Real Estate Preliminary Sale Contract — Notary Requirement and Annotation on Title Deed

A real estate preliminary sale contract is an important legal instrument in the Turkish legal system that constitutes the preliminary stage of real estate purchase and sale transactions and imposes on the parties the obligation to carry out the sale of a specific property in the future. Article 29 of the Turkish Code of Obligations No. 6098 and Article 1009 of the Turkish Civil Code No. 4721 determine the legal framework of preliminary sale contracts. In this article, we will comprehensively examine the definition, formal requirements, notarial arrangement obligation, annotation on the title deed, compulsory registration, performance lawsuits, and practical issues of real estate preliminary sale contracts.

Definition and Legal Nature of the Real Estate Preliminary Sale Contract

A real estate preliminary sale contract is a preliminary agreement in which one or both parties undertake the obligation to enter into a sale contract for a specific property in the future. Pursuant to Article 29 of the TCO, contracts regarding the future conclusion of a contract are valid and binding on the parties. Unlike the main sale contract, a preliminary sale contract does not directly result in a transfer of ownership; it only imposes on the parties the obligation to enter into a sale contract in the future.

A preliminary sale contract is of an obligatory nature. Through this contract, the parties acquire a personal (obligatory) right against each other. The ownership of the property is not transferred by the conclusion of the contract; the buyer only acquires the right to request a title deed transfer from the seller. This right can, as a rule, only be directed against the counterparty to the contract and cannot be asserted against third parties. However, when annotated on the title deed, this right becomes a right with real effect.

A preliminary sale contract can be structured as imposing obligations on one party or on both parties. In a unilateral preliminary sale, only one party (usually the seller) undertakes the obligation to sell, while in a bilateral preliminary sale, both the seller undertakes to sell and the buyer undertakes to purchase. In practice, mutual (bilateral) preliminary sale contracts are generally preferred.

Notarial Arrangement Requirement

For a real estate preliminary sale contract to be valid, it must be made in arrangement form before a notary. This requirement derives from Article 29/2 of the TCO and Articles 60/3 and 89 of the Notary Law No. 1512. The law requires the same formal requirement for the preliminary contract as prescribed for the main contract. Since real estate sales are subject to official form, preliminary sales are also subject to official form (arrangement form).

The requirement to be made in arrangement form means that the notary personally prepares the document, reads it to the parties, obtains their approval, and seals the document. Preliminary sale contracts made in authentication (certification) form are invalid. The Supreme Court has established consistent precedent on this matter, stating that preliminary sale contracts made in authentication form are absolutely void.

The sanction for non-compliance with the form requirement is absolute voidness. Pursuant to Article 12 of the TCO, contracts made without complying with the form prescribed by law are absolutely void, and either party may assert this voidness at any stage of proceedings. The judge also considers non-compliance with form ex officio. A lawsuit for title cancellation and registration cannot be filed based on an absolutely void contract.

However, within the framework of the good faith principle under Article 2 of the TCC, the Supreme Court also accepts exceptional situations where asserting non-compliance with form constitutes abuse of rights. These situations are quite limited and are evaluated according to the circumstances of each specific case.

Content and Essential Elements of the Preliminary Sale Contract

The essential elements that must be present in a valid real estate preliminary sale contract are as follows:

Identification of the Property: The property subject to the contract must be clearly identified in a manner that leaves no room for doubt. Title deed registration information such as the province, district, neighborhood/village, block, parcel, and map sheet number of the property must be included in the contract. Leaving the property unspecified affects the validity of the contract.

Sale Price: The sale price must be definite or determinable in the preliminary sale contract. If the price has not been determined at all, the contract is considered invalid. However, it is possible to tie the price to objective criteria to be determined in the future (such as expert determination or market value).

Identity Information of the Parties: The identity information of the seller and buyer (full name, Turkish ID number, address) must be completely included in the contract.

Intent of Preliminary Sale: The parties' intent to enter into a real estate sale contract in the future must be clearly expressed. A deadline for when the sale will be carried out may be specified in the contract, although it is also possible not to specify a deadline.

Payment Terms: When and how the sale price will be paid (cash, installments, deferred, etc.) should be specified in the contract. If an installment payment plan will be applied, the installment amounts and payment dates should be written in detail.

