New land registry law to facilitate foreign property ownership

January 29, 2012, Sunday/ 12:34:00

The details of the bill on land registry and cadaster, which has been presented to the presidency of the Turkish Parliament, have started to become clear.

Companies in which foreign investors own shares will no longer be subject to complex bureaucracy if the draft, which will also change the current reciprocity system, is enacted.

An official from the Environment and Urbanization Ministry who took part in the drafting process said: “The bill defines separate procedures for the possession of real estate by three groups; foreign people, foreign companies and companies that are wholly or partly owned by foreign investors. The position for foreign people and foreign companies was not clear; now their rights to own property are being clarified, as is the position of Turkish companies with foreign investors. The draft is introducing important exemptions that will facilitate property ownership for companies with foreign investors, including mortgage exemptions, exemption for immovable assets that were acquired in the course of merger and demerger and exemption for immovable assets that were put up for sale. Also, wasting time on unnecessary procedures will be avoided.”

Under existing regulations it isn’t clear whether a company should be classified as local or foreign and therefore which legal procedures they are subject to. In cases where a foreign company has bought shares in a Turkish company, or a foreigner has even a 1 percent share in the company, there are likely to be changes in the procedures the company should follow. Now, if 51 percent of a company’s administrative body consists of foreigners, it is defined as a “foreign company.” Companies in which the shares of foreign partners don’t exceed 50 percent are categorized as “foreign-capitalized companies,” meaning “foreign-capitalized” companies are treated differently from foreign companies. With this new regulation the companies that are funded by foreign capital are no longer dealt with under the procedures of the 36th Article of the Land Registry Law, which regulates the position of foreign investors in Turkey.

Whether or not a company is subject to the 36th Article will be established on a certificate of authorization issued while the company is going through the registration process.

The new bill will also facilitate foreign investment in Turkey. The article that reduces the quantity of land a foreigner can own from 30 hectares to two-and-a-half hectares will be changed to restore the 30-hectare limit. If the Environment and Urbanization Ministry and the Finance Ministry can come to an agreement with the Ministry of Foreign Affairs, it will be enough to work around the principle of reciprocity. In other words, the citizens of countries that limit Turkish citizens living in those countries in terms of buying real estate will be able to own immovable property in Turkey.

Foreign companies seeking to purchase more than 30 hectares of land will be permitted to own up to 60 hectares. However, this increase will be conditional on their beginning their relevant project within two years. If a foreign company fails to begin its project within this two-year period, the real estate they have purchased will be expropriated.

Bilateral relations will be a determining factor in the decision as to which countries will be listed among those for which the three ministries will bypass the reciprocity principle. In other words, it will be possible for a country granted this privilege to later be excluded from the list if serious problems in relations arise. However, even if a country is later excluded from this list, the rights of its citizens who obtained real estate in Turkey before the exclusion will be protected.

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