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TURKEY PROPERTY BUYING GUIDE

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TURKEY PROPERTY BUYING GUIDE Powered By Docstoc
					                                         Turyap Head Office
                                         Dulkadiroğulları Sok No 4
       TURKEY                            34345 Arnavutköy İstanbul
                                         Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                    Fax: ++90 212 257 4072
                                         international@turyap.com.tr
                                         http://www.turyap.com.tr
                        Turyap is an independent member of




                            The following information
                            is intended to guide you
                            through the process of
                            buying a property in
                            Turkey and to give you an
                            indication towards the
                            obligations of overseas
                            home ownership.


                            Buying property in Turkey
                            is not as complicated as
                            you might imagine. The
                            procedure is often far
                            simpler than in most other
                            European countries. The
                            main difference is the
                            requirement to obtain
                            permission from the
                            military to purchase the
                            property prior to
                            completion, as non-
                            nationals are only
                            permitted to buy within a
                            designated town area.




                                                                       1
                                                                      Turyap Head Office
                                                                      Dulkadiroğulları Sok No 4
       TURKEY                                                         34345 Arnavutköy İstanbul
                                                                      Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                                                 Fax: ++90 212 257 4072
                                                                      international@turyap.com.tr
                                                                      http://www.turyap.com.tr
                                                     Turyap is an independent member of


ELIGIBILTY TO OWNING A PROPERTY IN TURKEY

The Constitution; the relevant provisions of the Civil Code; the Title Deeds Act; the
Foreign Direct Investment Law and the relevant legislation form the legal framework
establish an equal property-ownership right both for Turkish citizens and foreign owners
as long as they meet the condition of being reciprocal and comply with legal restrictions.

In implementation of the reciprocity principle, it is essential that real estate acquisition
rights given by a foreign country to its own citizens and to commercial companies
established in foreign countries according to the laws of these countries are also given to
the citizens and commercial companies of the Republic of Turkey.

According to the law on “property purchase by foreigners in Turkey” enacted on January
7, 2006,
   - Foreign nationals (real persons) are able to acquire real estate in Turkey on the
      conditions of being reciprocal and complying with legal restrictions.
   - Foreign commercial companies having legal personality established in foreign
      countries according to the laws of those countries are able to acquire real estate in
      Turkey on the conditions of being reciprocal and complying with legal restrictions.
      However, those companies which are legal entities can buy property provided that
      they operate pursuant to the special laws such as the Tourism Encouragement
      Law, the Oil/Petroleum Law, the Industrial Zones Law etc. In addition, foreign
      legal entities other than the above mentioned commercial companies, such as
      foreign charities, foreign foundations and foreign societies, etc. cannot buy
      property in Turkey.
   - Companies can freely acquire real estate or limited rights in rem through a legal
      entity established or participated in Turkey by foreign investors (FDI companies)
      provided that such acquisitions are permitted for Turkish citizens.

There are some restrictions in locations and the size of the property in question. Foreign
nationals and foreign commercial companies are not allowed to buy property
   - in the military, strategic and security zones of Turkey. For instance the real
      estates located within province boundaries of Hatay and Canakkale; also the ones
      in Gokceada and Bozcaada cannot be sold to foreigners by law.
   - in the lands which are strategically very important in terms of energy, agriculture,
      mining, history, cultural values, biological flora, and national security that is
      determined by the Council of Ministers as specific zone to be preserved.
   - as land exceeding 25 hectares. In case the total area of all lands a foreigner owns
      in Turkey exceed 2.5 hectares then the Council of Ministers’ approval is needed.
      The current Law allows the Council of Ministers to increase this threshold to 30
      hectares.




                                                                                                    2
                                                                   Turyap Head Office
                                                                   Dulkadiroğulları Sok No 4
       TURKEY                                                      34345 Arnavutköy İstanbul
                                                                   Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                                              Fax: ++90 212 257 4072
                                                                   international@turyap.com.tr
                                                                   http://www.turyap.com.tr
                                                  Turyap is an independent member of


  -   as more than 0.5% of the total area of the whole province. The maximum size of
      all lands owned by a foreigner in a province shall be capped by the Council of
      Ministers and this cap should be less than 0.5% of the total area coverage of the
      whole province.

In general, foreigners may purchase freehold land and property in Turkey in their own
names provided that:
   • Their country has reciprocal agreements regarding property purchase with Turkey.
     (All countries within the EU have this agreement.)
   • The intended property is outside the designated Military Zones
   • Purchasers are found to have clean record after Military Security Investigation.
     You should not have any criminal record or a background in working for
     intelligence.




