2024 – NEW RULES ON PURCHASING IMMOVABLE PROPERTY FOR FOREIGNERS (TRNC)

On 21st of May 2024, the TRNC Legislative Assembly passed significant amendments to the law on Acquisition of Immovable Property and Long-Term Lease (Aliens Law) No. 52/2008.

These changes have a notable impact on property transactions.

This article summarizes the amendments to help you understand how they affect both new and existing property owners who have not yet obtained title deeds in their names.

A new definition of “Foreigner” and “Foreign legal entity”

Under the new amendments, a “Foreigner” is defined as an individual who is not a citizen of the TRNC and includes a foreign legal entity. The trustee of a foreigner is considered to be a foreigner for the purpose of this law.

A “foreign legal entity” is a company registered in the TRNC with a foreign shareholder, regardless of the share percentage owned by foreigner(s). It also includes companies where the majority of directors are foreigners or persons acting on behalf of a foreign person or entity.

Previously, a local company was considered “local” if 51% of shares were owned by TRNC citizens. Now, to qualify as a local legal entity, all shareholders must be TRNC citizens, and the majority of directors must be TRNC citizens.

Trustee Agreement

It was common for foreigners and foreign legal entities to make Trustee Agreements with TRNC citizens in order to purchase immovable property.

According to the amendments, Trustee Agreements that relate to buying more than one immovable property or agreements that do not meet the requirements stipulated in the Law No 52/2008 will be considered invalid.

All Trustee Agreements made before May 21, 2024, must be registered at the District Lands Office within 75 working days or they will become null and void.

Restriction on immovable property acquisition

The Amendments introduced stricter limits for foreigners and foreign legal entities to buy or lease long-term immovable property in Northern Cyprus, according to which foreigners and foreign legal entities cannot buy:

1. Agricultural land (“tarla”) and forest land;
2. Immovable Property in areas deemed undesirable by the Council of Ministers in terms of national security, public interest, and public order (except through inheritance). Any registration of a Contract of Sale for the property that contradicts the above, will be deemed invalid.
3. More than 7% (seven percent) of a district’s surface area, and in total more than 3% surface area of Northern Cyprus.
4. The Council of Ministers may restrict the rights of a certain foreigner or foreign legal entity, or its directors, shareholders, or members of a foreign legal entity, to purchase or rent, due to their special status or due to national security or public safety concerns. Any registration made in the relevant District Lands Office that is contrary to the above rule will be deemed invalid.

Requirements for acquiring immovable property by foreigners or foreign legal entities in Northern Cyprus

Foreigners and foreign legal entities are entitled to purchase ONE immovable property under the following conditions and subject to obtaining permission to purchase from the Council of Ministers:

1. If Land is being purchased, such land must be in compliance with building regulations, not exceed 1,338m2, and only one residence can be built on it;
2. If an Apartment is to be purchased, only one apartment is allowed. ‘Kat Irtifak’ title deed (pre-registration of floors for apartments to be built) or separate individual title deed must be provided in order to purchase;

However, foreigners who are citizens of the states that recognise the TRNC as an independent state (i.e. Turkey) can buy up to 3 apartments.

3. If a Detached House is to be purchased, the surface area cannot exceed 3,300m2 and no additional house or apartment can be built on the land.
4. Foreigners are not allowed to buy an immovable property on shared title deeds unless it is a detached house or apartment. A maximum of 3 (three) foreign persons can buy such a shared title deed.
5. If the property to be purchased is an apartment, less than half of the total apartment units built or to be built on the same plot can be purchased by foreigners of the first degree relatives or foreigners of the same nationality.

In any case, 20% of such developments must be sold to citizens of TRNC or to the citizens of the states that recognise the TRNC (i.e. Turkey).

The above rule does not apply to developments where permits were obtained and/or necessary applications were made prior to this amendment coming into force. However, land projects that are based on trustee agreements are excluded from this rule.

Who must apply for Permission to Purchase?

1. Foreigners;
2. Foreign legal entities, their shareholders, and directors if the majority of the Board of Directors consists of foreigners;

Should the foreign legal entity wish to transfer its shares to another foreigner or foreign legal entity and/or to change the foreign directors or trustees, Permission from the TRNC Council of Ministers must be obtained. (Applicable to foreign legal entities that have an immovable property in their name).

