Comprehensive Guide for Foreign Investors Purchasing an Apartment in Ongoing Construction Projects in Turkey

Comprehensive Guide for Foreign Investors Wishing to Purchase an Apartment in an Ongoing Construction Project in Turkey

The real estate sector in Turkey offers attractive opportunities, especially for foreign investors. Purchasing apartments from ongoing construction projects is often preferred as they usually offer more favorable prices compared to completed projects. However, such investments involve certain risks and require careful examination. Below is a comprehensive guide to the legal aspects, case law, and practices that foreign investors should consider when purchasing an apartment in an ongoing construction project in Turkey.

1. Necessary Legal Reviews (Due Diligence)

Before purchasing an apartment in an ongoing project, it is mandatory to conduct a detailed legal review. This review is necessary to minimize the risks the investor may face.

• Project Licenses and Permits: Ensure that all necessary documents such as construction permits, building licenses, and zoning status have been obtained. Make sure that the construction project is being carried out in accordance with local regulations.
• Floor Easement and Floor Ownership: Ongoing construction projects typically establish floor easements. However, after the construction is completed, floor ownership should be established. Ensure that the floor easement is properly recorded in the title deed.
• Legal Status of the Property: Check the title deed for any mortgages, liens, or similar restrictions. Such legal obligations can make the property purchase risky.
• Legal Advice: Ensure that all documents and permits related to the project where you plan to buy an apartment are complete and valid. Work with a real estate lawyer to verify the validity of these documents and obtain clear information about the legal status.

2. Purchase Agreement and Guarantees

When purchasing an apartment in an ongoing project, the contractor company and the purchase agreement are of great importance.

• Purchase Agreement: The contract should be carefully examined to ensure legal security. This agreement forms the basis of the transaction between the contractor and the buyer and plays a crucial role during the transfer of the property.
• Contract Approval: The purchase agreement should be notarized and registered in the land registry, or if a floor easement has been established, it should be conducted at the land registry office. This ensures the protection of the rights of the parties and the security of the property transfer.

3. Responsibilities of Contractor Companies

In Turkey, contractor companies have certain responsibilities towards consumers in construction projects. These responsibilities are particularly important in areas such as managing the construction process, timely delivery, and ensuring the quality of the construction.

• Completion of Construction: Contractor companies are obliged to complete the construction within the specified period. If the construction is delayed, the contractor is responsible for compensating the losses caused by the delay.
• Material Quality: Contractor companies are required to use materials that comply with the standards specified in the contract. In case of using substandard materials, the contractor bears legal and financial responsibility.
• Warranty Period: The contractor must provide a certain warranty period for defects and deficiencies that may occur in the delivered property. This period is generally 5 years from the date of delivery.

4. Prepaid Real Estate Sales Contract and Legal Requirements

Prepaid real estate sales in Turkey are regulated by the Consumer Protection Law No. 6502 and the related regulations. In such sales, contractors are required to meet certain conditions.

• Prepaid Real Estate Sales Contract: This contract is subject to special regulations aimed at protecting the consumer. Contractor companies must fulfill some important conditions before drafting such contracts:
  • Promise to Sell Agreement: Before making a prepaid sale, contractors must sign a promise to sell agreement with the consumer in the presence of a notary. This agreement is a commitment to the future transfer of the property.
  • Bank Guarantee or Insurance: The contractor is obliged to secure the amount paid by the consumer by obtaining a bank guarantee or insurance. This is done to prevent consumer grievances in case the construction cannot be completed.
  • Delivery Period: According to the law, the delivery period of the property cannot exceed 36 months. If the contractor exceeds this period, the consumer can claim compensation.

5. Process of Obtaining an Occupancy Permit After Floor Easement and Transition to Floor Ownership

In construction projects, the concepts of floor easement and floor ownership are crucial for property ownership. After the construction is completed, the transition to floor ownership is necessary to fully obtain ownership rights.

• Floor Easement:
  Floor easement is a preliminary stage in which the independent sections (such as apartments) of a building under construction are individually registered in the land registry. Floor easement secures the property rights of owners during the construction process.
  • Establishment of Floor Easement: Floor easement secures ownership rights during the construction process. This easement is created at the beginning of the project in the land registry, and a separate title deed is issued for each independent section (apartment).
• Process of Obtaining an Occupancy Permit:
  After the construction is completed, an occupancy permit (building usage permit) must be obtained. This document indicates that the construction has been completed in accordance with all legal requirements and that the building is ready for use.
  • Occupancy Permit: The occupancy permit is issued by local municipalities and certifies that the building is fit for use. Before obtaining the permit, the building is inspected to ensure it meets all construction and safety standards.
• Transition to Floor Ownership:
  After obtaining the occupancy permit, the transition from floor easement to floor ownership is carried out. This process ensures the full transfer of ownership rights to the owners of the independent sections (apartments).
  • Floor Ownership: Floor ownership involves the official registration of the independent sections in the land registry, fully securing the legal rights of the property owners. This process is conducted at the land registry office and formalizes the ownership rights.

