Inheritance Rights of Non-Turkish Citizens on Properties Located in Turkey
It is necessary to determine whether there are any restrictions in the legislation of the law of foreigners of the country where the Heritage is located regarding the transition of the Heritage to the non-Turkish citizen inheritors. For instance, pursuant to Article 35/1 of the Land Registry Law numbered 2644, for the transition of immovable properties to non-Turkish citizen inheritors, (i) those inheritors must be the citizens of one of the countries determined by the President of the Republic in terms of international bilateral relations and in cases where the interests of the country require it, and (ii) the total area of the immovable properties and independent and permanent limited real rights must not exceed 10% of the area of the district subject to private property and 30 hectares per person throughout the country. Another example is, pursuant to Law on Prohibited Military Zones and Security Zones numbered 2565, the transition of immovable properties located in prohibited military zones, military and private security zones and strategic zones to non-Turkish citizen inheritors is subject to prohibition or permission depending on the nature of the immovable properties.
In an event where the inheritors decide to exercise their right to use the Heritage, they must obtain a certificate of inheritance in Turkey. The certificate of inheritance is a document shows who are they to the legator and the proportion of the inheritance, and it can be obtained at any time after the death of the legator by at least one of the inheritors by applying to the competent Turkish civil court of peace with a certificate of inheritance or a corresponding document, which are either court order or administrative document duly issued by courts or administrative authorities of the country where the legator is a citizen.
Upon receipt of the certificate of inheritance, the Heritage shall be transited to the inheritors in proportion to their shares and all of the inheritors shall be joint owners on the Heritage. This transition is subject to inheritance and transfer tax in accordance with Article 1 of the Inheritance and Transfer Tax Law numbered 7338 (“Law”). Within this framework, the inheritors must submit an inheritance and transfer tax declaration on the Heritage for the amounts exceeding the exemptions regulated in Article 4 of the Law, within the periods regulated under Article 9 of the Law and pay the said tax at the rates regulated under Article 16 of the Law.
After the transition of the Heritage to the inheritors, if the inheritors decide to exercise not only the right of use but also the right of disposition over the immovable properties and registered movable properties, they must not only obtain the certificate of inheritance but also register such properties in their own names at the land registry or notary in proportion to their shares.
Turkey: The Legal Aspect of Sublease Agreements
The sublease agreement is the fully or partial lease of a leased property to third parties by the lessee who is a party to the main lease agreement. Article 322 of the Turkish Code of Obligations (“TCO”) regulates the sublease agreement and accordingly the conditions under which sublease agreement can be made are specified as;
- “The lessee may lease the leased property to someone else fully or partially, as well as transfer the right of use to someone else, provided that it does not lead to a change that will harm the lessor.
- In residential and roofed workplace leases, the lessee may not lease the leased property to another person or transfer the right of use without the written consent of the lessor.
- If the lessee uses the leased property in a manner other than the granted subject, the lessee shall be liable to the lessor. In this case, the lessor can also use the rights he/she has against the lessee to the sub-lessee or the transferee.”
Although it is stated in the article that the leased property may be transferred where there are no changes that may harm the lessor, for residential and roofed workplace leases, the written consent of the lessor must be obtained.
There are two parties in both main lease agreement and the sublease agreement. However, the de facto relationship between these agreements arises from the fact that one party is a party to both contracts at the same time and the performances subject to both agreements are partially harmonised. Therefore, the main lease agreement and the sublease agreement are de facto, if not de jure, interdependent and the obligations under both agreements affect each other.
i. Legal Nature of Sublease Agreement
According to the sublease agreement’s legal nature, it is a lease agreement. As a lease agreement, the sublease agreement is by mutual and appropriate declarations of will of the parties, it imposes obligations on both parties, therefore it is accelerated. The difference of the sublease agreement from the lease agreement is that the main-lessee of the actual lease agreement is become a sub-lessor in the sublease agreement and the lease right of sub-lessor is arising from the main lease agreement.
ii. The Relation Between the Main Lease and the Sublease
The relation between the main lease agreement and sublease agreement, shall be examined under four sub-sections which are parties, subject, content and duration of both agreements.
a. Parties
1. In Terms of the Main Lessee and Sub-Lessee
Sublease agreement is an agreement concluded between the main-lessee and the sub-lessee. The party who is the lessee in the main lease agreement becomes the sub-lessor. This does not establish a direct legal relationship between the lessor and the sub-lessee. On the other hand, even if the party who has the title of sub-lessee subsequently concludes another lease agreement with the main-lessor, this does not eliminate the liability of the party who has the title of sub-lessor.
The addressee of the sub-lessee is the main-lessee who partially or fully leases the leased property. The reason is that, the main-lessee is in the position of the "lessor" to the sub-lessee and has the same responsibilities and rights as the main-lessor. The sublease agreement is entirely subject to the provisions of the main lease agreement. The fact that the lessee has partially or fully leased the leased property does not eliminate its contractual connection with the lessor. The main lease agreement retains all its provisions.
