Statutory Pre-emption Right (Şufa) — Conditions of Exercise and Court Procedure

The pre-emption right (şufa) is the priority right to purchase afforded to the other co-owners where one co-owner sells their share to a third party. Learn about the period for exercising the pre-emption right, the court procedure and the requirement to deposit the price under TMK Arts. 732-735.

The pre-emption right, also known as the right of first refusal, is a right giving the other co-owners the opportunity to purchase, on the same terms and in priority, a share in an immovable that one co-owner has sold to a third party. Governed by Articles 732 to 735 of the Turkish Civil Code, the statutory pre-emption right is an important legal institution protecting co-owners by virtue of the nature of co-ownership. It aims to protect co-owners' interests and to prevent the fragmentation of the immovable by preventing the break-up of co-ownership. This right is one of the most important subjects in property law, both because of its deep roots in Turkish legal history and because it arises frequently in practice.

Definition and Legal Nature of the Pre-emption Right

The pre-emption right is a statutory right giving the other co-owners a priority right to purchase where one co-owner of an immovable held in co-ownership sells their share, in whole or in part, to a third party. Under TMK Art. 732, where a co-owner sells their share in an immovable in whole or in part to a third party, the other co-owners may exercise the pre-emption right.

Although the legal nature of the pre-emption right is debated in doctrine, it is accepted to be a formative right exercised by way of an action. The right is attached to the status of co-owner and cannot be transferred to a third party independently of the share. Where a share is transferred or passes by inheritance, the new owner's status as co-owner is assessed together with the timing of the sale and the accrual of the right and with the parties' standing; no absolute rule can be laid down that an accrued pre-emption claim never passes to heirs.

Conditions for the Statutory Pre-emption Right to Arise

Certain conditions must be met together for the statutory pre-emption right to arise. Where all of them are satisfied, the co-owner holding the right may exercise it.

The first condition is that there be co-ownership in shares over the immovable. The statutory pre-emption right does not apply to joint ownership. Where joint ownership is converted into co-ownership in shares, however, the pre-emption right becomes exercisable from the date of conversion.

The second condition is that one of the co-owners has sold their share in whole or in part. Since TMK Art. 732 expressly uses the word “sells”, the pre-emption right arises only in sale transactions. It cannot be exercised in transactions other than sale, such as gift, exchange or division of an estate. The Court of Cassation nevertheless accepts that the pre-emption right may be exercised where a transaction is made in the guise of a gift but is in truth a sale (a collusive gift).

The third condition is that the share has been sold to a third party. Where a co-owner sells their share to another co-owner, no pre-emption right arises. The right may be exercised only where the share is sold to a third party who is not a co-owner. Consistently with the purpose of the right, this rule aims to prevent outsiders from being brought into the co-ownership.

The fourth condition is that the sale was validly effected. No pre-emption right arises from an invalid or void sale. A promise-of-sale contract not registered in the land register does not of itself give rise to the pre-emption right; but once title is transferred on the basis of the promise of sale, the right becomes exercisable.

The Period for Exercising the Pre-emption Right

The statutory pre-emption right is exercised against the purchaser by way of an action. The sale must be notified to the other co-owners by the purchaser or the seller through a notary. The action must be brought within three months of that notification and in any event within two years of the sale (TMK Art. 733). Actual knowledge does not of itself start the three-month period.

The judge requires the sale price and the land registry costs falling on the purchaser to be deposited within a strict period to be fixed. The scope of the price and allegations of collusion as to the price are explained under a separate heading below.

Bringing the Pre-emption Action

The pre-emption right is exercised by way of an action. Under TMK Art. 734 the holder of the right may seek by action an order for registration of the share in their name. The action is brought against the third party (the purchaser) who bought the share. It cannot be brought against the selling co-owner.

The court with subject-matter jurisdiction in a pre-emption action is the civil court of first instance. Venue lies, under HMK Art. 12, with the court of the place where the immovable is situated (exclusive venue). The parties may therefore not conclude a venue agreement, and the court takes lack of venue into account of its own motion.

