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2. New Turkish Legislation about Foreigners Buying Property in Turkey By Av. Coskun Yorulmaz

3. Laws Concerning Property Acquisitions by Foreigners The relevant Act is Tapu Kanunu, No 2644 ( “Title Deeds Act”) The relevant Act is Tapu Kanunu, No 2644 ( “Title Deeds Act”) Enactments of 1984 and 1986 ( with Acts numbered 3029 and 3278) Enactments of 1984 and 1986 ( with Acts numbered 3029 and 3278) Sought to relax the application of the “reciprocity principle” Sought to relax the application of the “reciprocity principle” The decisions of the Turkish Constitutional Court ( Anayasa Mhk.) The decisions of the Turkish Constitutional Court ( Anayasa Mhk.) Cancelled the above enactments due to incompatibility with the constitutional provisions. Cancelled the above enactments due to incompatibility with the constitutional provisions. The enactment of 2005 ( Act no 5444) The enactment of 2005 ( Act no 5444) Some provisions has been cancelled by the CC. Some provisions has been cancelled by the CC.

4. Too Many Changes of Law? is it Peculiar to Turkey? Spain Spain The Valencian “land-grab” laws of 1994 The Valencian “land-grab” laws of 1994 Bulgaria Bulgaria The relevant law enacted in 2007 The relevant law enacted in 2007 France France A relevant change of law in 2007 A relevant change of law in 2007

5. Real or Legal Persons who may Acquire Real Estate in Turkey Individuals of foreign nationality ( Mr Anderson) Individuals of foreign nationality ( Mr Anderson)

6. Foreign Companies, e.g. companies registered with the Companies House ( “Belgrave (UK) Ltd.”) Foreign Companies, e.g. companies registered with the Companies House ( “Belgrave (UK) Ltd.”) Turkish Company with foreign capital, i.e. registered with a directorate of trade registry in Turkey ( “Istanbul Ltd. Sti”) Turkish Company with foreign capital, i.e. registered with a directorate of trade registry in Turkey ( “Istanbul Ltd. Sti”)

7. PART 1

8. The Reciprocity Principle Very well established principle Very well established principle Reciprocity must exist “de jure” and “de facto” Reciprocity must exist “de jure” and “de facto” There are different categories of countries, e.g. List A countries There are different categories of countries, e.g. List A countries There has been no change of law with regard to this principle There has been no change of law with regard to this principle

9. Restriction as to the Location and Type of the Property Real estate must be situated in an area with a zoning plan Real estate must be situated in an area with a zoning plan to be used for commercial or residential purposes to be used for commercial or residential purposes

10. Restrictions as to size Mr Anderson or Belgrave Ltd. may, within the boundaries of The Republic of Turkey and at any one time, can own 2.5 hectares of real estate ( 25,000sqm or approximately 6.2 acres) Mr Anderson or Belgrave Ltd. may, within the boundaries of The Republic of Turkey and at any one time, can own 2.5 hectares of real estate ( 25,000sqm or approximately 6.2 acres) The Board of Ministers (Bakanlar Kurulu) could extend this limit up to 30 hectares. The CC cancelled the relevant provision. The Board of Ministers (Bakanlar Kurulu) could extend this limit up to 30 hectares. The CC cancelled the relevant provision. The total size of land of a town or province which is owned by foreigners at any one time may not exceed 10% of the area which has been subject to a zoning i.e. spared for residential, commercial or industrial use. The total size of land of a town or province which is owned by foreigners at any one time may not exceed 10% of the area which has been subject to a zoning i.e. spared for residential, commercial or industrial use. Prior to the decision of the CC, the ratio was 5/1000 of the total area of a town or province. Prior to the decision of the CC, the ratio was 5/1000 of the total area of a town or province.

