Real Estate Guide
Principles of ownership
Freehold (Mülkiyet) - freehold is unlimited by time and can be enforced against any third party. The freeholder may occupy the property or lease it to someone else.
Superficies Right (Üst Hakkı) - superficies right is a limited right in rem which gives to the owner, the right to construct a building over a land and maintain the legal ownership of the relevant building (but not the legal ownership of the land) during the superficies term (max. 100 years). This right can be delegated to any third party or inheritor unless otherwise agreed. The owner of such right has to pay a superficies fee to the landlord and this is usually paid annually.
Leasehold (Kira) - leasehold can be either fixed for a specific term or indefinite. The rights deriving from a lease agreement are only enforceable between the parties of such agreement. Without prior written consent of the owner, lease agreement cannot be transferred. Unless otherwise agreed between the parties, compulsory insurance or property taxes are undertaken by the owner. The lease agreement can be registered with the relevant Title Deed Registry, then the tenant’s rights over the leased property will be enforceable against third parties.
Commonhold/usufruct – Ownership in a building which is divided into flats are subject to the Condominium Law no. 635. Please refer to our explanation herein below. As for the usufruct right, please refer to our explanations set forth herein below under the section of “Utilisation Right”.
Condominium ownership (kat mülkiyeti) – Independent ownership right can be established on the individual units of a property which can be independently used such as a flat, office, shop or storehouse. Common areas are jointly owned. Rights and obligations of such ownership are set forth under the Condominium Law no. 635.
Utilisation right – (intifa hakkı) According to article 795 of the Turkish Civil Code, utilisation right (right of usufruct) can be established on a property by registration in the Title Deed Registry.
Rights of Residence (sükna hakkı) - According to article 823 of Turkish Civil Code; right of residence gives the right to utilise from the property or particular part of the property. This right cannot be transferred to any third party or inheritor.
According to article 688 of the Turkish Civil Code, joint ownership is a type of ownership where a property, which is not physically divided into parts, is jointly owned by more than one person. Unless otherwise agreed, shares of ownership are considered to be equal. Shares can be transferred and pledged.
According to article 701 of the Turkish Civil Code, co-ownership is a type of ownership where a property is owned by a group formed by law or an agreement. Co-owners do not have shares in the property but instead each owner holds the ownership rights for all the properties subject to co-ownership. Accordingly, co-owners should unanimously resolve on the issues regarding the administration and disposition of the property unless otherwise stipulated in the law or agreement.
Registration - registration with the Title Deed Registry is compulsory to acquire the ownership of a property. In addition, the limited rights in rem must also be registered with the Title Deed Registry.
Restrictions on foreign ownership
Restrictions on the acquisition of a property and/or limited rights in rem by foreign individuals and/or foreign corporations established outside of Turkey are set forth under Article 35 and 36 of the Title Deed Law no. 2644 (“Title Deed Law”). Accordingly, the restrictions on the subject matter are as follows:
- Foreign Real Person;
According to article 35 of the Title Deed Law, foreign real persons can acquire property and/or limited rights in rem in Turkey provided that there is reciprocity between Turkey and the country of purchaser. The total square of the real property and superficies owned by a foreign real person cannot exceed (i) 10% of the district where the real property is located at and (ii) 30 hectare per person country wide.
- Foreign Companies;
According to article 35 of the Title Deed Law, foreign companies can acquire real property and limited rights in rem only within the scope of special laws such as Petroleum Law or Tourism Promotion Law. Foreign companies whose activities do not fall under such special laws cannot acquire real property or limited rights in rem.
- Foreign Capital Turkish Companies;
According to article 36 of the Title Deed Law, the companies established in Turkey whose (i) 50% or more of the shares are held by foreign real persons, foreign companies and international organizations or (ii) directors can be appointed or dismissed by the same can acquire property or limited rights in rem in order to carry out the business activities set forth in the articles of association of the company. The consent of the Governor’s Office should be obtained.
