Be careful about the initial contracts for the sale of real estate in Turkey!

Our foreign investor clients in Turkey often present a legal problem with an invalid initial contract for the sale of real estate, within the “initial sales contracts” used for unfinished real estate projects.

Since these projects have not yet been completed, it is impossible to transfer ownership to customers through a sales contract, because the initial sales contract simply means a contract that includes a promise from the vendors / developers that they will deliver a real estate project in the future, and customers have to pay in advance.

This method is used for many projects being developed in Turkey - especially in Istanbul - for two reasons:
- It is relatively cheaper to buy an apartment or other unfinished projects. It is therefore a better investment.
- Thanks to some amendments to the regulations, it is now possible to use initial sales contracts to apply for Turkish citizenship through investment.

However, as mentioned above, there are many legal problems arising from initial sales contracts. For example, foreign investors face some legal problems because they have a serious lack of knowledge and do not know what points they should be very cautious in signing these contracts.

When property developers or brokers mislead or deceive foreign investors, they are not aware of potential legal problems. Below we will attempt to record several important points on this to assist potential investors and investors who are already facing legal problems:

• First and foremost; the initial sales contract must be completed on a formal written form, most importantly through the Notary Public. The parties to the contract cannot complete it without the use of the official form, and they cannot do it alone; the initial sales contracts must be prepared and verified by the public notary.

• There are some basic elements that must be provided in the contract; however, these elements need not be mentioned here, as the notary public instructs the parties and provides them with an official form once they have requested it.

• Foreign investors must keep a copy of the contract and all related documents.

• If investors do not comply with the above official requirements, their contracts will be technically null and void! Of course, this would threaten the investor's legal rights arising from the contract.

What happens to investors who have already signed such contracts because of their lack of awareness? Have they lost all their investment and rights because their contracts are null and void? Answer: They should worry, but without fear: No, because they have not lost everything they have paid, thanks to some customer protection laws in Turkey; these laws protect the "goodwill" of customers to some extent.

• Foreign investors should, in such a situation, promptly prosecute developers who do not deliver projects according to their promise, claiming that the contract is null and void and the client has no right. This litigation is worrying, but it is the only way to recover the payments made.

• Payments can still be fully recovered; however, even though not entirely impossible, they are unlikely to receive penalties through a lawsuit, mainly due to the terms of the penalties in the contract, which are also considered null and void.

In conclusion, it is best to be aware from the outset of the legal requirements of the initial sales contracts, so as not to face any problem in the future. However, for those who are already facing legal problems - due to null and void initial contracts - the best thing to do is to initiate legal action as soon as possible.

Last but not least .. In order to win such claims; it is extremely important to keep all bills / receipts of payments as well as bank records, and all records of written communication with property developers or real estate agencies.

• It is also very important to make any payments to a bank account of a developer in the name of a developer or an account in the name of an individual officially responsible for that company.

• In explaining each payment through the bank, the purpose of payment must be clearly written.

• If payments are made in cash, invoices / receipts must be taken immediately against such payments.

• All communications with property developers / agencies should be written, preferably by email; this is extremely important to establish certain facts during litigation.