Tapu Property Valuations – Investors Beware!

Turkey property developmentsThe Tapu is one of the most important documents you can have when investing in Turkey property, but what happens when the details are incorrect? Should we just shrug our shoulders and say ‘that’s the way Turkey is.’

It is easy to get carried away when investing in overseas property, we often only focus on the cash we will make from an investment in growing property markets in Turkey. The property doesn’t cost much and we’ll cover the costs when we rent it out so what is there to worry about?

When it comes to your money, being complacent is not the best way to go as some unfortunate investors in Turkey have realised.

Like any legal document, the Tapu needs to be in order otherwise it can have a major impact on things like your future tax liability both in Turkey and in your home country.

While investing in Turkey can be a very straightforward process if you use a reputable agent, I have known a lot of people who chose to go it alone and ended up getting confused about why they had paid more for their property than the value stated on their TAPU.

Say for example you have just invested in a new build property costing £70,000. If you look closely at your Tapu the value is stated as 70,000 YTL. This means the actual value of the property on your legal documentation will be shown as the equivalent of £24,000.

Mr friendly developer might put an arm around you and say “hey forget about it, this is just how things are done here, nothing to worry about. Between you and I we do it to avoid paying too much tax on the sale.”

Things might work out ok in the short term, after all you have the legal documents you need and can happily start enjoying the returns on your investment. The developer is happy because he gets to keep more of the profit from the sale.

But what happens, if say less than 5 years later you decide you want to sell? The picture then gets a lot muddier. You dig out the Tapu, however you don’t speak Turkish and can’t understand what is written.

Still at least you will have nearly 5 years of capital growth on your investment to fall back on if there are any problems.

The likelihood is you will need it.

There is now a real possibility that your investment will be liable for CGT, not on the profit you made over and above the £70,000 you originally paid, but also on the difference between that and the original Tapu valuation of £24,000 Mr friendly developer told you not to worry about.

So how do you avoid this happening?

Make sure you hire a good lawyer to make sure all the paperwork including the Tapu is 100% correct. This way you will avoid any headaches when it may be time to sell in the future.

Click here to review our Turkey property portfolio.

Have you ever had a problem with a Tapu valuation? Please leave your comments below.

Kind regards
Brett Tudor

Property Expert

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