                                                                                                 3
                                                                       Turyap Head Office
                                                                       Dulkadiroğulları Sok No 4
       TURKEY                                                          34345 Arnavutköy İstanbul
                                                                       Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                                                  Fax: ++90 212 257 4072
                                                                       international@turyap.com.tr
                                                                       http://www.turyap.com.tr
                                                      Turyap is an independent member of


APPOINTING A SOLICITOR AND A REPRESENTATIVE

It is not compulsory to hire a solicitor; however there are lots of transactions whilst
buying a property in Turkey and some important steps are best attended via solicitors.
Although all TURYAP’s real estate is thoroughly investigated and verified with all
developers' backgrounds checked, with contracts reviewed before they are offered to the
market, we still advise our clients to consult a solicitor who can provide independent
legal and financial advice about all issues of the buying process. Registered and
authorised solicitors are professionals privileged to gather all information and undertake
enquiries as well as performing checks to secure your rights.

The solicitors ensure that the title of the property is checked; that the person who is
selling the property actually owns it; whether there is any charge on the property;
where applicable all building licences and permissions are in order; and the terms and
conditions stipulated by the vendor are checked for fairness. Upon request we can
recommend reputable English-speaking solicitors in Turkey. A sworn-translator can also
be arranged for sales contract translations.

Knowing that all the steps involved in buying can be a daunting DIY experience, it is
only reasonable that you prefer to appoint a solicitor. All necessary transactions can be
dealt with by means of a legal document called "Power of Attorney" which can be done
in the presence of a Notary-Public, clearly defining under what conditions and the period
a Power of Attorney shall be in force for.

You may cancel the Power of Attorney at any time. In that case, you should send a
written notice to your Agent and say that you are revoking the Power of Attorney. You
should also notify your bank or other financial institutions where your Agent is likely to
use the Power of Attorney that it is no longer valid.

It’s not needed to be in Turkey for you to prepare a Power of Attorney. You can have it
prepared in your home country. In that case, please make sure that it is legalized so
that it can be a valid document in Turkey. Legalization simply means confirming that a
signature, seal or stamp appearing on a document is genuine.

The signatures or seals of public officials such as solicitors, notaries public, registrars on
certain documents have to be confirmed before those documents can be accepted in
Turkey. Many types of documents can be apostilled by your country’s Ministry of Foreign
Affairs offices.




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                                                                           Turyap Head Office
                                                                           Dulkadiroğulları Sok No 4
       TURKEY                                                              34345 Arnavutköy İstanbul
                                                                           Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                                                      Fax: ++90 212 257 4072
                                                                           international@turyap.com.tr
                                                                           http://www.turyap.com.tr
                                                          Turyap is an independent member of


THE CONTRACT

Once the sale and purchase conditions are agreed with the owner, TURYAP provides you a copy of
the TAPU (Turkish Title Deeds) and make sure whether:

   -   The TAPU really belongs to the property you are interested in,
   -   It is a residential or commercial property in a zone covered by an Implementary Development
       Plan or a Local Development Plan,
   -   The property really belongs to the person who introduced himself to you as the owner,
   -   A joint ownership is in question,
   -   No annotation prohibiting the sale/purchase of the property appears on the TAPU,
   -   The Implementary Development Plan or the Local Development Plan allows you to erect a
       building on the land,
   -   The building complies with all regulations such as earthquake-proof standards,
   -   The current owner owes no over-due taxes to the Tax Office and no over-due debts to the
       utility companies,
   -   A binding contract with a tenant using the property is in question.

A private purchase contract is then drawn up between the buyer and the seller. To take
the intended asset off the market for up to 20 days, a negotiable non-refundable
reservation fee, which is generally 1-2% is paid to the seller.

The contract should contain all details and conditions related to building specifications,
the estimated time of completion, the milestones (if off-plan), terms and conditions for
payment and the responsibilities of both parties. During this period (while the property is
reserved for 20 days) you can start preparing financial arrangements and checking-over
the contract with your solicitor. This Contract Agreement is binding under the Turkish
Law and apart from agreeing parties should also be signed by the solicitor and a legal
translator (where applicable). Once signed, two copies of the contract are to be made in
both Turkish and English for both parties to keep. When the contract includes a “price”
clause, each party will need to pay a Stamp Duty equivalent of 0.75% of the stated
value.

You are strongly advised to sign both the English and Turkish versions of the contract in
the presence of a Notary Public and then have them notarised. This will ensure that:

   •   The people signing the contract and their signatures are genuine,
   •   The contract is in line with Turkish laws and officially acceptable anywhere in
       Turkey,
   •   The terms within the contract are binding for all parties.
   •   Constraints- existence of pre-emption rights or restrictive covenants, or debts over
       the property are recorded.


