presence of the land registrar. If the foreign party does not speak Turkish, a certified translator must also be present to verbally translate the content of the deed. The parties are then asked whether the terms of the deed are in accordance with their will. If both responses are in the affirmative, the buyer and the seller can put their signatures on the transfer deed. After completion of the transaction, the title deed is drawn up in the name of the new owner.
Taxes and Fees
Parties are required to pay transfer tax at a rate of 4 percent of the real sale value. The transfer tax is calculated and charged upon the verbal declaration of the purchase price by the parties. The declared purchase price cannot be less than the amount stated in the real estate value statement which is obtained from the municipality.
The transfer tax is paid to the concerning tax office. In principal, the seller and the buyer are required to share the tax burden equally. In practice, however, the buyer usually bears the entire burden.
The service fee is paid to the land registry office in return for the execution of transaction and registration services. The current service fee is 116.10 TRY.(1) However, this fee is multiplied by a coefficient between 0.5 and 2.5 depending on the location of the real estate. Therefore, the minimum service fee would be 58.05 TRY whereas the maximum charge would be 290.25 TRY.
Parties can negotiate on who will pay the service fee. However, in practice, the fee is usually paid by the buyer.
(1) Effective for the period between 01 January 2018 and 31 December 2018.