Can Foreign-Capital Companies Acquire Real Estate in Turkey?

Yes. Companies established in Turkey with foreign capital may acquire real estate ownership and limited real rights in Turkey within the framework of the conditions stipulated by law. However, not all foreign-capital companies are subject to the same regime.

In this regard, first of all, foreign companies established abroad with foreign-capital Turkish companies established in Turkey under Turkish law must be distinguished from one another. For foreign legal entities established abroad in accordance with their own national laws, the primary provision is Article 35 of the Land Registry Law No. 2644. For companies established in Turkey in which foreign investors hold a certain percentage of shares or management control, Article 36 applies.

The fundamental criterion in the assessment under Article 36 of the Land Registry Law is whether the share of foreign investors in the company capital is 50% or more or, even if the capital share is below 50%, whether they have the authority to appoint or dismiss the majority of the managers.

Therefore, it is not sufficient solely to examine whether the company's capital belongs to foreign nationals. The partnership structure, management control, direct or indirect affiliation relationships, the region where the immovable property is located, and the fields of activity in the company's articles of association must be evaluated together.

Regarding the structuring of foreign companies in Turkey, additionally the establishment process of branches and liaison offices of foreign companies in Turkey related explanations can also be reviewed.

1. Difference Between a Foreign Company and a Turkish Company with Foreign Capital

A. Foreign Legal Entities Established Abroad

Article 35/2 of the Land Registry Law applies to commercial companies established in accordance with the laws of a foreign state and having their headquarters abroad.

As a rule, these companies cannot directly acquire immovable property in Turkey. The acquisition of immovable property or limited real rights is only possible in cases explicitly provided for by special laws.

Therefore, a GmbH established in Germany, an Ltd. established in the UK, or a foreign company established in another country acquiring immovable property directly in Turkey is not subject to the same legal regime as a joint-stock or limited liability company established in Turkey by foreign investors acquiring immovable property.

B. Foreign-Capital Companies Established in Turkey

A joint-stock or limited liability company established in Turkey in accordance with Turkish law does not become a foreign legal entity established abroad merely because its shareholders are foreign. The company possesses a distinct legal personality established under Turkish law.

However, in the event that foreign investors' shareholding or management control in the company falls within the scope of Article 36 of the Land Registry Law, a special procedure shall apply regarding the acquisition of immovable property.

For the general framework regarding corporate, real estate, and other legal transactions of foreigners immigration law information page are also among the related matters.

2. Companies Falling Within the Scope of Article 36 of the Land Registry Law and the 50% Rule

Companies within the scope of Article 36 of the Land Registry Law may acquire real property or limited real rights in order to carry out the activities specified in their articles of association.

There are two fundamental conditions regarding whether a company falls within the scope of Article 36:

• Foreign natural or legal persons or international organizations holding 50% or more of the company's capital,
• Even if the capital share of foreign investors is below 50%, having the authority to appoint or dismiss the majority of the company's board members or managers.

Indirect Partnerships and Affiliates

In the event that a foreign investor has a direct or indirect partnership structure in another company established in Turkey, the ultimate partnership ratio is also taken into consideration.

For instance, if the foreign investor's share in Company A is 60% and Company A's share in Company B is 90%, the evaluation of the ultimate foreign partnership ratio in Company B will be based on 60% x 90% = 54%.

Therefore, it is not sufficient to examine only the direct partners of the company that will acquire the real estate. Group companies and affiliate chains must also be reviewed.

Companies Below 50%

Companies in which foreign investors hold a share of less than 50% and do not possess the authority to appoint or dismiss the majority of the board of directors or managers fall outside the scope of Article 36 of the Land Registry Law.

Such companies may acquire real estate and limited in rem rights pursuant to Article 36/4 within the framework of the provisions applicable to domestically-capitalized companies.

However, "falling outside the scope of Article 36" does not mean that all other restrictions on real estate acquisition are eliminated. The nature of the real estate, zoning status, special statutory provisions, and other general restrictions must additionally be examined.

3. Is a Governor's Office Permit Required When a Foreign-Capital Company Acquires Real Estate?

For companies within the scope of Article 36 of the Land Registry Law, the real estate acquisition process is conducted within the framework of the provisions of the Regulation on the Acquisition of Real Estate Ownership and Limited In Rem Rights by Companies and Affiliates Within the Scope of Article 36 of the Land Registry Law No. 2644, published in the Official Gazette dated August 16, 2012, and numbered 28386.

Pursuant to this Regulation, the application is filed with the Provincial Planning and Coordination Directorate of the Governorate located at the place where the real estate is situated.