2. In Terms of Main Lessor and Sub-Lessee
Even though the sublease agreement is an agreement concluded between the sub-lessee and the main-lessee, in some cases, the lessor has the right of direct claim against the sub-lessee, even though the main lessor is not a party to the contract. Accordingly, the main-lessor has the right to apply directly to the sub-lessee and ask him/her to act in accordance with the agreement. As a matter of fact, as can be seen in Article 322; “If the lessee uses the leased property in a manner other than the granted subject, the lessee shall be liable to the lessor. In this case, the lessor can also use the rights he/she has against the lessee to the sub-lessee or the transferee”. Accordingly, if the sub-lessee fails to use the property in accordance with the agreement, the sub-lessee shall be liable to the main-lessee for breach of the sublease agreement. The lessor's right of claim is based on the ownership of the premise. In line with the powers granted by the ownership right, the main-lessor has the right of direct claim to the sub-lessee, even though he/she is not a party to the sublease agreement.
Another right of the lessor against the sub-lessee is the right of retention. As a matter of fact, pursuant to Article 336; "... The lessor's right of retention covers the movables of the same nature brought by the sub-lessee to the leased property, provided that it does not exceed the sub-lessee's rent debt to the main-lessee..."
It is regulated that the right of retention in question is on the movables that are in the possession of the lessor and are used for the furnishing or the leased property, as a security of a one-year and six-month rent in progress. However, in any case, it is made possible to use the right of retention provided that the sub-lessee does not exceed the rent debt to the main-lessee.
b. Subject
The subject matter of the sublease agreement is the partial or full lease of the leased property to another person. However, it is limited to the subject matter of the main lease agreement, and is prohibited by law to include a contrary commitment in the sublease agreement.
c. Content
Pursuant to Article 322, since a sublease agreement may only be concluded on the condition that it does not harm the main-lessor, the rules applicable to the main lease agreement shall apply even if the sublease agreement has different provisions from the main lease agreement. However, this does not affect the independence of the sublease agreement.
d. Duration
Considering that the right of use of the sub-lessee arising from the sublease agreement is limited to the right of use of the main-lessee obtained under the main lease agreement, the duration of the sublease agreement will exist within the duration of the main lease agreement. Within the established practices of the Supreme Court, the termination of the main lease agreement also terminates the sublease agreement. Therefore, it should be accepted that the lessor has the authority to remove the sub-lessee from the immovable (leased property) upon the termination of the lease.
iii. The Context of Roofed Workplace and Sublease
The context of a workplace, is a place where an economic activity of a commercial or industrial nature is carried out. Pursuant to Article 322, it is regulated that the main-lessee may not sublet the roofed workplace without the written consent of the main-lessor and may not transfer the right of use. Accordingly, written consent is a condition of validity for the sublease agreement. However, the written consent may also be given after the date of the signatures. It should be noted that the main-lessor's verbal consent is not valid. The Supreme Court practice indicates the following;
“... According to Article 322 of the TCO, sublease can be defined as the lessee renting the leased property to a third party with the written consent of the lessor in residential and roofed workplace leases.” (6th Civil Chamber of the Supreme Court E. 2015/4040 K. 2015/5966 T. 16.6.2015)
If, without the written consent of the lessor, the main-lessee concludes a sublease agreement in roofed workplace leases, this agreement will be deemed invalid and the main-lessee will be in breach of the main lease agreement. In cases where the main-lessee does not comply with the sublease prohibition, the main-lessor should take legal remedies without delay upon learning of this situation. The main-lessor's silence for a long period of time may be interpreted as consent to the sublease. Within the scope of Article 316, the main-lessor is required to notify the main-lessee in writing that the agreement will be terminated if the main-lessee fails to remedy the breach by giving at least thirty days' notice.
iv. Transfer of the Sublease and Relationship of the Lease
It is often assumed that the concepts of sublease and the assignment of the lease relationship have the same meaning. However, sublease and assignment of the lease relationship have different legal conditions. Accordingly, the transfer of the lease relationship is regulated under Article 323 as follows; “The lessee cannot transfer the rental relationship to another person unless he obtains the written consent of the lessor. The lessor cannot refrain from giving this consent unless there is a justifiable reason in the workplace leases… in workplace leases, the transferring lessee shall be jointly and severally liable with the transferee until the end of the lease agreement and for a maximum period of two years...”
Furthermore, the assignment of the lease agreement causes fundamental changes in the agreement. In the sublease agreement, the lessee, while retaining the title of lessor, signs a sublease agreement with a third party and obtains the title of sub-lessor within the sublease relationship. In the assignment of the lease agreement, the lessee loses the title of lessee with the assignment of the contract with its receivables and debts and are transferred to the lessee to whom the contract is transferred prospectively. The decision of the 6th Civil Chamber of the Supreme Court numbered 2015/4040 E.2015/5966 K. indicates accordingly;
“In the transfer of the tenancy, all the rights and obligations of the first lessee passes to the transferee lessee, and the transferee lessee becomes responsible to the lessor."