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                                                                     Turyap Head Office
                                                                     Dulkadiroğulları Sok No 4
       TURKEY                                                        34345 Arnavutköy İstanbul
                                                                     Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                                                Fax: ++90 212 257 4072
                                                                     international@turyap.com.tr
                                                                     http://www.turyap.com.tr
                                                    Turyap is an independent member of




Although these contracts are not compulsory according to current regulations and
mutual declaration of both the buyer and seller to the TAPU (Title Deeds) Registry Office
is enough to carry out the transfer of ownership, having a robust sales & acquisition
contract will allow you to protect yourself from certain potential risks.

To activate the contract and take the property off the market as sold, you will need to
sign the contract and pay a deposit, which is negotiable between the seller and yourself.
Real estate purchase deposits are averaged at 5 to 10% of the selling price. In some
situations interim payments may be required.




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                                                                            Turyap Head Office
                                                                            Dulkadiroğulları Sok No 4
        TURKEY                                                              34345 Arnavutköy İstanbul
                                                                            Tel: ++90 212 257 1333
 PROPERTY BUYING GUIDE                                                      Fax: ++90 212 257 4072
                                                                            international@turyap.com.tr
                                                                            http://www.turyap.com.tr
                                                           Turyap is an independent member of


REGISTERING THE PROPERTY

Both buyer and owner (or their legally authorised agents) need to apply to the TAPU
Office (Land Registry) to transfer the ownership. During the application, the buyers are
to provide the local TAPU Office with the following documents:
    1) Title Deed or a document indicating the property’s exact location (plot or parcel
       number etc.)
    2) Passport and/or ID Card of the buyer,
    3) Two recent passport size (4 cm x 6 cm) photos of the buyer,
If any agent is being used;
    1) Passport and/or ID Card of the agent
    2) Two recent passport photos of the agent and
    3) A valid Power of Attorney

Companies established in Turkey in line with the Foreign Direct Investment Law have to
issue an authorization document to be prepared by the Commercial Registry Office on
behalf of them.
This document basically covers
   - The name and title of the company,
   - The names of the authorized representatives and whether the type and legal
      features of business allow the property purchase.

Commercial companies established in countries with which reciprocity exists have to
submit an officially ratified authorization document similar to the document described in
the above subsection.

If any power of attorney is to take place in the acquisitions of commercial companies then two recent
passport photos of the agent and an acceptable Power of Attorney are required.

Upon your application, the office in question does a search on your behalf to see
whether the asset is in a Military Security Zone. They ask the local military authorities to
identify the property's exact status and once the military authorities confirm that the
real estate is outside the military and security zones, your application is automatically
accepted.

Currently a new bill prepared to reduce the military clearance periods will ease this
procedure once enacted. Where the owner of the property is already a foreigner, due to
the checks and searches that have been carried out previously the whole procedure can
literally take five minutes.




                                                                                                          7
                                                                       Turyap Head Office
                                                                       Dulkadiroğulları Sok No 4
       TURKEY                                                          34345 Arnavutköy İstanbul
                                                                       Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                                                  Fax: ++90 212 257 4072
                                                                       international@turyap.com.tr
                                                                       http://www.turyap.com.tr
                                                      Turyap is an independent member of


Finally, having received the military clearance, you are given an official ownership
document called Tapu -Turkish Title Deeds. Without having a Turkish title deed, you will
not be considered the legal owner of a property even if you had signed a legally
acceptable purchase contract with the seller.

At this point you will have completed all payments (including interim payments where
applicable) deducting any previous deposits. Payments can be made in USD, EUR, New
Turkish Lira (YTL) or other convertible currencies sold or purchased by the Central Bank
of Turkey. Additionally, according to the current regulations, any monetary transaction
which exceeds YTL 8,000 (approximately € 4,000) has to be made through banks,
private financial agencies or Post Office (PTT). In this way payments will go through the
system and this will enable all property-buying transactions to be documented for future
reference.

Additionally, using a banking system is a secure way to make the payments and it is the
most preferred method by purchasers. Most of the banks in European countries and in
Turkey are compatible with each other’s services.


OTHER TITLE TRANSFERS (WILLS)

Wills prepared by foreign nationals in their own countries are valid in Turkey and the
ownership of a property will pass on to the individual(s) as inherited.

These transfers are exempt from any military clearance and the other restrictions
applied to foreign nationals.

Please note that transfer of ownership of a property to an heir is subject to inheritance
tax. Thus, if the heir sells out his inherited property, he is not subject to any personal
income tax based on the capital gains.