Title to real estate
Investigation of title - The records in the Title Deed Registry can be reviewed upon request. Therefore all the information registered with the relevant Title Deed Registry regarding a property will be deemed to be in the knowledge of buyer.
Transfer of title - In order to transfer a real property a deed of conveyance should be prepared and executed by the relevant parties before the Title Deed Registry.
Registration - Registration with the Title Deed Registry is compulsory to acquire the ownership of a property. In addition, the limited rights in rem must also be registered with the relevant Title Deed Registry.
The Title Deed Registry is open to public; however, it is required to have a benefit in order to conduct a research regarding a specific property. The Title Deed Registry keeps records in relation to the following information;
- (a) the owner of the property,
- (b) the qualifications of the property (location, size, plot no, parcel no etc.),
- (c) kind and purpose of the ownership,
- (d) acquisition details, and
- (e) encumbrances (eg mortgages, easement rights) over the property, if any.
Commercial leases - please refer our explanations below.
Structure of a real estate transaction
Negotiation of terms/Agreement:
The structure of property transactions is as described below:
- Deed of Conveyance: As explained above, a deed of conveyance should be signed before the relevant Title Deed Registry in order to transfer the ownership of a real property. Other than the Deed of Conveyance, the parties are not required to execute any other agreement for the sale of a real property.
- Property Transfer Commitment Agreement: In case the parties intend to execute an agreement in advance in order to commit the sale of a property which will take place in the future, a property transfer commitment agreement must be executed before a notary public. Property transfer commitment agreements which are not signed before Notary Publics are null and void.
Heads of terms – Heads of terms can be agreed in the property transfer commitment agreements, and these would be binding on the parties.
Investigation of title – please refer our explanation herein above under the section of “Title to Property”.
Purchase deed – Please refer to our explanation herein above under the section of “Deed of Conveyance”.
Contracts – please refer our explanation herein above under the property transfer commitment agreements.
Completion/closing - When the transfer of ownership is registered with the relevant Title Deed Registry, the sale transaction will be completed.
Post completion – There is no post completion requirement in connection with the sale of property apart from certain taxes that may have to be declared and paid by the parties.
Leases - the term of a lease agreement can be freely specified by the parties. Pursuant to the Code of Obligation no. 6098 the lease agreement in general terms can be terminated (i) at the end of the term of the lease agreement; (ii) due to the noncompliance with the lease agreement; (iii) by a termination notice if the lease agreement is indefinite in time; (iv) by a termination notice in case of the occurrence of a major condition; or (v) due to the tenant’s death and (vi) bankruptcy of the tenant.
Language requirement – The language of the agreements executed by Turkish companies should be Turkish. The lease agreement between two Turkish companies can be signed in dual language, English and Turkish. Even if the agreements are executed bilingual, Turkish version shall prevail in the event of a dispute before the Turkish courts and official authorities.
Governance of lease signature/administration – There is no administrative process to be followed in terms of signing leases. Lease documents should be signed by the authorized personnel of the parties.
Usual commercial lease terms
Summary of available lease types - Lease agreements can be executed either for a definite or indefinite period.
Alterations/modifications - alterations are usually permitted with the landlord's consent. Often no consent is required for the installation or relocation of internal removable partitioning.
Assignment and sub/under letting - Tenants can assign or sub-lease the lease agreement by reaching a mutual agreement with the landlord in this regard.
Destruction/reinstatement - reinstatement is not obligatory; however, it is possible to agree on such terms in the relevant lease agreement. It is common in Turkey to insert clauses to this effect in the lease agreements.
Duration of lease - the term of a lease agreement can be freely specified by the parties. Pursuant to the Code of Obligations no. 6098, (i) lease agreements with definite term can be terminated without cause by tenants by delivering a written notification to the landlord 15 days before the end of the lease term, and by landlords upon the completion of ten years period from the commencement of lease agreement by delivering a written notification three months in advance before the end of each extension year; (ii) lease agreements with indefinite term can be terminated by tenants at any time and by landlords after ten years from the commencement of the lease agreement by delivering a written notification three months in advance in accordance with the general provisions of the Code of Obligations; or (iii) lease agreements can be terminated by landlords by filing a law suit if there is a valid reason for the termination of the lease agreement.
