Conveyancing in Turkey

Your dreams to spend your holidays in your own villa in Turkey may turn into a nightmare

It has been quite common lately to hear sad stories of foreigners who “bought” property from Turkish constructors in resort centers. In general, most of the complaints refer to sellers who disappeared, and uncompleted villas.

Why is it so problematic?

The main reason is rather complex system the landowners and the contractors adopted in developing lands through the years in Turkey.

In this widely used system, the landowner does not pay any money to the constructor but agrees that a portion of the completed property will belong to the constructor. Therefore, the constructor obtains the title for his share only after completing the construction in full, or in some cases on a pro rata basis according to stages of the construction. In the latter case, usually the landowner has a lien on the property transferred to the constructor.

Since the landowner does not pay for construction at the beginning, the constructor tries to fund the construction in advance by selling the property which would belong to him after completion. On the other hand, since the constructor does not have the title, it is impossible for him to complete the conveyancing deal at the land registry, which is a must to call the transaction valid and binding. Therefore, he prefers to sell the property by an "ordinary contract" without observing the procedural rules according to Turkish Law, which will be discussed in the end of this article. By means of reference in this article, an "ordinary contract" is the one not signed at the land registry or before the notary.

But there was a lawyer who signed the contract !

It seems that the constructors selling properties on holiday resorts to foreigners in Turkey have some knowledge about the foreign law systems, i.e. the English system where the contract is prepared by seller’s solicitor and then submitted to buyer’s solicitor for approval. Those constructors should have felt that by presence of a lawyer, a foreign buyer may feel secure but in our experience, the lawyer's role in the transaction is rather limited. This system resembles the conveyancing contracts under English law where full title guarantee is not offered.

What should I do?

Without going into any great detail on this subject, suffice it to say that a foreigner should either consult his own solicitor who may contact a lawyer in Turkey or directly consult a Turkish lawyer who actually understands what is required from him.

I do not wish to imply that all sellers are swindlers, and I know too many who are not. However, even if this is not the case, you should bear in mind that the majority is suffering from global crisis, and the constructors are no exception. So, if the constructor falls into a financial crisis, what you have in your hand in the end might be a piece of paper to light the candles in the garden of your so “bought” villa while watching the sunset with empty pockets.

What are the main issues I should bear in mind?

1- Under Turkish Law, a contract for conveyancing (transfer of title of a land, flat, house) which has not been signed by the parties or by their attorneys of fact at the land registry does not give any guarantee to obtain the title even if the contract contains explicit undertaking of the seller and/or owner to transfer title towards the buyer against buyer's fulfillment of certain obligations and/on payment of the agreed consideration.

2- If the contract is not signed at the land registry , then it can not be interpreted as seller's covenant to transfer title on a certain date in the future, either. Such undertaking shall be enforceable only if it is prepared by notary public and signed by the owner and buyer. However, even prepared by a notary public, in order to guarantee the title, the notarized covenant must be registered at the land registry so that the claim may be directed to new owner if the property is sold to a third party in the meantime.

3- Where the seller entered into an “ordinary contract” (that is to say a contract not signed at the land registry or drawn up by a notary) with the buyer is not the owner of the property, the only remedy the buyer may have is to sue the seller under unjust enrichment provisions of the Turkish Code of Obligations, and claim for the payments made to the seller. Even if some liquidated damages/penalties are stipulated in the contracts applicable in case of non performance or delay by seller/owner, these conditions would not be enforceable, either, within the light of the explanations in paragraphs 1 and 2 above.

4- There is one exception.

If the seller had title but parties signed an ordinary contract, and the buyer fulfilled his obligations towards the seller and the seller did not express invalidity of the contract while accepting payment from the buyer but afterwards refused to officially transfer the title by means of going to land registry and signing the papers, then the buyer may be granted with title by the court on the grounds that claiming invalidity of conveyancing agreement at that stage would be against good faith. However, one must bear in mind that in the meantime the seller might have sold the property to another person.

It is best to be on the safe side!

Assuming that you are buying from the actual owner, it is wise to pay attention to the followings:

First things first, always check out the title deed and ensure that the seller is indicated as the owner on the title deed. Then, get a copy from the title deed and double check with Lang Registry. Check with Lang Registry if there are any encumbrances not written on title deed.

Unless you have complete trust on the seller, it is not a custom to pay him before you go to Land Registry. What will you do if the seller disappears? While in Land Registry, do not pay cash but use a blocked cheque. That means the bank guarantees to have reserved the amount in seller’s name written on the cheque. You can hand over this cheque to buyer while signing the papers.

Always declare the sale price in full at the land registry. Since the seller may wish to avoid the taxes calculated according to the sale price, he may advise you to indicate the minimum sale price acceptable by the authority. Even if you had agreed to pay for the Seller’s portion of taxes, do not hesitate to declare the real prize and pay the extra. Although declaring the minimum sale price and paying taxes according to this amount will not invalidate the transaction in the beginning, in the long run you will be under the threat of (i) paying for extra tax with interest and penalties, and (ii) the action by seller’s creditors claiming that you acted together with debtor in bad faith to defraud the creditors. The consequence of the latter is so severe that you may lose the title.

Izzet Hamle
Istanbul Bar 17637
izzet@hamle.av.tr

As a disclaimer, please note that all material included above is for informational purposes only and may not reflect the most current legal developments. No reader should act or refrain from acting on the basis of any matter contained in above without seeking legal or other professional advice on the particular facts and circumstances at issue. The form in which this information is presented and the information is copyrighted. No transmission or use of this information is permitted without express written permission from Izzet Hamle.