ACQUISITION OF TITLE AND OWNERSHIP RIGHTS
Turkish law recognises lands, independent and permanent rights (such as usufruct rights) perfected into the land registry records and independent units registered under the Condominium Law as real property. An individual or a legal entity may own property in the form of full ownership, co-ownership or joint ownership. The ownership may be in the nature of a freehold or easement right. Simple ownership is the most common type of ownership, followed by co-ownership and joint ownership. Co-ownership and joint ownership differ on the disposal of the share owned; a co-owner may not dispose of its share without the consent of the other co-owners unless otherwise agreed, whereas each joint owner can freely dispose of its share without the consent of the other joint owners. Freehold vests in the owner full legal and beneficial ownership of the property. It is the most extensive right over real estate under Turkish law granting the right to freely use (usus), enjoy the benefits (fructus) and dispose of the property (abusus). On the contrary, easement rights are limited in rem. Usufruct rights grant the beneficiary the right to freely use and enjoy the benefits of the property, but the beneficiary cannot dispose of the property.
TITLE TO IMMOVABLE PROPERTY
(a) Registration system
The land registry records are kept in an electronic centralised system known as the Turkish Land Registry and Cadastre Information System (TAKBIS) and in physical title books maintained by the relevant land registry directorate. Each land registry directorate is under the supervision of regional land registry group directorates which in return are under the control of the national General Directorate of Land Registry and Cadastre.
Parties to an asset transaction shall finalise the sale and transfer of ownership by executing and registering an agreed form of official deed before the relevant land registry directorate. Registration is mandatory in order to be recognised as the titleholder and enforce ownership rights. The execution of an official deed and registration thereof may not be necessary where a real property is inherited or acquired by a court order, or through adverse possession, or via execution proceedings. Due to the public nature of TAKBIS, any holder of a particular right registered therewith will have protection against third party claims, including against bona fide purchasers. Therefore, a third party may rely on the content of the land register as any establishment or transfer of a right made by a person registered in the land register as the right holder will be upheld.
(b) Acquisition by individuals (i.e. real persons)
(i) Acquisition by Turkish individuals: There is no restriction on Turkish individuals acquiring real property in Turkey.
(ii) Acquisition by non-Turkish individuals: Until 2012, non-Turkish individuals were allowed to acquire real property in Turkey only if their country of citizenship were allowing, either under an international treaty or de facto, Turkish citizens to acquire real property (i.e. on the basis of the reciprocity principle).
However, following a change in the legislation, the reciprocity principle was abolished and now citizens of those countries listed by the President may acquire real property and rights in rem in Turkey, subject to certain restrictions as explained below. Such list is quite extensive, covering almost every developed country in the world. In terms of restrictions, the President has the discretion to restrict their acquisition of real property for reasons including, among others, citizenship and location and/or because the total area that is being acquired exceeds certain limits. As a general practice, acquisition of real property by non-Turkish nationals in or nearby military zones and other security zones is not allowed. Furthermore, where a non-Turkish national has acquired an undeveloped real property, it must submit a development project within 2 years from the acquisition to the Ministry of Environment, Urbanisation and Climate Change and complete such development within the timeframe to be determined by such Ministry.
There are also some restrictions specific to the total area which individual non-Turkish nationals may acquire as follows: (a) the total area that may be acquired by foreign individuals and the total area of the rights in rem owned by the foreign individuals in a single district cannot exceed 10% of the total area of such district subject to private property (i.e. lands owned by individuals and/or legal entities and not the State 6) ; and (b) country-wide, a foreign individual cannot own more than 30 hectares of land. Prior to 2012, this limit was 2.5 hectares. The President is entitled to double such 30-hectare limit. Acquisition of real property by a non-Turkish individual may also entitle such individual to claim Turkish citizenship provided that conditions listed in section 4.5.5 (b) above are met.
(c) Acquisition by legal entities
Acquisitions by legal entities of real property in Turkey can be classified into three sub-categories:
(i) acquisition by Turkish legal entities with full local shareholding, and (ii) acquisition by Turkish legal entities with foreign shareholding, and (iii) acquisition by non-Turkish legal entities
(i) Acquisition by Turkish legal entities with full local shareholding: There is no restriction preventing Turkish legal entities with full local shareholding from acquiring the ownership of real property in Turkey. As noted under 2.1 (Domestic Legislation on Foreign Investment), an investor is required to notify the Ministry of Industry and Technology. If, as a result of a share transfer or otherwise, a foreign shareholder acquires 50% or more of the shares, or the privilege to appoint or dismiss the majority of the members of the board of directors of a Turkish company with full local shareholding, the Ministry of Industry and Technology will inform the General Directorate of Land Registry and Cadastre of such change, and subsequently, such directorate will advise the relevant governorship to evaluate whether the Turkish entity (now with foreign shareholding) can own real property in Turkey. If real property is located in or nearby military zones and other security zones, the relevant governorship may notify the company to provide additional documentation and may eventually require the company to sell such real property.
(ii) Acquisition by Turkish legal entities with foreign shareholding: The acquisition by Turkish legal entities with a foreign shareholding of real property in Turkey shall require prior written consent of the relevant governorship where the real property is located, if the foreign shareholders own 50% or more of the shares, or have the privilege to appoint or dismiss the majority of the members of the board of directors of such company. If the foreign shareholder own less than 50% of the shares or have no such privilege, no prior written consent of the relevant governorship shall be sought. Also, Turkish legal entities with foreign shareholding are not required to obtain the relevant governorship’s prior written consent to (i) perfect mortgages in their favour, (ii) acquire real property through foreclosure, (iii) acquire real property in industrial zones, technological development zones and free trade zones, and (iv) acquire/transfer the title or easement right on immovable property, as a result of a merger or demerger.
