Investing in real estate can be both rewarding and complex, especially in a market like Turkiye. Whether purchasing a residence or commercial property, taking the necessary steps for real estate due diligence is crucial. This article will guide you through the key aspects of due diligence to help ensure a smooth and secure property acquisition.
1. What is Due Diligence? What is Its Function in Real Estate?
Due diligence is the process of thoroughly investigating a property to verify its legal, financial, and physical conditions before making a purchase. It helps prevent future disputes, unexpected costs, and even potential legal issues. In Turkiye, the dynamic real estate market attracts both local and international buyers, which makes it crucial for buyers to understand the unique aspects of Turkish property laws and regulations.
2. Title Deed Verification (Tapu)
One of the most critical steps in the Turkish real estate purchase process is verifying the title deed, known locally as tapu. The title deed confirms the legal ownership and boundaries of the property. Here are key points to consider during title deed verification:
Confirm the Seller’s Ownership: Ensure the person selling the property is its rightful owner by checking the title deed registry at the Land Registry Office.
Encumbrances and Liens: Verify if there are any liens, mortgages, or other encumbrances on the property. These obligations can complicate ownership and create legal issues down the line.
Zoning and Land Use: Confirm the property’s zoning status to ensure it aligns with your intended use. For example, properties in designated residential zones cannot legally be used for commercial purposes without special permissions.
3. Property Tax and Financial Checks
Unpaid taxes and financial obligations can impact the property’s value and pose risks to buyers. Turkish law requires that any outstanding taxes be cleared before ownership is transferred.
Property Tax Clearance: Ensure there are no unpaid property taxes by requesting a tax clearance document from the local municipality.
Utilities and Maintenance Fees: Check if the property has outstanding utility bills or unpaid maintenance fees, especially in apartment buildings or gated communities where shared expenses are common.
4. Building Permit and Compliance Verification
Verifying the property’s compliance with Turkish building and zoning regulations is essential. Properties that lack proper permits may face penalties or even demolition orders.
Construction Permit: Confirm the property has a valid construction permit, especially if it’s a new or recent build.
Building Compliance Certificate: This certificate, issued by local authorities, confirms the building’s adherence to Turkish building codes and zoning laws.
Earthquake-Resilience Report: Turkiye is in a seismically active region, making it essential for buildings to comply with earthquake-resistant standards. Request this report for added safety.,
5. Property Condition, Structural Inspection, Defects in the Real Estate
A comprehensive property inspection ensures there are no hidden issues that could incur high repair costs after purchase. This is particularly relevant for older properties that may require renovations.
Care should be taken to avoid defects in the purchased real estate. There may be obvious defects that can be easily detected, or there may be hidden defects that are not immediately visible. If such a situation is encountered, it will be necessary to initiate a legal process in due time. However, legal processes will require labor, time and money. For this reason, you should be careful about defects before buying.
6. Legal and Contractual Review
To mitigate risks and ensure that transactions comply with legal requirements, it is useful to seek legal advice. Within this framework:
Drafting and Reviewing Contracts: Ensure all terms, conditions, and responsibilities are clearly defined in the contract. Clauses should specify the property details, price, and payment terms, as well as any agreed-upon repairs or modifications.
Notarization Requirements: In Turkiye, all real estate contracts must be notarized to be legally enforceable. This includes any agreements made before the final purchase contract.
Double Sale Prevention: Make sure that the property has not been sold to multiple buyers. Unfortunately, this risk exists in some markets, especially when dealing with new constructions.
7. Power of Attorney Considerations for Foreign Buyers
If you’re a foreign buyer who can’t be in Turkiye for the entire transaction process, consider granting power of attorney (PoA) to a trusted representative or lawyer.
The person to be entrusted with power of attorney must be trustworthy. It will be useful if this person has a reference. In particular, working with lawyers who are registered with the bar associations in Turkey will minimize reliability concerns.
In any case, the limits of the power of attorney may be considered. Particularly in the case of powers of attorney granted to non-lawyer representatives, it may be considered that the powers should be limited to the transaction to be carried out.
Finally, a time limit may be imposed on the power of attorney. For example, if the transactions are expected to take 2-3 months, a power of attorney valid for up to 1 year may be considered.
8. Municipality and Utility Registration
After the purchase is complete, make sure to register the property with the local municipality and utility providers to ensure all ownership records are updated.
Municipal Registration: Register the new ownership with the local municipal office. This is essential for property tax records.
Utility Transfer: Transfer all utility subscriptions, including water, electricity, and gas, into your name. This prevents unpaid bills from previous owners from becoming your responsibility.
9. Insurance and Earthquake Preparedness
In Turkiye, earthquake insurance is mandatory for all properties, and it’s wise to also consider other forms of property insurance to cover additional risks.
Compulsory Earthquake Insurance (DASK): This insurance policy is mandatory, covering property damage due to earthquakes. Ensure your policy is active and up-to-date.
Comprehensive Property Insurance: Consider additional coverage for fire, theft, and other risks. This is especially beneficial for high-value properties or those located in areas prone to natural disasters.
10. Understanding the Purchase Process and Timeline
In Turkiye, the property purchase process involves several steps that require careful planning and attention. Here’s a basic outline of the typical transaction flow:
Pre-Agreement: If both parties agree on terms, a pre-agreement contract may be signed, often with a deposit.
Due Diligence: The buyer completes all necessary checks, as outlined above, with support from legal advisors and property inspectors.
Final Purchase Agreement: Once due diligence is complete, a final purchase agreement is signed and notarized.
Title Transfer: The title transfer occurs at the Land Registry Office with both parties or their authorized representatives present.
Final Payment: The remaining balance is paid upon completion of the title transfer.
11. Are Annotations Always Risky?
Annotations (records) can be recorded on the title deeds of real estates. These annotations are recorded on the title deed to inform potential buyers and interested parties.
For example, a lawsuit involving real estate may be annotated. If a property has “family residence” status, this can be annotated on the title deed. A lease agreement may be annotated on the title deed. As in these examples, there may be many records in the title deed.
We would like to point out that an annotation on the title deed alone is not a reason not to buy. Giving up the real estate immediately because there is an annotation may cause you to miss some opportunities. It is necessary to look at the source of the annotation and whether it has an impact on the real estate.
Again, if there is an annotation imposed by the courts, it will be useful to examine the relevant case file and evaluate the risk. There may be annotations that do not affect the condition and value of the real estate and do not pose a risk. Therefore, it is necessary to examine the annotations on the title deed and, if necessary, get information from a real estate consultant or a lawyer about the nature of the annotation and make a decision accordingly.
Disclaimer: The information and opinions on this page are for general information and academic contribution purposes. It may not reflect the views of Otto Law and Mediation. Due to the fact that law is a dynamic field, the information and opinions on the site may be out of date. The articles on the site may not reflect the prevailing doctrine or common judicial practices in that field and may contain the author’s own legal convictions. The information and legal opinions on this site are not legal advice and these contents are not intended to be legal advice. It is recommended to seek professional legal support for specific cases. Otto Law and Mediation or the author of the relevant article are not responsible for the consequences of applying the information and opinions on the site to concrete events. We present it to your information.