In the application, the title deed and coordinate information regarding the real estate, a commitment letter demonstrating the connection with the scope of activity in the company's articles of association, a document showing that the company is authorized to dispose of real estate and indicating its representative, and documents showing the partnership structure generally come into question.

In terms of current practice, TKGM's Circular No. 2012/13 on the acquisition of real estate by foreign-capitalized companies is one of the significant sources of the application regime.

Why is the Region Where the Real Estate is Located Important in the Governorate Review?

The Regulation provides for a separate review to determine whether the immovable property is located within:

• a military forbidden zone,
• a military security zone,
• a zone designated within the scope of Article 28 of Law No. 2565,
• a private security zone.

...

Following the application, the Governor's Office requests information from the relevant military and security authorities. The Regulation also sets forth specific timeframes for these institutions to respond.

If the Immovable is Outside the Security Zone

If it is determined that the immovable property falls outside the relevant military or private security zones, the Governor's Office shall provide written notification to the company and the land registry office to enable the registration procedure to be carried out.

Pursuant to Article 8 of the Regulation, the registration request must be made within six months following this notification. If this period expires, the application must be renewed.

If the Immovable is Within a Military Zone

If the immovable property is located in a military forbidden zone, a military security zone, or one of the zones designated within the scope of Article 28 of Law No. 2565, an additional evaluation shall be conducted in terms of national security.

Article 6 of the Regulation sets forth the procedures and periods regarding this assessment in detail.

If the Immovable is in a Special Security Zone

If the immovable is located in a special security zone, an assessment is conducted in terms of national security by the Commission within the Governorate pursuant to Article 7 of the Regulation.

Following a positive assessment or one deemed positive, notification is made to the land registry office for the registration procedure.

4. How Does the Governor's Office Application Process Proceed?

For a company within the scope of Article 36 of the Land Registry Law, the general process can be summarized as follows:

1. The immovable and the partnership structure of the company are examined.
2. It is determined whether the company falls within the scope of Article 36 of the Land Registry Law.
3. The necessary information and documents are prepared.
4. An application is submitted to the Provincial Planning and Coordination Directorate of the Governorate where the immovable is located.
5. It is investigated whether the immovable is located in a military or special security zone.
6. Where necessary, a security assessment is conducted by the relevant military authorities and the Governorate Commission.
7. Upon a positive result, notification is made to the relevant land registry office for registration.
8. The registration process is carried out.

The Regulation provides for specific periods, such as 15 days and 30 days for certain institutions, and three business days for certain transactions. Therefore, it is incorrect to state a fixed period such as "Governorate approval is definitively concluded in 30, 45, or 60 days."

5. Does a Subsequent Share Transfer Affect the Real Estate?

Yes. Any subsequent change in the shareholding structure of the real estate-owning company is also of particular importance pursuant to Article 36 of the Land Registry Law.

In particular, if the shares or management control of foreign investors change in a manner that falls within the scope of Article 36, the provisions of Article 11 and subsequent articles of the Regulation shall apply with respect to the real estate owned by the company.

Pursuant to Article 11 of the Regulation, as a result of a share transfer, the information regarding the share transfer of the company falling within the scope of the Regulation shall be submitted within the framework of Article 5 of the Regulation on the Implementation of the Foreign Direct Investments Law reported to the Ministry within one month following the share transfer .

Therefore, instead of the general expression in the text such as "notification to the Governorate within 30 days", the legislation regarding notification to the Ministry within one month regulation must be taken as the basis.

Subsequent Discovery That the Real Estate is Located in a Security Zone

Following a share transfer, a security zone investigation may also be conducted regarding the company's existing real estate. Article 11 of the Regulation provides for a special procedure in this case for the evaluation of the company's existing real estate by the relevant security authorities.

Therefore, if the transfer of a Turkish company owning real estate to a foreign investor is planned, not only the share valuation but also the legal status of the company's existing real estate portfolio must be examined.

6. In Which Cases Does the Regulation Regime Not Apply?

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A general assumption such as "Governor's Office approval is required in all cases" should not be made in these areas. It must also be verified under which specific law the concrete real estate falls.

7. Utilization of Real Estate in Accordance with the Company's Scope of Activity

The acquisition of real estate by companies within the scope of Article 36 of the Land Registry Law is linked to carrying out the business activities specified in the articles of association.

Therefore, it is crucial that there is a legal and factual connection between the company's business activities set forth in its articles of association and the purpose of acquiring the real estate.

Pursuant to Article 13 of the Regulation, whether the acquired real estate is used within the framework of the business activities specified in the articles of association of the company or its affiliate may be evaluated by the Governor's Office Commission.