11. Further Restrictions Applicable to Belgrave Ltd. It may only acquire land if a specific piece of legislation allows it to do so. It may only acquire land if a specific piece of legislation allows it to do so. Tourism Encouragement Act Tourism Encouragement Act Petroleum Act Petroleum Act Industrial Zones Act Industrial Zones Act

12. Acquisition of Real Estate by way of Inheritance There has been no change in law with regard to this matter since 2005. There has been no change in law with regard to this matter since 2005. If there is reciprocity and beneficiaries are legal heirs of the deceased; If there is reciprocity and beneficiaries are legal heirs of the deceased; Not subject to restrictions in paras 1 and 2 of Art 35, i.e. restrictions as to type, location or size. Not subject to restrictions in paras 1 and 2 of Art 35, i.e. restrictions as to type, location or size. If there is reciprocity, but inheritors are inheriting under the provisions of a testamentary disposition, i.e. a Will; If there is reciprocity, but inheritors are inheriting under the provisions of a testamentary disposition, i.e. a Will; In this case, the restrictions will apply. In this case, the restrictions will apply. If there is no reciprocity; If there is no reciprocity; The acquisition will be provisional to mandatory disposition of the real estate. The acquisition will be provisional to mandatory disposition of the real estate.

13. PART 2

14. Turkish Companies with Foreign Capital ( “ Istanbul Ltd. Sti ) Regulated by the Foreign Direct Investment Act, No 4875 (Dogrudan Yabanci Yatirimlar Kanunu) Regulated by the Foreign Direct Investment Act, No 4875 (Dogrudan Yabanci Yatirimlar Kanunu) “Foreign Capital Company”: An incorporated company set up or with participation of ” foreign investor”s. “Foreign Capital Company”: An incorporated company set up or with participation of ” foreign investor”s. A Foreign Investor: A Foreign Investor: Real Persons of foreign nationality or Turkish nationals resident abroad, or Real Persons of foreign nationality or Turkish nationals resident abroad, or Foreign incorporated entities Foreign incorporated entities

15. Changes of Law Effecting Istanbul Ltd. Pursuant to Art 3.d of FDI Act, it was treated no differently to Turkish Companies with Turkish Capital in terms of rights as to acquisition of real estate. Pursuant to Art 3.d of FDI Act, it was treated no differently to Turkish Companies with Turkish Capital in terms of rights as to acquisition of real estate. The Constitutional Court cancelled Art 3.d in March 2008. The Constitutional Court cancelled Art 3.d in March 2008. The Parliament enacted the new Art 36 of the Tapu Kanunu. The Parliament enacted the new Art 36 of the Tapu Kanunu. “The Turkish Ministry of Public Works and Settlement” ( Bayindirlik ve Iskan Bakanligi) issued a statutory instrument to specify the implementation of Art. 39 ( Yabanci Sirketlerin Tasinmaz Edinimine Iliskin Yonetmelik) “The Turkish Ministry of Public Works and Settlement” ( Bayindirlik ve Iskan Bakanligi) issued a statutory instrument to specify the implementation of Art. 39 ( Yabanci Sirketlerin Tasinmaz Edinimine Iliskin Yonetmelik)

16. Where Will the New Law Apply? Setting up a Foreign Capital Company Setting up a Foreign Capital Company Title of a real estate acquired under Art. 36 is transferred to another Foreign Capital Company Title of a real estate acquired under Art. 36 is transferred to another Foreign Capital Company A Foreign Capital Company acquires shares of a Turkish company with Turkish Capital which owns real estate. A Foreign Capital Company acquires shares of a Turkish company with Turkish Capital which owns real estate.

17. The New Law Will Not Apply; Where a Foreign Capital Company goes bankrupt and its foreign shareholders ( real person shareholders or otherwise) seek to acquire the title of its real estate. Where a Foreign Capital Company goes bankrupt and its foreign shareholders ( real person shareholders or otherwise) seek to acquire the title of its real estate. In this case, Art. 35 will apply (reciprocity, size restrictions etc.) In this case, Art. 35 will apply (reciprocity, size restrictions etc.)

18. Real Estate acquisition of a Foreign Capital Company must be for the carrying out of its business activities set out in its Articles of Association (Ana Sozlesme) Real Estate acquisition of a Foreign Capital Company must be for the carrying out of its business activities set out in its Articles of Association (Ana Sozlesme) The real estate must actually be used in carrying out of such activities. The real estate must actually be used in carrying out of such activities.

19. The Procedure The “ Commission” The “ Commission” Representatives of the Chief of General Staff, the Treasury, the Police, the Ministry of Trade and Industry will sit. Representatives of the Chief of General Staff, the Treasury, the Police, the Ministry of Trade and Industry will sit. The commission will be chaired by the Governor, or a deputy Governor he will appoint. The commission will be chaired by the Governor, or a deputy Governor he will appoint. Applications to be lodged with “Valilik Il Planlama ve Koordinasyon Mudurlugu”( The Provincial Directorate of Planning and Co- ordination) Applications to be lodged with “Valilik Il Planlama ve Koordinasyon Mudurlugu”( The Provincial Directorate of Planning and Co- ordination) Quite a few of documents to go in with the application ( Please refer to Art. 4 of the SI (Yonetmelik). Quite a few of documents to go in with the application ( Please refer to Art. 4 of the SI (Yonetmelik).