Application for Permission to Purchase

Application for permission to purchase must be made online. The documents related to the property particulars and Police Clearance Certificate from the country of the applicant’s citizenship must be uploaded to the system. The Ministry will reject the application if the applicant has any criminal record.

PTP Application Fees:

1. First application – half of the gross minimum salary wage (i.e. as of 21.05.24 -17,035TRY);
2. Second application (same property) – double of the application fee (i.e. one gross minimum salary wage).

 

Transfer of the Title Deed

After the Permission to Purchase is approved, the transfer of the title deed must be effected within 6 months.  If not completed, the permission to purchase will become invalid.

If the sale price is paid in instalments, the six-month period starts from the last payment date.

However, although the transfer of the title deed has to be made within 6 months of the last instalment paid to the vendor, the taxes (i.e. remaining transfer fee, VAT (if applicable), and stoppage tax) have to be paid within 60 days after the permission to purchase is granted and published in the Official Gazette. Otherwise, the permission to purchase will become invalid.

If the permission to purchase becomes invalid due to the reason stated above (i.e. taxes were not paid within 60 days), the purchaser has the right to reapply for permission to purchase and pay double the fee. However, the same foreigner or foreign legal entity cannot re-apply a third time for the same property.

 

Penalties & Fine

If the vendor and/or foreign purchaser do not comply with the rules stated above, a fine of 500 minimum salary wages will be imposed, particularly in the following cases:

1. If the vendor sells agricultural or forest land to a foreigner or foreign legal entity;
2. Those who exceed acquisition limits (i.e. more than one property or the square meter exceeds the limits)
3. If the contract of sale is made without the vendor obtaining a separate title deed or “Kat Irtifak” title deed.
4. If the vendor sells the property with the shared title deed and the amount of persons on such title deed exceeds three.
5. If the vendor offers to sell more than half of the apartment units on the same plot to foreign relatives of the first degree or foreigners of the same nationality.
6. If the trustee agreement is made for the purpose of exceeding the acquisition limit specified above.

Transitional Rules Regarding the Existing Contracts of Sale

These TRANSITIONAL RULES are related to sales transactions that were commenced before the date of the amendments coming into force.

1. Everyone who had made the contract of sale before 21st of May 2024 must register their contract of sale with the District Lands Office and apply for permission to purchase within 6 months.

Those who fail to comply with the above section will be considered as having committed an offence and will be charged with a fine of 500 times the minimum salary wage.

However, if one can provide that he/she was abroad during this time that will be a valid defence in Court.

2. Foreigner and foreign legal entities who obtained permission to purchase immovable property from the Council of Ministers before the 21^st of May 2024, and the vendor who sold immovable property to them, must complete the transfer of the title deed at the relevant District Land Registry Office within 6 (six) months from 21^st of May 2024. Those who fail to comply with the above section (whether it is a vendor or purchaser or both) will be considered as having committed an offence and will be charged with a fine of 500 times the minimum salary wage.
3. If at the time the foreigner and foreign legal entity is granted the permission to purchase, the final approval of the immovable property has not been received and/or its division has not been completed and/or its separate title deeds have not been issued before 21^st of May 2024, the vendor and the purchaser must pay all taxes and fees (i.e. remaining transfer fee, VAT (if applicable) and stoppage tax) within 60 (sixty) business days from the date of publication of the Council of Ministers decision to grant the permission to purchase.
4. Trustee Agreement that was made before the 21^st of May 2024, must be registered with the relevant District Lands Office within 75 (seventy-five) business days starting from 21^st of May 2024. If such an agreement is not registered within the above specified period, it will become null and void.
5. If the above rules are not complied with, the decision of the Council of Ministers to grant permission to purchase will become invalid and the registration of the contract of sale at the DLO will be automatically deleted and deemed invalid.
6. If the vendor does not have a separate individual title deed or “Kat Irtifak” title deed, the purchaser can apply for permission to purchase provided that the Building permit (inşaat ruhsatı) is obtained. This rule is in the force until 21st of May 2025.
7. If the transfer cannot be carried out due to an ongoing lawsuit, the transfer has to be made one month from the date when the court decision becomes absolute.