Since a separate examination must be conducted regarding title deed records, encumbrances, and the intended use in real estate transactions, real estate law and title due diligence the information regarding the matter is also connected to the subject.

8. Liquidation Process in Case of Non-Compliance with Legislation

If a foreign-capital company acquires real estate in violation of the legislation or uses it contrary to the provisions of the Regulation, the liquidation process may come into question.

Pursuant to Article 14 of the Regulation, the Governor's Office shall notify the Ministry of Finance of the situation, along with the information and documents regarding the violation.

The Ministry of Finance notifies the company owning the real estate that the real estate or limited real right shall be liquidated within six months. In the presence of justifiable grounds, this period may be extended for up to six months, once only.

If the company fails to carry out the liquidation within the given period, the real estate or limited real right shall be liquidated by the Ministry of Finance in accordance with general provisions, and after deducting liquidation expenses, the proceeds shall be deposited into a bank account to be opened in the name of the right holder.

Therefore, instead of the expression "a maximum of one year, generally 6 months to 1 year in practice" in the article, the system explicitly set forth in Article 14 of the Regulation— 6 months + a one-time extension of up to 6 months for justifiable grounds— should be taken as the basis.

9. Court of Cassation Precedents and Legal Risks

Yargıtay 1st Civil Chamber, E. 2022/6599, K. 2023/2586, T. 15.05.2023

In the decision of the 1st Civil Chamber of the Yargıtay E. 2022/6599, K. 2023/2586, T. 15.05.2023 dated, concerning a dispute regarding the acquisition of agricultural immovable property by a foreign national, the lawsuit for deed cancellation and registration filed on the grounds that the immovable did not comply with the statutory acquisition conditions became moot due to the subsequent transfer of the immovable back to its former owner, and the court examined how litigation costs and attorney's fees should be evaluated in such a case.

The decision stated that the justification status at the time the lawsuit was filed and whether the defendant caused the filing of the lawsuit must be evaluated, and the Regional Court of Justice decision was upheld.

Decision source: Court of Cassation (Yargıtay) Case Search system case searches can be conducted through. The secondary decision source regarding the detailed text of the decision has also been checked.

Yargıtay General Assembly of Civil Chambers, E. 2018/558, K. 2021/1514, T. 30.11.2021

Of the Yargıtay General Assembly of Civil Chambers E. 2018/558, K. 2021/1514, T. 30.11.2021 dated decision is affirmed. However, the subject matter of this decision is not a general evaluation that the acquisition of immovable property by foreign-capitalized companies is "related to public order" directly within the scope of Articles 35 and 36 of the Land Registry Law, as stated in the previous version of the text.

The decision essentially pertains to a procedural and substantive review in a dispute concerning the certificate of inheritance of a foreign national decedent. Therefore, the decision has not been used directly as a precedent regarding the acquisition of immovable property by foreign-capitalized companies.

For those who wish to conduct research on all Yargıtay decisions Yargıtay’ın resmî emsal karar arama açıklaması may be used.

10. General Comparison by Types of Real Estate

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11. Frequently Asked Questions (FAQ)

1. Can a foreign-capital company purchase residential property or land in Turkey?

Yes. A foreign-capital company established in Turkey may acquire real estate provided that it meets the conditions under Article 36 of the Land Registry Law. However, whether the company falls within the scope of Article 36, the region where the real estate is located, and the compliance of the acquisition purpose with the field of activity in the company's articles of association must be additionally evaluated.

2. Can a 100% foreign-capital joint stock company directly acquire a title deed?

Yes, in principle, the acquisition of real estate is possible; however, if the company falls within the scope of Article 36 of the Land Registry Law, the application and security zone review procedure set forth in the Regulation must be applied. Therefore, the statement "a 100% foreign-capital company cannot acquire a title deed" is incorrect.

3. Is a Turkish company with 40% foreign partnership subject to the Governorate procedure?

Having only 40% foreign capital is not solely sufficient to fall within the scope of Article 36. However, even if the capital share of foreign investors is below 50%, it must be further examined whether they have the authority to appoint or dismiss the majority of the executives.

4. What happens to the existing real estate if the share of foreign partners exceeds 50%?

If the share transfer brings the company within the scope of Article 36 of the Land Registry Law and the relevant Regulation, an examination may also be conducted regarding existing real estate pursuant to Article 11 and subsequent provisions of the Regulation. In particular, it may be further investigated whether the real estate is located in military or special security zones.

5. When is the notification made to the Ministry following the share transfer?

Pursuant to Article 11 of the Regulation, for companies falling within the scope of the Regulation, the notification regarding the share transfer shall be made within the framework of Article 5 of the Implementation Regulation on the Foreign Direct Investments Law within one month following the share transfer to the Ministry must be made.

