BRICKS & MORTAR: Will Turkey's discriminatory property law be EU stumbling block?

By bne IntelliNews December 18, 2008

David O'Byrne in Istanbul -

Is Turkey looking to pressure the EU into allowing it to continue current restrictions on foreigners buying property in Turkey for up to 12 years after Turkey joins the European Union?

Unsourced reports in the local media are indeed claiming that the Turkish government has requested a waiver on the full introduction of Chapter 4 of the accession agreement, which deals with The Free Movement of Capital, one of two chapters that will be opened in a new round of negotiations to start on December 19. The other chapter to be negotiated is Chapter 10, which covers Information Society and the Media.

Speaking to bne, spokesmen for the European Commission in Brussels and Ankara pointed out that they were unable to confirm or deny that Turkey had made such a request ahead of the start of negotiations. However one spokesman commented that it would be highly unlikely that any such request would be considered so far ahead of Turkey's earliest planned entry date of 2015. A spokesman for Turkey's foreign ministry also offered no comment.

The current position though is quite clear: without a special dispensation for its current property law, Turkey won't be able to join the EU.


According to the European Commission's most recent progress report on Turkey's accession process, published November 5, following the overturning by Turkey's Constitutional Court in January this year of the previous property law and the introduction of a new more restrictive law in July, Turkish law is no longer consistent with Article 56 of the Treaty establishing the European Community.

The new property law, which obliges all foreign companies and individuals to have their property purchases vetted by a commission headed by the local governor who presides over where the property is located, has been widely criticised by Turkish legal firms representing foreign clients, pointing to the possible conflict of interests this introduces. In addition, the law prevents foreign individuals from buying property in areas where the local authorities have not produced a 1:1000 scale master plan, a move which has been widely interpreted as an attempt to restrict prospective foreigners to buying purpose-built holiday and residential developments, where full plans have been drawn up and filed with the local authorities. "This is really unfair on foreign individuals looking to buy and renovate and live here, as opposed to foreign investors looking to just rent for profit," says Sahin Kargin of the Horasan estate agent's office in the historical Istanbul district of Galata, explaining that these buyers are mostly interested in buying property in older Istanbul districts which have no 1:1000 scale master plan and where sales to non-Turks are currently banned.

It's a problem that's believed to have left several hundred foreign buyers unable to get property deeds for properties they were led to believe they had purchased. The majority of those affected are thought to have bought property in coastal developments where the necessary plans do not yet exist but can at least be drawn up comparatively easily. Others, however, are not so lucky, having bought and renovated older properties in the huge historical Istanbul districts of Beyoglu and Fatih where again no 1:1000 scale plans exist and no firm plans have yet been announced for what, due to the size of the areas in question, will be a momentous task.

Three Istanbul-based journalists who have bought properties in Beyoglu over the past two years confirmed to bne that they have been unable to be issued with property deeds, but declined to offer any on-the-record comment. However, one Istanbul-based property buyer who was happy to comment was Gerd Verhusen, head of the property development company City Center Development, which buys and renovates derelict residential property. As his company is Turkish registered, he is not restricted by the problem of missing master plans. However, as it's backed by foreign investors, he is still faced with having his purchases vetted by the local gubernatorial committee - a process he complains has involved him supplying no less than seven notarised copies of his passport, and suffering repeated delays as new regulations are implemented by officials. This, for a process that's supposed only to check whether the property in question lies within a military security zone, a check which until Turkey's old property law was abolished in January was conducted by local registrars unaided by the encumbrance of a committee.

Verhusen complains that delays are making it almost impossible for companies like his to buy property, as most property sales are time sensitive. "This new law isn't hurting me or other foreign buyers, we're just losing an opportunity to invest money in this country," he says. "It's the ordinary Turks who are now unable to sell their property at the full market rate who are being hurt. This law just shoots them in the foot."

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BRICKS & MORTAR: Will Turkey's discriminatory property law be EU stumbling block?

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