Annotation on the Title Deed and Its Legal Consequences

The annotation of a real estate preliminary sale contract on the title deed is based on Article 1009 of the TCC. According to this article, personal rights such as construction in return for land share, real estate preliminary sale, and gift promises may be annotated in the land register. Annotation gives the personal right real effect, enabling the right holder to assert their right against third parties who acquire the property.

For annotation on the title deed, one (or both) of the parties to the preliminary sale contract must apply to the land registry office. The original or notarially certified copy of the preliminary sale contract prepared by the notary is submitted with the application. The land registry office records the annotation in the land register, and the annotation takes effect from this date.

Pursuant to Article 1009/2 of the TCC, the annotation is valid for 5 years from the date of annotation as a rule. Within this period, the main sale contract must be concluded or registration must be obtained by court order. Upon expiry of the 5-year period, the annotation automatically loses its effect and can be deleted ex officio by the land registry office. However, it is not possible for the parties to agree on the renewal of the annotation or for the period to be extended by court order before the 5-year period expires; this period is absolute in nature.

The most important legal consequence of the annotation is that if the property is transferred to third parties after the annotation date, the buyer can assert their right against the new owner as well. In preliminary sale contracts without an annotation, the buyer's right is merely a personal claim against the seller and cannot be asserted against third parties who acquire the property.

Compulsory Registration (Registration by Court Order)

If the seller does not carry out the title deed transfer despite the preliminary sale contract, the most important legal remedy available to the buyer is compulsory registration. Pursuant to Article 716 of the TCC, a person who has a legal basis providing for the acquisition of ownership but whose property has not been registered in their name may file a lawsuit for compulsory registration against the person preventing registration.

A compulsory registration lawsuit (title cancellation and registration lawsuit) is a performance lawsuit in which the buyer, based on the preliminary sale contract, requests the court to cancel the title deed registration in the seller's name and order registration in the buyer's name. The following conditions must be simultaneously met for this lawsuit to be filed:

A Valid Preliminary Sale Contract: The contract must have been made in arrangement form before a notary. Compulsory registration cannot be requested based on a contract that does not comply with formal requirements.

Payment of the Sale Price: The buyer must have fully paid the sale price agreed upon in the contract or prove their readiness to pay. In cases of partial payment, deposit of the remaining amount may be requested.

The Property Being Still Registered in the Seller's Name: If the property has been transferred to a third party, a compulsory registration lawsuit cannot be filed against the seller. However, if an annotation has been made on the title deed, the lawsuit can also be filed against the third party.

Statute of Limitations: Rights arising from the preliminary sale contract are subject to a 10-year statute of limitations pursuant to Article 146 of the TCO. The statute of limitations begins to run from the performance date agreed upon in the contract.

Performance Lawsuit and Compensation

If the seller does not perform the preliminary sale contract (does not carry out the title deed transfer), the buyer has two fundamental options: a claim for specific performance (compulsory registration) or a claim for compensation.

A claim for specific performance is carried out through the compulsory registration lawsuit explained above. In this lawsuit, the court decides on the cancellation of the title deed registration in the seller's name and the registration of the property in the buyer's name. The court decision is submitted to the land registry office, and the registration is carried out.

A compensation claim is asserted under Article 112 of the TCO (liability arising from breach of obligation). The buyer may claim compensation for damages suffered due to the seller's breach of contract. The scope of compensation may include positive damages (the benefit that would have been obtained if the contract had been performed) and negative damages (expenses incurred in reliance on the contract).

A problem frequently encountered by buyers in practice is the property appreciating in value after the preliminary sale contract and the seller preferring to sell to a third party at a higher price. In this case, if no annotation has been made on the title deed, the buyer cannot recover the property from the good-faith third party; they can only claim compensation from the seller. This is why the importance of having the preliminary sale contract annotated on the title deed becomes evident once again.

Termination of the Preliminary Sale Contract

A real estate preliminary sale contract may terminate for various reasons:

Termination by Performance: The preliminary sale contract achieves its purpose and terminates upon the conclusion of the main sale contract and completion of the title deed transfer.

Termination by Mutual Agreement: The parties may terminate the preliminary sale contract at any time by mutual agreement (rescission). In case of termination, the parties' obligations toward each other cease.

Statute of Limitations: Rights arising from the preliminary sale contract are subject to a 10-year statute of limitations pursuant to Article 146 of the TCO. Upon expiry of the statute of limitations, the buyer's right to compulsory registration becomes time-barred.