6. How long does it take to obtain the Governor's Office permit?

It is not accurate to provide a single general conclusion period. The Regulation stipulates different timeframes for the opinions of military authorities and the Commission's evaluation. For example, there are specific periods such as 15 days for certain security zone investigations and 30 days for military evaluation. The completion period of the application may vary depending on the region where the immovable property is located and the nature of the transaction.

7. Can a company absolutely not purchase an immovable property if it is located in a military security zone?

This cannot be expressed as an absolute prohibition. Which security zone the immovable property is located in and the evaluation of the relevant authorities in terms of national security are of importance. Articles 6 and 7 of the Regulation provide for special procedures in such cases.

8. What happens to immovable property acquired in violation of the legislation?

A liquidation process may come into question within the scope of Article 14 of the Regulation. The company is notified to liquidate the immovable property within six months; if there are justifiable grounds, this period may be extended for up to six months once. If the liquidation is not carried out within the specified period, the immovable property shall be liquidated in accordance with general provisions.

9. Can a branch of a foreign company in Turkey purchase immovable property in its own name?

A branch of a foreign company in Turkey does not possess a separate legal personality independent of the parent company. Therefore, the acquisition of immovable property by a branch of a foreign-headquartered company must be distinguished from that of a separate joint-stock or limited liability company established in Turkey. For the structures of foreign companies in Turkey, additionally to the current explanations regarding the branch and liaison office regime can be consulted.

10. Does the immovable property acquired in the name of the company grant Turkish citizenship to the foreign partner?

No. Real estate acquired in the name of a company does not mean that the foreign partner has personally acquired real estate in their own name. Regarding exceptional citizenship based on the acquisition of real estate, the investment made by the natural person in their own name and the other conditions under Article 20 of the Regulation are evaluated.

In current practice, regarding citizenship through the acquisition of real estate, at least 400,000 USD or the equivalent in foreign currency in addition to the real estate amount and the three-year non-sale commitment, the nature of the real estate and other conditions are also important. These matters are explained in detail in the current guidelines of the TKGM.

Real estate ownership and the right of residence must also be distinguished from one another. On this matter, conditions for residence permit based on real estate ownership can be examined further.

12. Difference Between Real Estate Acquisition, Residence, and Citizenship

The acquisition of real estate by a company does not result in the company partners automatically acquiring a residence permit or Turkish citizenship.

Real estate purchased in the name of a company and real estate purchased by a foreign natural person in their own name are evaluated differently under law.

The subsequent termination or revocation of a residence permit issued due to a foreigner's ownership of real estate also constitutes a separate administrative action. On this matter, revocation of residence permit and litigation process related information can be reviewed separately.

For the evaluation of concrete court decisions regarding residence permits based on real estate, cancellation of real estate residence permit and V-69 decision review is a relevant example.

13. Conclusion and Legal Evaluation

For foreign investors wishing to acquire real estate in Turkey, the correct corporate structure must first be determined.

A foreign company established abroad and a foreign-capital company established in Turkey are not subject to the same legal regime. For companies established in Turkey, it is decisive whether foreign investors hold 50% or more of the shares, or whether they possess management control despite holding less than 50% of the shares.

For companies within the scope of Article 36 of the Land Registry Law, the real estate acquisition process is conducted through the Governor's Office Provincial Planning and Coordination Directorate, and it is investigated whether the real estate is located in a military, security, or special security zone.

It is also important that the real estate is used within the framework of the scope of activities set forth in the company's articles of association. Subsequent share transfers must be examined separately as they may affect the legal status of existing real estates.

When an acquisition or use contrary to the legislation is detected, a liquidation process may come into question within the scope of Article 14 of the Regulation. Therefore, prior to purchasing real estate, not only the land registry record but also the company's partnership structure, scope of activity, the region where the real estate is located, and special statutory provisions must be examined together.

Regarding the acquisition of real estate by foreign companies, branch structuring, company partnership, and foreigners' rights connected to real estate, additionally current explanations on obtaining a work permit by establishing a company may also be evaluated among the relevant legal topics.

Author Information

Attorney Batın YILMAZ
Istanbul Bar Association Bar Registry No: 77008

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Contact Information

Attorney Batın YILMAZ
Istanbul Bar Association Bar Registry No: 77008

Yakuplu Mahallesi, Hürriyet Bulvarı, Skyport Residence No: 1/133,
Beylikdüzü / Istanbul
Phone: +90 532 669 34 90
E-mail: info@batinyilmaz.av.tr

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