20. Assessment of the Application PDPC will enquire with; PDPC will enquire with; The office of the Chief of General Staff or its representative for this matter The office of the Chief of General Staff or its representative for this matter Military security zone, security zone or strategic zone Military security zone, security zone or strategic zone The General Directorate of Security ( Emniyet Genel Mudurlugu) The General Directorate of Security ( Emniyet Genel Mudurlugu) Private security zone Private security zone The provincial Directorate of trade and Industry The provincial Directorate of trade and Industry the areas of activity specified in its Articles of Association the areas of activity specified in its Articles of Association The authorities above will have 30,20 and 7 days respectively, within which to respond The authorities above will have 30,20 and 7 days respectively, within which to respond

21. Outcome of the assessment If the real estate is located outside a restricted zone of any type If the real estate is located outside a restricted zone of any type The Commission will make a decision, taking into consideration of the opinion of the provincial directorate of trade and industry. The Commission will make a decision, taking into consideration of the opinion of the provincial directorate of trade and industry. If the real estate is located within a private security zone If the real estate is located within a private security zone Same as above Same as above If the real estate is in a military zone, and If the real estate is in a military zone, and The opinion of military authorities is negative, then this opinion will be conclusive The opinion of military authorities is negative, then this opinion will be conclusive If their opinion is positive, then the Commission will make a decision If their opinion is positive, then the Commission will make a decision

22. Violations and Sanctions A Foreign Capital Company must acquire and use real estate in compliance with the Art.36 A Foreign Capital Company must acquire and use real estate in compliance with the Art.36 If violation is established, If violation is established, Mandatory disposition Mandatory disposition The Commission will inform the Ministry of Finance The Commission will inform the Ministry of Finance MoF will notify the company MoF will notify the company To dispose of the real estate within 6 months from notification ( may extend a further 6 months) To dispose of the real estate within 6 months from notification ( may extend a further 6 months) If company fails to do so, the ministry will liquidate the real estate If company fails to do so, the ministry will liquidate the real estate

23. PART 3

24. Limited Rights in REM Mr Anderson needs to borrow to finance the purchase Mr Anderson needs to borrow to finance the purchase He applies to Z Bank in Turkey for a mortgage He applies to Z Bank in Turkey for a mortgage Z Bank lends him 70% Z Bank lends him 70% He asks Mr Dawn to lend him the balance He asks Mr Dawn to lend him the balance Mr Dawn lends him 15% Mr Dawn lends him 15% He borrows from Belgrave Ltd 15% He borrows from Belgrave Ltd 15%

25. Z Bank is a Foreign capital company in the sense of FDI Act. Z Bank is a Foreign capital company in the sense of FDI Act. The SI requires an application to the Commission The SI requires an application to the Commission The Ministry of Public Works and Settlement issued a circular earlier this month (Genelge No:1671) The Ministry of Public Works and Settlement issued a circular earlier this month (Genelge No:1671) There is no more a requirement to apply to the commission each and every time an hypotec is created. There is no more a requirement to apply to the commission each and every time an hypotec is created. They will obtain the certificate from the Governorship of the city where their head office is located. They will obtain the certificate from the Governorship of the city where their head office is located. They will submit this certificate to any Land Registry one time only. They will submit this certificate to any Land Registry one time only. Only applies to “hypotec” and not any other form of limited right in rem. Only applies to “hypotec” and not any other form of limited right in rem. Applicable to all FDI Companies? “Banks, financial institutions and other companies” Applicable to all FDI Companies? “Banks, financial institutions and other companies”

26. Mr Dawn and Belgrave Ltd. are not subject to the previous regulations. Mr Dawn and Belgrave Ltd. are not subject to the previous regulations. They may create an hypothec without being subject to restrictions mentioned in Art.35 of the Tapu Kanunu. They may create an hypothec without being subject to restrictions mentioned in Art.35 of the Tapu Kanunu.