NORTHERN CYPRUS’S NEW REAL ESTATE LAWS

In-Depth Look at Northern Cyprus’s New Real Estate Law for Foreign Investors

The Northern Cyprus Turkish Republic has recently passed a pivotal amendment to its laws governing foreign investment in real estate, specifically targeting the acquisition and long-term leasing of immovable property by foreigners. Published in the Official Gazette on May 21, 2024, this legislation marks a significant evolution in the regulatory framework. Here’s a comprehensive breakdown of the key components and their implications for foreign investors:

Detailed Amendments and Key Figures:

1. Definitions and Scope:

• The concept of ‘Region’ has been expanded to include districts, sub-districts, villages, neighborhoods, and military areas.
• ‘Immovable Property Acquisition’ now covers all transactions that establish real rights over property.
• The term ‘Foreigner’ is now clarified as any natural person who is not a citizen of the Northern Cyprus Turkish Republic, extending to include foreign legal entities. Additionally, for the purposes of this law, the trustee of a foreigner is also classified as a foreigner.
• The definition of ‘Foreign Legal Entity’ is broadened to encompass any company formed or registered within the Northern Cyprus Turkish Republic that is either partially or wholly owned by foreign persons. This includes companies where the majority of directors or those in similar authoritative roles are foreigners, or where the majority of voting rights are controlled by foreigners or their representatives.

2. Investment Requirements:

• On a related note, ‘Investment’ is defined as committing at least 20,000,000 Euros to sectors like tourism, education, health, industry, agriculture, technology, or research and development. Notably, the construction and sale of residential properties do not qualify as investments under this revised law.
• Furthermore, a ‘Trustee Agreement’ is detailed as an arrangement compliant with this law, wherein the property a foreign individual or entity intends to buy is held in trust. The individual or entity holding the property under such an agreement is recognized as a trustee or similar within the confines of this law

3. Property Acquisition Restrictions:

• The sale of agricultural lands and forests to foreigners is now prohibited.
• The Council of Ministers is authorized to designate specific regions where foreign acquisition of immovable property is restricted, except through inheritance, to safeguard national security, public interest, or public order. Such restrictions will be communicated through regulations published in the Official Gazette. Registrations in violation of these regulations will be considered invalid.
• The total area of immovable property available for sale to foreigners within any district is limited to 7% of that district’s total area and 3% of the total national area. Any registrations that exceed these limits will be deemed invalid

4. Acquisition Process and Conditions

Section 8 of the Principal Law is repealed and replaced with the following stipulations concerning the purchase of immovable property by foreign individuals or legal entities:

1. Eligibility for Property Purchase:
   • Land: Foreigners may purchase land up to 1338 square meters, suitable for constructing only one house, provided the land complies with existing construction permits.
   • Apartment: A foreign individual or entity is permitted to purchase one apartment. However, citizens of countries that recognize and have reciprocal agreements with the Northern Cyprus Turkish Republic may purchase up to three apartments.
   • Detached House: The purchase of a detached house is permissible on land not exceeding 3300 square meters, with no allowance for additional buildings on the property.
2. Condominium or Equivalent Ownership: Prospective buyers must establish condominium or equivalent ownership status as per the Condominium and Equivalent Ownership Law prior to application.

Procedural Requirements and Fees

1. Application Process:
   • Applications for property purchase must be submitted online through the Ministry’s automation system, accompanied by necessary documentation such as title deeds or equivalent ownership proofs.
   • Applicants are required to pay a service fee equivalent to half of the gross minimum wage at the time of application. This fee is split, with half going to the Compensation Fund for Immovable Properties and the remainder used for services related to immovable property administration.
2. Additional Requirements:
   • Applicants must provide criminal record certificates and positive security investigation results from their home countries. Applications will be rejected if the security investigation yields negative results.
3. Transfer of Property:
   • The property transfer must be completed within six months following the publication of the Council of Ministers’ decision in the Official Gazette. This transfer should be processed at the relevant District Land Registry Office. Failure to complete the transfer within this timeframe results in automatic cancellation of the purchase permission.
   • The six-month period commences upon full payment of the purchase price. Additionally, taxes and fees associated with the purchase must be settled within 60 business days from the decision’s publication date, or the permission will be canceled.
4. Reapplication and Restrictions:
   • Entities whose permissions have been canceled due to non-compliance may reapply, albeit with a doubled application fee.
   • Purchases in the form of share certificates for lands are prohibited. However, joint title deeds for an apartment or a detached house can be issued to up to three foreigners.
   • No more than half of the apartments in a single parcel may be sold to foreigners who are direct relatives or of the same nationality.
5. Local and Reciprocal Ownership Quotas:
   • At least 20% of housing units in designated construction areas must be sold to citizens of the Northern Cyprus Turkish Republic or nationals from countries with reciprocal recognition.

Implications for Foreign Investors:

This legislation introduces a more controlled environment for foreign investment in Northern Cyprus real estate, emphasizing significant financial investment and strict compliance with local regulations. The high investment threshold and the specific exclusions underscore a strategic shift towards attracting substantial and high-impact investments while safeguarding local resources and property markets.

Strategic Considerations:

Foreign investors must carefully navigate these new regulations by engaging with experienced local legal and real estate professionals. Understanding these detailed provisions is crucial for compliance and for maximizing the strategic benefits of property investment in Northern Cyprus.

This detailed account provides potential investors with a clear understanding of the recent legislative changes, equipping them with the necessary information to make informed decisions in the Northern Cyprus real estate market.