In accordance with the Supreme Court’s decision, all rights and obligations of the first lessee (main lessee) passes to the transferee lessee which becomes responsible to the lessor until the end of the lease agreement. In a situation where a party has a disagreement with the other, what are the processes for taking legal actions? On May 5th 2023, the Ministry of Justice announced that any disputes arising out of the lease agreement shall be included within the scope of mandatory arbitration as a pre-liminary condition of litigation stage. In other words, the party at first shall need to apply to an arbitration centre from the local court as a mandatory stage prior to filing a lawsuit. After the conclusion of the arbitration stage and concluded as “no agreement was made”, the party who files a lawsuit is obliged to attach the original or a copy approved by the arbitrator of the final minutes at the end of the arbitration to the lawsuit petition.
v. Conclusion
Sublease agreement is an agreement concluded between the main-lessee and the sub-lessee. In order for the sublease agreement to be valid in residential and roofed workplaces, the written consent of the main-lessor is required. Although there is no direct legal binding between the main-lessor and the sub-lessee, in some cases, the main-lessor has a right to claim against the sub-lessee. For example, the right of retention and the right of claim.
The subject matter of the main lease and the sublease agreement is the leased property. In terms of its content, the sublease agreement cannot contain more severe provisions than the main agreement or provisions that may harm the main lessor. In addition, the duration of the sublease agreement cannot be longer than the main lease period. In accordance with the legislations and regulations, any disputes arising out of the lease agreement shall be included within the scope of mandatory arbitration as a pre-liminary condition of litigation stage.
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Inheritance Rights of Non-Turkish Citizens on Properties Located in Turkey
In cases where the legator and the inheritors are non-Turkish citizens, it is first necessary to determine which country's law shall be applicable for the transition of the inheritable properties located in Turkey (“Heritage”) to the inheritors. Within this framework, pursuant to Article 20 of the International Private and Civil Procedure Law numbered 5718, Turkish law shall apply for the transition of immovable properties and for the transition of movable properties, the national law of the deceased/legator shall apply.
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Determination of the Acquisition Date for Gains from Appreciation
Pursuant to the Repeating Article 80 titled "Gains from Appreciation" of the Income Tax Law No. 193 ("Law"), it is regulated that the gains arising from the disposal of certain goods and rights specified in the Law are considered as gains from appreciation and these gains are taxable income.
In this context, regardless of the method of acquisition (except for those acquired gratuitously), the gains arising from the disposal of goods such as lands, buildings, mines, quarries, ships and rights registered as real estate, the details of which are listed in Article 70 of the Law, within five years starting from the date of acquisition, are considered as gains from appreciation.
The term "disposal" in this article refers to the sale, assignment for consideration, bartering, expropriation, and capitalization in trade companies of the above-mentioned goods and rights.
However, in practice, it is observed that the beneficiaries are uncertain about the calculation of the relevant five-year period and request an opinion from the Revenue Administration or the relevant authorities in order to resolve the hesitations regarding the starting date of the five-year period.
The opinions of the relevant authorities include following statements in sum;
“Even if the date of acquisition in real estates is accepted as the date of registration to the title deed and these dates are first acquisition dates of the real estate, if any type change is made on the title deed records as a result of the zoning application of the municipality regarding the real estates in question; the registration of the said zoning change to the title deed shall be considered as a new acquisition and the gain to be obtained from the sale of the said real estates within 5 years from the date of the type change shall be taxed as gain from appreciation in accordance with… "
(Izmir Tax Office Directorate - Date: 12.08.2020 - Subject: Regarding the date to be taken into consideration as the date of acquisition in the sale of real estates located within the zoning plan but not yet subject to the zoning application).
As seen in the opinion issued by the relevant authority on whether the gain obtained shall be considered as gain from appreciation and whether it shall be subject to tax in this discretion; the date of the beginning of the relevant five-year period is accepted as the date of the type change on the title deed records as a result of the zoning application, not the date of the first acquisition of the real estate.
Other opinions of the authorities on this subject, it is seen that the subject is evaluated in a similar manner and the starting date is taken as the date of the change of type:
“The date on which the field registered in your name in the title deed is assigned and registered in your name as a cherry orchard within type classification is accepted as the date of acquisition and the gain obtained from the transfer to other shareholders within 5 years is declared as gain from appreciation...”
(Manisa Tax Office Directorate - Date: 16.06.2016 - Subject: Gains from Appreciation) In this respect, it is seen that with various opinions, the view that the date of registration of type change (i.e. the transition from field to land) to the title deed is taken as the date of acquisition of the real estate, not the date of the first acquisition. However, it is clear that this view is not correct. In any case, if there is an issue with the tax administration, a lawsuit should be filed and the judgement of the judiciary on the concrete case should be requested. Otherwise, it will be against the beneficiaries to accept the acquisition date as the date for any change to be registered.