(iii) Acquisition by non-Turkish legal entities: The acquisition of real property by non-Turkish legal entities is allowed only if the purpose of such acquisition relates to petroleum exploration and extraction, touristic developments, or in industrial zones. Identical with non-Turkish individuals, a foreign company must submit a development project within 2 years from the acquisition to the Ministry of Environment, Urbanisation and Climate Change and complete such development within the timeframe to be determined by such Ministry. There is a specific restriction on foundations, associations and similar entities to acquire real property in Turkey. However, foreign legal entities may freely establish a mortgage over real property located in Turkey.
TITLE TO MOVABLE PROPERTY
There are two ways of acquiring the title to a movable property: (i) acquisition by way of taking the possession of unclaimed movable property, or (ii) acquisition by way of transfer of title. The general rule under Turkish law is that the title to a movable property shall be transferred by transfer of possession of the property. Under this general rule, in order for the title of the movable property to be transferred, parties must be in mutual agreement regarding the transfer of possession, the transferor must be entitled to transfer the property, and the transferee must take the possession with the intention of being the owner of the movable property. One exception to this rule is where the parties specifically agree that the title of a movable property passes to the transferee, but the movable property remains in the possession of the transferor. Furthermore, according to the bona fide rule set forth under the Turkish Civil Code, in case the transferor is not entitled to transfer the title of the property and it is impossible for the transferee to have access to such information, title of the movable property is deemed to have passed to the transferee. However, if the transferee could obtain such information by acting with due care, the bona fide rule does not apply.
Lease relationships are governed under the provisions of the Turkish Code of Obligations. The Turkish Code of Obligations entered into force on 1 July 2012, replacing the Repealed Code and Lease Law. Almost all major principles under the Repealed Code and the Lease Law have been maintained under the Turkish Code of Obligations, with certain differences to meet the requirements of the present day. Certain significant provisions of the Turkish Code of Obligations with respect to lease agreements for commercial have entered into force on 1 July 2020. In basic terms, those provisions relating to the transfer of the leases, return of the leased property before the expiry of the term, termination due to material reasons, contract bundling, limitation on the security deposit provided by the tenants, restriction on amending the lease agreement to the detriment of the tenants, determination of rent, indexation and restriction on rent increases, restriction to impose further obligations to tenants other than payments of rent and operational charges, and limitation on the grounds for termination. For such matters, the parties may freely agree the terms under the lease agreement. Where no such agreement exists, the provisions of the Repealed Code and Lease Law shall apply. Parties are entitled to conclude lease agreements with a fixed term or indefinite term at their own discretion. If a lease agreement is concluded for a fixed term, it shall automatically terminate following the expiry of the term. However, a fixed-term agreement may turn into an indefinite term agreement
if the tenant continues to use the leased property following the expiry of the term without having an explicit agreement by and between the tenant and the landlord. Where a residence or workplace is leased, the lease agreement shall be automatically extended for consecutive 1-year periods unless the tenant notifies the landlord of its intention to terminate the lease agreement at the end of the term with at least 15 calendar days’ prior notice. The only exception to this general rule is the landlords’ right to terminate any fixed term lease agreement after 10 years of renewals by serving the tenant with a 3 month prior written notice before the expiry of each subsequent lease term after the tenth year. There is no statutory form for lease agreements; however, it is a general practice to have written lease agreements.
The rent can be denominated in any foreign currency, if the tenant and/or landlord is a non-resident in Turkey or if the tenant is subject to the exemption stated under the Executive Order of the President amending the Decree No. 32 and its secondary legislation. However rent denominated in foreign currency cannot be increased for an initial term of 5 years. Where the rent is denominated in TRY, rent may be increased at a rate which must not exceed the producer price index for the preceding year as announced by the Turkish Statistical Institute. For any lease agreement having a term of more than 5 years, the parties may request that the rent corresponding to the sixth year of the lease is re-determined by the court, regardless of any agreement that may be concluded by and between the landlord and the tenant in this respect. In such a case, the court should take into consideration the producer price index, the condition of the leased property, the rent of similar properties and decide on such grounds.
The security deposit to be provided by tenants may not exceed the equivalent of 3 times the monthly rent for the leased property. Furthermore, if the parties agree that the security deposit will be paid in cash, then the money must be deposited into a special savings account with a bank. The parties may also agree that the security deposit will be provided in the form of securities. In such a case, the securities must be reserved in a bank. Banks may release the security only with the consent of both parties, or based on a legally effective payment order obtained in execution proceedings, or a legally effective court judgment. A lease agreement can be annotated with the records of relevant land registry directorate. Such annotation would grant the lessee a right to enforce the terms of the lease agreement against a future owner of the leased property.
RIGHTS IN REM
There are different types of rights in rem granting its holder certain benefits except for ownership rights, including but limited to:
(a) “usufruct rights” granting the right to use and benefit from the property,
(b) “occupancy rights” granting the right to reside in the property,
(c) “right of constructions” granting the right to construct a building without owning such property,
(d) “transit rights” granting the right to pass from one location to another, and
(e) “resource rights” granting the right to use, for example, water supply in an adjacent property.
A usufruct right is the most extensive right in rem as it grants the beneficiary of such right the full benefit from the property (except for ownership), whereas other rights in rem are more restricted. The creation of a right in rem is subject to registration in the records of the relevant land registry directorate. It is possible to register a usufruct right as if it is separate property, provided that (i) it is transferable to a third party without the consent of the owner of the underlying property (i.e. “independent”), and (ii) it is established for at least 30 years (i.e. “continuous”). Where there is an independent and continuous usufruct right, the beneficiary may grant security interest over such right in favor of third parties.