The statement of claim must state clearly that the claimant is a co-owner, that the defendant purchased the share in the capacity of a third party, the date and price of the sale, that the pre-emption right was exercised in time, and that an order is sought for registration of the share in the claimant's name. The land registry record, the deed of sale and any notification document must be attached.

The Obligation to Deposit the Price

The pre-emption price consists of the sale price in the land register together with the land registry costs falling on the purchaser, and must be deposited in cash within the strict period fixed by the judge. If it is not deposited in time, the action is dismissed. An allegation of collusion as to the price is assessed under the rules on proof against an official deed and on the parties' relationship to the collusion; if the true sale price is established, the deposit may be fixed accordingly.

Cases in Which the Pre-emption Right Cannot Be Exercised

A sale of a share by compulsory auction, a gift, an exchange, division of an estate and other non-sale dispositions do not give rise to the statutory pre-emption right. If the purchaser is already a co-owner, no pre-emption right arises for the other co-owners. A sale to a close relative is not of itself an exception; whether an apparent sale is in truth a gift is determined by concrete evidence.

Contractual Pre-emption Rights

A contractual pre-emption right may be created in writing under TBK Art. 237/3. If annotated in the land register, it may be asserted against subsequent owners on the terms and for the period stated in the annotation; the effect of the annotation is a maximum of ten years. The current documentary and signature requirements of land registry legislation apply to the annotation; it should not be generalised that a notarial instrument is mandatory in every case.

Consequences of the Pre-emption Action

If the pre-emption action is upheld, the court orders registration of the share sold in the claimant's name in the land register. The purchaser's land registry entry is cancelled and the share is registered in the claimant's name. The sale price deposited is paid to the defendant (the purchaser).

Registration in the land register takes place once the judgment becomes final. Finality does not require the parties to exhaust all avenues of appeal; the judgment may become final by a failure to appeal in time, by statutory finality, or by the conclusion of an appeal.

If the pre-emption action is dismissed, the purchaser's land registry entry is preserved; the costs of the proceedings are determined by the outcome and by the Code of Civil Procedure. Where several co-owners exercise the right against the same sale, the bringing and consolidation of the actions, the parties' claims and the sums deposited are assessed together; no single rule can be laid down that the share sold is automatically divided equally in every case.

Allegations of Collusion in Pre-emption

In practice it is frequently seen that sellers and purchasers carry out various collusive transactions in order to prevent the exercise of the pre-emption right. Presenting the sale as a gift, showing the sale price far above the true value, and selling the share first to a close relative and then transferring it to the true purchaser are the foremost of these.

Where it is alleged that a sale was presented as a gift, the holder of the pre-emption right must prove by proper evidence that the transaction was in truth a sale. Kinship, or the apparent gift, is not of itself proof of a genuine sale. An allegation that the sale price in the land register was collusively inflated is examined having regard to whether the claimant was a party to the transaction and to the rules on proof against an official deed. If collusion is proved, the amount to be deposited may be fixed by the court on the basis of the true sale price and the land registry costs falling on the purchaser.

Proof and Evidence in a Pre-emption Action

Co-ownership and the sale are proved by the land registry record and the official deed of sale; the notarial notification by the certificate of service. The three-month period starts only with the notarial notification; where there is no notification, the date of actual knowledge does not start the three-month period, but the two-year long-stop period from the sale continues to run. Allegations that the transaction was a gift or an exchange, that the price in the land register was collusively stated, or that the purchaser was already a co-owner, are assessed under the rules of proof in the Code of Civil Procedure.

Frequently Asked Questions

When does the three-month period begin?

From notification of the sale by the purchaser or the seller through a notary.

What is the long-stop period?

Two years from the sale.

Is there no pre-emption right on a sale to a close relative?

Kinship alone does not extinguish the right; whether the transaction was a genuine sale is examined.

How is a general waiver made?

In official form and by annotation in the land register.