Impossibility of Performance: The contract terminates when performance becomes impossible due to reasons such as expropriation of the property or destruction in an earthquake. In this case, if the debtor is not at fault, the obligation terminates pursuant to Article 136 of the TCO.

Withdrawal from the Contract: If one of the parties breaches the contract, the other party may withdraw from the contract pursuant to Articles 123-126 of the TCO. In case of withdrawal, the parties are obligated to return what they have received.

Relationship Between Preliminary Sale and Construction-for-Land-Share Contracts

In practice, real estate preliminary sale contracts are frequently used in conjunction with construction-for-land-share (construction in return for land share) contracts. The landowner promises to transfer certain land shares to the contractor, while the contractor undertakes to construct a building and deliver certain independent sections to the landowner.

In such mixed contracts, since the preliminary sale element includes the promise to transfer land shares to the contractor, the entire contract must be made in arrangement form before a notary. Construction-for-land-share contracts made in authentication form are invalid due to the preliminary sale element.

It is also possible to annotate construction-for-land-share contracts on the title deed. Within the scope of Article 1009 of the TCC, rights arising from construction-for-land-share contracts may be annotated on the title deed, and this annotation becomes enforceable against third parties.

Foreigners Making Real Estate Preliminary Sale Contracts

The acquisition of real estate by foreigners in Turkey is regulated by Article 35 of the Title Deed Law No. 2644 and related legislation. For foreign natural persons to be able to make a preliminary sale contract, the reciprocity condition must be met between the country where the property is located and Turkey, or permission must have been granted by a Council of Ministers (Presidential) decree.

For foreign nationals to make a preliminary sale contract before a notary, a notarially certified translation of the passport, the presence of a sworn interpreter, and the necessary military restricted zone permits must be obtained. Additionally, the total real estate area that foreign natural persons can acquire throughout Turkey is limited to 30 hectares.

Preliminary Sale in Light of Supreme Court Decisions

The Supreme Court has a rich body of precedent on real estate preliminary sale contracts. Some of the notable decisions are as follows:

The 14th Civil Chamber of the Supreme Court has stated that making the preliminary sale contract in arrangement form is a validity condition, that a contract made in authentication form is absolutely void, and that a claim for compulsory registration cannot be made based on such a contract.

The General Assembly of Civil Chambers of the Supreme Court has ruled that a claim for compulsory registration cannot, as a rule, be accepted in cases where the sale price has not been fully paid, but that registration may be ordered on the condition that the remaining amount is deposited with the court treasury.

The 14th Civil Chamber of the Supreme Court has ruled that the 5-year annotation period for preliminary sale contracts annotated on the title deed is absolute in nature, that the annotation automatically loses its effect upon expiry of the period, and that it may be deleted ex officio by the land registry office.

The 15th Civil Chamber of the Supreme Court has stated that claim rights arising from preliminary sale contracts are subject to a 10-year statute of limitations, that the statute of limitations begins to run from the performance date, and that if no performance date is specified, it is calculated from the date of the contract.

Points to Note in Practice

Important points to note in practice when making a real estate preliminary sale contract are as follows:

It must not be forgotten that the contract must be made in arrangement form before a notary. Preliminary sale contracts made in ordinary written form or authentication form are invalid and produce no legal effect.

It is of great importance that the buyer has the annotation made on the title deed immediately after the contract is concluded. The annotation secures the buyer's right and enables the buyer to assert their right against the new owner if the property is transferred to third parties.

The clear specification of payment terms for the sale price in the contract prevents potential future disputes. In installment payments, the amount, due date, and place of payment of each installment should be specified.

Whether there are any encumbrances (mortgages, attachments, annotations, etc.) on the property must be investigated before the contract is concluded. It is possible to make a preliminary sale contract for a property with encumbrances; however, the responsibility for removing the encumbrances should be specified in the contract.

Considering that the 5-year annotation period is absolute in nature, the main sale contract should be planned to be concluded within this period. Upon expiry of the period, the annotation loses its effect, and the buyer's right reverts to merely a personal claim.

Frequently Asked Questions

Final note: This article has been prepared for general informational purposes and does not constitute legal advice. We recommend that you consult a lawyer for your specific legal issues.