Forfeiture/irritancy - not applicable.
Insurance - pursuant to the Law on Catastrophe Insurance no. 6305, the landlords or the owners of usufruct rights (intifa hakki) must maintain the compulsory earthquake insurance for the residential buildings and flats subject to the Property Law and renew this insurance annually.
Rent review - rent and payment terms are determined by the parties and generally reviewed annually. The rent amount can be set in a foreign currency.
Repair/decoration/furnishing - the tenant is responsible for daily repairs and maintenance of the interior. Fundamental repairs are carried out by the landlord.
Service charge - pursuant to common practice, service charges (eg utility bills) are borne by the tenant; although the parties may agree otherwise under the lease agreement.
Tenant’s duties – Tenants must (i) use the leased property in compliance with the provisions of lease agreement, (ii) be attentive to the leased property and respect the neighbours, (iii) endure the repair in the leased property or the measures taken for preventing damages, and (iii) permit third parties to visit the leased property for the sale, repair and next rental when necessary.
Termination/break clauses - if the tenant does not inform the landlord that he/she will evacuate the leased property, 15 days prior to the end of the lease term; the lease agreement will be renewed automatically for one year. The lease agreement can only be terminated pursuant to the conditions set out above under the heading “Term of a commercial lease”.
Increasing covenant strength
Lease deposit - a deposit clause may be included in the contract. A common form of deposit is a sum equal to one month’s rent paid to the landlord.
This is usually released to the tenant after the property is vacated without any damage.
Surety - the landlord may require a surety as a security in addition to a rent deposit.
Warranty – Certain warranties such as the condition of the property may be incorporated into the rent agreements.
Rent deposit/bank guarantee - the common practice is a sum equal to one to three months’ rent is paid to the landlord as a deposit. The rent deposit is usually released to the tenant after vacating the property without any damage. The common practice for the commercial lease agreements is to provide a bank guarantee in favour of the landlord instead of providing rent deposit in cash.
Security of tenure
If the tenant does not inform the landlord that he/she will evacuate the leased property, 15 days prior to the end of the lease term; the lease agreement will be renewed automatically for one year.
On sale/acquisition of property - tax payments concerning the property shall depend on the nature of the parties.
Immovable property tax - see our explanations set forth below under the title of “Land Tax”
Income tax – If both the landlord and tenant are real person and the lease property is used for residential purposes then the landlord is required to pay income tax for the rental.
Land tax –According to article 12 of the Property Tax Law numbered 1319, the land and plots located in Turkey are subject to land tax. This is to be paid by the landlord.
Lease tax - if the tenant is leasing the property for business purposes and the landlord is a real person, withholding tax will apply and this should be paid to the tax office by the tenant.
Local tax - not applicable.
Mortgage – mortgage can be placed on a property in order to secure the payment of a debt. A mortgage can be provided for an amount to be labelled either in Turkish Liras or in foreign currency.
Other taxes - According to article 302 of the Code of Obligations no. 6098, the landlord is obliged to pay the taxes and charges in relation to the leased property (including without limitation the property tax). However, there are also certain taxes (eg environment tax) which needs to be paid by the tenant.
If the landlord is an entity, regardless of whether the tenant is a real or legal person, VAT will be applicable which will be paid by the tenant to the landlord.
Property lease tax - while the landlord is responsible for property tax, all other taxes (eg environment tax), are the responsibility of the tenant, although parties may change the responsibilities by contract.
Value added tax - if the landlord is a commercial company or if both parties are commercial companies, the landlord is obliged to issue an invoice in consideration of the payment. This invoice shall include a VAT charge which shall be paid by the tenant to the landlord.
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