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Turkey Holiday Property Sales buying process
Every country has its unique process for buying a new home, however, buying in Turkey is generally much simpler that you may imagine. In fact, it€™s often far simpler than buying in most other European countries.
Here at Turkey Holiday Property Sales, we€™ll take care of everything for you, if you like; however, for those who are interested, here is a step-by-step brief overview of the buying process
Eligability of owning property in Turkey
Several areas in law form the legal framework for buying a home in Turkey, including, the Constitution, and the relevant provisions of the Civil Code, the Title Deeds Act and the Foreign Direct Investment Law. Together they establish an equal property-ownership right both for Turkish citizens and foreign owners
According to the law on €œproperty purchase by foreigners in Turkey€ enacted on January 7th 2006, foreign nationals are able to acquire real estate in Turkey on the conditions of being reciprocal and complying with legal restrictions.
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.
We would 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.
The contract
Once the sale and purchase conditions are agreed with the owner, you€™ll be provided with 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 to 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 €œprice€ 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
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.
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:
- Title Deed or a document indicating the property€™s exact location (plot or parcel number etc.)
- Passport and/or ID Card of the buyer
- Two recent passport size (4 cm x 6 cm) photos of the buyer If any agent is being used;
- Passport and/or ID card of the agent
- Two recent passport photos of the agent
- A valid Power of Attorney
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 GBP, USD, EUR, New Turkish Lira (YTL) or other convertible currencies sold or purchased by the Central Bank of Turkey.
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.
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, nonresidence-
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. 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 terms 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 of1.5% based on the reference value of the asset is to be paid.
Property buying guide
The general VAT rate, at the time of writing, 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
Solicitor charges vary according to location and work requirements. Costs start from £200 GBP.
Translator costs starts from £65 GBP.
Public Notary charges starts from £65 GBP.
There is a re-registration cost of the utilities at completion of around £300 GBP.
Estate agents€™ commission is generally 3% of the purchase value (split between the buyer and the seller)
Disclaimer
The information contained here is a brief outline of some of the issues involved in buying a property in Turkey and should not be treated as a definitive guide. We cannot guarantee its accuracy and remains your responsibility to independently confirm its accuracy and completeness. For further information, please give us a call.
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