Legal Advice: Carefully follow the process of obtaining the occupancy permit and transitioning to floor ownership. Work with a real estate lawyer to ensure that the occupancy permit is obtained and that the transition to floor ownership is completed after the construction is finished.

6. Construction Insurance

Insurance against potential risks is mandatory in construction projects. Construction insurance is critical for the safety of the project and the protection of property owners' rights.

• Who Should Obtain It?
  Construction insurance is usually taken out by the contractor. This insurance covers the damages and risks that may occur during the construction process.
  • All Risks Insurance: This is the most comprehensive type of insurance that can be obtained during the construction process. This policy covers many risks, such as fire, natural disasters, theft, etc. It also covers damages that may result from the contractor's negligence.
  • Contractor's Liability Insurance: This insurance covers the damages that the contractor may cause to third parties during the construction process. The contractor takes out this policy to protect against potential compensation claims.

Legal Advice: When obtaining construction insurance, carefully examine the scope of the policy and the coverage limits. Ensure that adequate coverage is provided and that the insurance policy is valid throughout the construction process. Work with an insurance consultant or construction law attorney to secure your investment.

Conclusion

When the right steps are taken, purchasing an apartment in an ongoing construction project in Turkey can be a profitable investment. However, care must be taken, and necessary legal precautions must be observed. By following the above recommendations, you can ensure the security of your investment and successfully become a property owner. Working with a real estate lawyer during your investment process is essential to minimize risks and provide legal protection.

Questions and Answers I Need to Ask as a Foreign Investor in Turkey

As I am about to make an important investment decision, such as purchasing an apartment in an ongoing construction project in Turkey, a few critical questions come to mind. The answers to these questions will help me manage my investment effectively and minimize potential risks.

1. What are the most important risks when buying an apartment in an ongoing project? How can I manage these risks?

Answer: The main risks you may encounter when buying an apartment in ongoing projects include the failure to complete construction on time, the contractor's bankruptcy, or poor material quality. To manage these risks:

• Carefully conduct the Due Diligence process: Gather detailed information about project licenses, construction permits, the contractor's past projects, and financial status.
• Ensure the purchase agreement is notarized or executed at the land registry office, and carefully review its details.
• Check the contractor's insurance policies and work with a reliable insurance consultant to protect your investment.

1. What should I pay attention to before signing the purchase agreement?

Answer: The purchase agreement is the most important document that will protect your investment. Before signing the agreement:

• Remember that the agreement must be signed in a notary or registered at the land registry office. This ensures the legal security of the property transfer.
• Ensure that the agreement clearly specifies the delivery time, penalties for delays, the features of the apartment, and the quality of materials.
• Check that guarantees such as a bank guarantee or insurance are provided to ensure the contractor fulfills their obligations.

1. What are the responsibilities of contractor companies towards consumers?

Answer: Contractor companies in construction projects have certain responsibilities towards consumers:

• Completion of Construction: The contractor is obliged to complete the project within the period specified in the contract. In case of delay, the contractor is required to compensate the consumer.
• Material Quality: The contractor must use materials that meet the quality standards specified in the contract. The use of substandard materials is the contractor's responsibility and entitles the consumer to compensation.
• Warranty Period: The contractor is required to provide a certain warranty period for defects in the delivered apartment. This period is typically 5 years from the date of delivery.

1. What conditions must a contractor fulfill when entering into a prepaid real estate sales contract?

Answer: Contractors entering into a prepaid real estate sales contract are required to meet the following conditions under the Consumer Protection Law No. 6502:

• Promise to Sell Agreement: The contractor must sign a promise to sell agreement with the consumer in the presence of a notary. This is a legal commitment to the future transfer of the property.
• Bank Guarantee or Insurance: The contractor is obliged to provide a bank guarantee or insurance to secure the amount paid by the consumer. This is to prevent consumer losses in case the construction is not completed.
• Delivery Period: According to the law, the delivery period for the property cannot exceed 36 months. If the contractor exceeds this period, the consumer can claim compensation.

1. How is the occupancy permit obtained after floor easement, and how does the transition to floor ownership take place?

Answer: The process of obtaining an occupancy permit after floor easement and transitioning to floor ownership is crucial for fully obtaining property rights:

• Occupancy Permit: Upon completion of construction, an occupancy permit (building usage permit) must be obtained from the local municipality. This document certifies that the building is legally ready for use and meets all technical requirements.
• Transition to Floor Ownership: After obtaining the occupancy permit, the transition from floor easement to floor ownership must be made. This process is carried out at the land registry office and ensures the full legal recognition of property rights.

