The Buying Process
Buying a property in Turkey can be very simple, but it is a good idea to be familiar with the main points of the procedure.
MOST PEOPLE ARE SURPRISED at how straightforward and quick the buying procedure is in Turkey. Once everything has been agreed, a property transaction between two Turkish people can be completed in an afternoon. For a foreign buyer it takes significantly longer only because of the need for official permission from the military authorities. Below is an outline of the main parts of the buying process.
PROPERTY SEARCHES
Your solicitor will need to conduct a search at the registry office (tapu dairesi) to confirm that the property belongs to the seller, or that they have the authority to sell it for someone else. They will also check that there are no outstanding debts or charges, restrictive covenants or pre-emption rights against the property. For both new and re-sale properties it is important to ascertain that all the appropriate planning regulations were followed and building permission was granted. The solicitor will also check that the property is not in a military restricted area, where foreigners are forbidden from owing land or property. You can also ask them t check on the status of adjoining land, if you are concerned about future development.
In normal circumstance all the searches and checks should take no longer than 3-4 working days.
DEPOSIT & CONTRACT
After the initial searches have been completed, it is normal to pay a 10-15% deposit to show your commitment and to hold the property during the military investigation process (see below). Payment of the deposit should be recorded in a contract, written in Turkish and translated into English, which is signed by both the buyer and the seller.
The contract will also give the agreed price for the property and also may include details of how the payment is to be made. Provisions for what happens in the event that the purchase does not go though should also be included in the document, which should be drafted by a Turkish solicitor experienced in property law.
Contracts for off-plan purchases will also contain other details, such as the payment schedule, the date of completion, a schedule of works and any guarantees.
MILITARY PERMISSION
Foreign nationals buying property in Turkey must be approved by the military authorities. Before granting permission for the sale to proceed, the staff at the military headquarters will run background checks to make sure that you are a person of “good character”. This involves checking whether you have a record of serious criminal or terrorist activity. Minor offences should not generally count against you.
As part of the military permission process, the authorities also check that the property you intend to buy is not located in a military restricted zone. These areas are dotted across the country and may include land adjacent or near military bases or strategically important parts of the coast. The whole procedure usually takes about 12-14 weeks, although some estate agents and developers seem to be able to get approval faster.
COMPLETION
Once you have received the go-ahead from the military authorities you can proceed with the actual transaction. This is usually conducted in the local land registry office (tapu dairesi), although you can also perform the transaction in a Notary Public, in which case the title deeds for the property will be officially changed in the land registry at a later time.
Performed in the presence of a land registry official, the transaction involves the current title deed holder, or their legal representative, giving consent for new title deed (tapu) to be issued in the buyer’s name. By this point the money for the transaction should have already changed hands (see below). An interpreter should be present to translate during the entire procedure, so you understand exactly what is going on.
As the legal owner, your name and details will now be on the title deed, copies of which are given to you and kept at the registry office. Additional copies of the title deed can be ordered from the registry office for a small charge.
TRANSFERRING THE MONEY
There are several options for transferring money to Turkey, aside from a briefcase full of cash (not recommended!). The best way is to open a Turkish bank account well before the date of completion. That way, you can transfer the funds for the purchase from our account in the UK by Priority Payment electronic transfer. You will need to go to your local branch and fill out a form, giving the name and address of the bank where the account is held; the account number and branch code. This transfer method costs about £25 and takes 3-5 working days, though sometimes considerably longer (depending on your bank).
Then you will need to make a transfer from your Turkish account so that the money reaches the seller’s bank account on the day of the completion. The transfer of title will not normally take place until the cleared funds are in the seller’s account.
Another alternative is to have your bank issue a banker’s draft, a form of cheque, which can be sent by courier or even taken in person to the beneficiary. Remember that banker’s drafts take time to clear once they have been paid into the beneficiaries account, so give yourself plenty of time.
If you are buying your property in a foreign currency, such as euros, contact a recognised foreign exchange dealer, like Currencies Direct, Tel +44 (0)207 813 0332, www.currenciesdirect.com , who generally give a better exchange rate abnd charge less commission than the high-street banks.
Remember to transfer enough money to cover the costs involved in the purchase.
OBTAINING A TAX NUMBER
Once you have purchased a property you need to register with the local tax office who will issue you with a tax identification number. Your solicitor can perform this for you following the exchange of title.
GRANTING POWER OF ATTORNEY
Granting power of attorney to your solicitor or another trusted person allows them to act on your behalf. This can be particularly useful if you don’t have the time to return to Turkey at the points of the buying process that your presence is required. Of course, it also save you spending money on air travel and accommodation.
A power of attorney can be drafted by a Turkish solicitor and will need to be notarised in your presence at the Notary Public.
BUYING COSTS
The costs of buying a property in Turkey are lower than in the UK. The main costs include a transfer tax of 3%, based on the declared value of the property. This is usually shared equally between the buyer and the seller, although a different arrangement can be made and set down in the contract.
A registration fee, also based on the value of the property, is paid by the purchaser when the deeds are transferred at the registry office. If you use a Notary Public, the fees are standard and vary from £100 - £250 depending on the service provided.
If the sale was organised through an estate agent their standard commission is 3% of the sale price from both the buyer and the seller. This commission rate may be open to negotiation in some circumstances. Value added tax, or DKV in Turkish, only applies to properties bought at auction. You must also pay for compulsory earthquake insurance, which is about £50. Finally, don’t forget to take into account your legal fees.
DECLARED VALUE VS. MARKET VALUE
You may notice that the value of the property on the official title deed, or tapu, is far lower than the actual price you paid for the property. Although illegal, under-reporting the value of the property is a universal practice, which reduces the stamp duty and annual property tax paid to the government. In fact, the declared value, particularly of an older re-sale property, may be less than 50% of the actual market value.
Although the government will inevitably crack down on this practice, it is widely agreed that this will not be for some time yet. In the meantime, your seller won’t take very kindly to an attempt to declare the market value of the property and increase his tax bill!
SETTING UP A TURKISH LIMITED COMPANY
Foreign nationals can buy property using a Turkish Limited company set-up for the purpose. One advantage of buying through a company is that you avoid the time consuming military investigation procedure. A Turkish solicitor can help you establish the company with set-up costs of about £1,500. There are also administration costs, such as the fee for preparing the end of year accounts. This option makes particular sense if you are planning to let the property as you can benefit from the lower Turkish corporate tax rate and be able to off-set set-up and running costs against any profit. However, technically you may be liable to pay tax on the value any time you use the property, which is treated as a benefit in kind by the Inland Revenue. Consult a tax adviser for information.