When a married couple gets divorced and one of the parties is to transfer the ownership
of his/her property (or a share) into the name of the other party, then this transaction is
not subject to any tax. Similarly, in Turkey, subsistence payments made by a divorced
party to the other party are all tax exempt.




                                                                                                     8
                                                                      Turyap Head Office
                                                                      Dulkadiroğulları Sok No 4
       TURKEY                                                         34345 Arnavutköy İstanbul
                                                                      Tel: ++90 212 257 1333
PROPERTY BUYING GUIDE                                                 Fax: ++90 212 257 4072
                                                                      international@turyap.com.tr
                                                                      http://www.turyap.com.tr
                                                     Turyap is an independent member of


TAXES

With regards to real estate in Turkey, following taxes or compulsory insurances are in
question:
   • Personal income tax (based on rental income and capital gains)
   • Inheritance and succession tax
   • VAT (if a commercial delivery takes place)
   • Real estate tax
   • Real Estate Acquisition and Purchase Levy (at the time of purchase or sale)
   • Stamp Duty (if a contract with a monetary clause exists)
   • Environmental tax (collected through water utility bills)
   • Corporate tax (in case of a commercial transaction of a company)
   • Earthquake insurance (a nationwide contribution rate is applied)

A real estate property may give an individual two types of gains.

Firstly, you can rent it out and earn rental income. In that case, you are to pay a
personal income tax. Secondly, the market value of your asset may rise and hence you
can attain a gain. If you sell out your property within five years following the acquisition
date, you will be subject to personal income tax based on the difference between the
selling price and the inflation-adjusted acquisition price.

For sales by individuals five years after purchase date, personal income tax is not
charged on the gains. In addition, all properties are subject to revaluation every five
years for tax purposes.

Annual Property Tax rates for cultivated land, uncultivated (for building) land, non-
residence-purpose buildings, and residential buildings are 0.1%, 0.3%, 0.2%, and 0.1%
respectively. Tax is calculated on the basis of the declared value of the asset, which
cannot be less than a threshold determined by tax authorities. Tax payments are made
in two periods with equal instalments, March-to-May and November each year and are
collected by the local government (Municipality-Belediye). The tax rate is annually
updated by a coefficient determined by the Ministry of Finance taking into account the
inflation rate. There is no difference between foreign nationalities and Turkish citizens in
term of taxes or levies being charged.

Both the buyer and seller pay a real estate sale-and-acquisition levy of 1.5%, based on
the declared value of the asset. It is collected prior to the transfer of ownership at the
TAPU (Title Deeds) office. For registering a new building constructed on land, a levy of
1.5% based on the reference value of the asset is to be paid.




                                                                                                    9
                                                                              Turyap Head Office
                                                                              Dulkadiroğulları Sok No 4
        TURKEY                                                                34345 Arnavutköy İstanbul
                                                                              Tel: ++90 212 257 1333
 PROPERTY BUYING GUIDE                                                        Fax: ++90 212 257 4072
                                                                              international@turyap.com.tr
                                                                              http://www.turyap.com.tr
                                                             Turyap is an independent member of


The general VAT rate is 18% however some goods and services are taxed at either 1%
or 8%. Commercial delivery of a residential property with a net area up to 150 sqm is
subject to VAT at 1% whereas commercial delivery of those with more than 150 sqm is
subject to VAT at 18%.

As opposed to having to declare your rental revenue to the local tax office annually, you
are to immediately declare your capital gain as soon as a sale subject to personal
income tax is carried out.

In case you want to sell a property, property can be sold to Turkish or foreign nationals
without any restriction and the proceeds of the sale can be converted to any currency
and is transferable to any country.


FEES

   1) Solicitor charges vary according to location and work requirements. Costs start
      from € 250.
   2) Translator costs starts from € 80.
   3) Public Notary charges starts from € 80.
   4) There is a re-registration cost of the utilities at completion of around € 350.
   5) Estate agents’ commission is 3% of the purchase value whereas TURYAP applies
      2%.



DISCLAIMER 2006 TURYAP
Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy,
we have not verified it and make no guarantee, warranty or representation about it. It is your
responsibility to independently confirm its accuracy and completeness. Any projections, opinions,
assumptions or estimates used are for example only and do not represent the current or future
performance of the market. This information is designed exclusively for use by TURYAP clients, and cannot
be reproduced without prior written permission of TURYAP.

For more information regarding Opportunities and trends in Turkish real estate market, please contact:

Ferhunde Ozguler
fozguler@turyap.com.tr

TURYAP Property Group
Dulkadiroğulları Sok No 4
34345 Arnavutköy, Istanbul
Tel : 00 90 212 257 1333 x 129
Fax: 00 90 212 257 4072



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