1. Who should obtain construction insurance, and what does it cover?

Answer: Construction insurance is usually obtained by the contractor and protects both the project and the rights of the property owners:

• All Risks Insurance: This policy covers many risks, such as fire, natural disasters, theft, etc., that may occur during the construction process. It also covers damages that may result from the contractor's negligence.
• Contractor's Liability Insurance: This policy covers damages that the contractor may cause to third parties during the construction process. It is an important guarantee for ensuring that the contractor fulfills their obligations.

Conclusion

Purchasing an apartment in an ongoing construction project in Turkey requires careful planning and thorough legal review. The questions and answers provided above offer important information that will help you make safer investment decisions. By working with a real estate lawyer at every step, you can secure your investment and minimize potential risks.

What can I do if the contract was not signed in the presence of a notary or at the land registry? I have made all my payments, but the contractor is not transferring the title deed to me.

Answer: This is a very serious situation, and unfortunately, in Turkey, contracts not executed in the presence of a notary or at the land registry can create issues regarding legal validity. However, there are still various legal avenues available to protect your rights and obtain the title deed. The steps to be taken, legal grounds, and applicable case law are as follows:

1. Legal Status of the Contract and Court Decisions: Real estate sales contracts not executed in the presence of a notary or at the land registry are considered unofficial contracts under the Turkish legal system. These contracts may cause legal problems if the title transfer is not completed. However, in many rulings, the Court of Cassation has determined that even if the contract is invalid, requests for the fulfillment (transfer of the title deed) can still be honored.
   • Ruling of the 14th Civil Chamber of the Court of Cassation: The Court of Cassation has ruled that even if the real estate sales promise contract was not notarized, if mutual performance (payment and delivery) has occurred between the parties, the contractor must complete the title transfer. In this case, the unofficial nature of the contract cannot be used as an excuse for the contractor not to transfer the title.
2. Filing a Lawsuit for Title Deed Cancellation and Registration: If the contractor has received all your payments but has not completed the title transfer, you can file a lawsuit for the cancellation and registration of the title deed under Article 1018 of the Turkish Civil Code. This lawsuit imposes a legal obligation to transfer the property to you.
   • Content of the Lawsuit: In the lawsuit, you will need to prove that you have fully paid but the contractor has not transferred the title deed. This can be supported by bank statements, payment receipts, and, if available, witness testimonies.
   • Court Decision: If the court determines that the contractor has not fulfilled their obligations and that the plaintiff is justified, it will order the transfer of the title deed to the plaintiff. This decision obliges the contractor to complete the title transfer.
3. Legal Basis for Contractor's Responsibilities: Under the Consumer Protection Law No. 6502, contractors have certain obligations towards consumers. According to the law, the contractor must fulfill the conditions promised and transfer the property to the consumer.
   • Law Provisions: The relevant provisions of the law clearly define the obligations that the contractor must fulfill towards consumers. If the contractor fails to fulfill these obligations, the consumer has the right to file a lawsuit to enforce the title transfer.
   • Criminal Liability: If the contractor fails to meet the contract conditions, they are obliged to compensate the consumer financially. The contractor's responsibility is not limited to the title transfer but includes fulfilling all contract conditions.
4. Initiating Enforcement Proceedings: If you do not wish to go to court, you can initiate enforcement proceedings against the contractor if the title deed is not transferred. This process can exert pressure on the contractor and speed up the title transfer.
   • Enforcement Proceedings: You can initiate enforcement proceedings against the contractor to transfer the title deed. The enforcement office will give the contractor a specific period, and if the title transfer is not completed within this time, the enforcement office will ensure the transfer.
   • Providing Security: During enforcement proceedings, if the contractor objects, the enforcement office may suspend the process. However, the enforcement process can be continued with a court order.
5. Claims for Compensation: The contractor's failure to fulfill their obligations is not only limited to enforcing the title transfer but also entitles the consumer to claim compensation. If it is determined that the contractor did not comply with the contract terms and caused you material or moral harm, you can file a lawsuit for compensation.
   • Material Compensation: You can claim compensation for the loss you suffered due to not receiving the title deed despite having made full payments. The amount of compensation is determined by the court and collected from the contractor's assets.
   • Moral Compensation: If this process has caused you psychological stress or pressure, you can claim moral compensation.
6. Attempting Settlement: Before initiating legal proceedings, it may be beneficial to attempt to reach a settlement with the contractor. This can save time and money and expedite the title transfer process. You can try mediation or negotiations and reach an agreement to complete the title transfer.

Conclusion: The fact that the contract was not executed in the presence of a notary or at the land registry may increase the challenges in transferring the title deed. However, even in this situation, there are various legal remedies available to protect your rights, such as filing a lawsuit for title deed cancellation and registration, initiating enforcement proceedings, and claiming compensation. Working with a real estate lawyer at every stage of the process will help you effectively protect your rights.