Legal Preemption Right in Light of Supreme Court Decisions

The preemption right arising from the law is regulated in Article 732 of the Turkish Civil Code No. 4721 titled “Restrictions on the Right to Transfer”. According to the provision, “In case a shareholder in shared ownership sells his/her share in the real estate to a third party in whole or in part, the other shareholders may exercise the preemption right”. As can be understood from the clear wording of the provision, if one of the shareholders who owns a property with shared ownership sells his/her share in the real estate to a third party in whole or in part or if he/she performs a transaction equivalent to a sale on the real estate, the other shareholders may claim the part of the real estate subject to sale (in whole or in part) from the person to whom the real estate is sold by asserting their preemption right.

Based on these explanations in the law, the legal pre-emption right is defined in the doctrine as “a right that, in cases where a shareholder in shared ownership sells his/her share in the immovable property in whole or in part to a third party or transfers it through a transaction economically equivalent to a sale, gives the other shareholder or shareholders the opportunity to purchase this share and acquire its ownership under the same conditions with a decision given upon the lawsuit they file, and is exercised through a lawsuit that arises from the law, is related to the property and creates innovation.”[1]

On the other hand, certain conditions must be met in order to use the legal pre-emption right. First of all, in order to use the legal pre-emption right, there must be a co-ownership relationship on a real estate. Co-ownership is regulated in Article 688 of the Turkish Civil Code No. 4721. According to the provision, “The ownership of a thing that is not materially divided by more than one person in its entirety with certain shares” is defined as co-ownership. In co-ownership, each of the stakeholders has the right to dispose of the thing that is the subject of the property in proportion to their shares.

A co-ownership relationship can be established indirectly through a legal transaction, a decision of an official authority or a court decision, or it can arise from the law. The legal pre-emption right can only be in question in a co-ownership relationship. In other words, a co-ownership relationship does not occur in joint ownership or condominium ownership. However, Article 8 of the Condominium Law states; “In case one of the independent sections of a real estate where condominium ownership is established or a land share to which a condominium easement is attached is sold, the other condominium owners or easement right holders do not have the right to purchase first. In case one of the shareholders of an independent section sells his/her share to someone else, the other shareholders can use the right to purchase first.” This provision clearly states that there is no right of pre-emption in condominium ownership relations, and then regulates that if one of the shareholders of an independent section sells his/her share to someone else, the other shareholders can use the right to purchase first.

On the other hand, the question of when the legal pre-emption right arises is also important. According to the majority view in the doctrine, the legal pre-emption right arises simultaneously with the establishment of the joint ownership as required by law. According to another view, the legal pre-emption right arises not with the establishment of the joint ownership relationship, but when the share is sold to a third party.[2] In its decision No. 2005/8551 and Decision No. 2005/8234 dated 19.09.2005, the 6th Civil Chamber of the Court of Cassation has ruled that the legal pre-emption right arises automatically with the establishment of the joint ownership relationship as required by law, and has set forth the practice of the Court of Cassation on the subject.[3]

The second condition required for the use of the legal pre-emption right is the partial or complete sale of the share on the immovable property or its transfer through a transaction equivalent to a sale. It should be noted that while this condition is met in sales contracts and voluntary auctions; it cannot be met in cases of expropriation and land consolidation that give rise to the obligation to transfer ownership, in cases where the ownership of the share subject to the pre-emption right is transferred to another person by a judge’s decision, in mixed contracts with a predominantly donation nature or in company mergers. Therefore, the pre-emption right cannot be used in these cases.[4]

Finally, the pre-emption right is a right that can only be used by filing a pre-emption lawsuit. Indeed, Article 734 of the Turkish Civil Code stipulates that the pre-emption right can only be used by filing a lawsuit by including the provision “The pre-emption right is exercised by filing a lawsuit against the buyer.” In this context, the pre-emption lawsuit is an innovative lawsuit. While the competent court in pre-emption lawsuits is the court of the place where the immovable property is located, the competent court is the civil court of first instance. It should be noted that the legislator has bound the filing of a pre-emption lawsuit to limitation periods. According to Article 733 of the Turkish Civil Code, “The pre-emption right expires three months after the date of notification of the sale to the rightful owner and, in any case, two years after the sale.” In order for the three-month relative period to begin, the buyer or seller must notify all shareholders of the sale. It should be noted that this notification must be made through a notary. The 3-month limitation period will not begin unless the buyer or seller notifies the rightful owner of the sale through a notary. In such a case, the rightful owner may file the pre-emption lawsuit within 2 years from the date of the sale. In this case, the operation of the 2-year limitation period is not dependent on the notary notification. In this case, the period will begin from the date of the sale.

The important issue in terms of pre-emption lawsuit is the deposit of the pre-emption fee before the decision to register the share is made. This issue is regulated in Article 734 of the Turkish Civil Code, stating that “The pre-emption right holder is obliged to deposit the sales price and the title deed expenses incurred by the buyer in cash to the place determined by the judge within the period determined by the judge before the decision to register the share in his/her name is made.” As can be understood from the regulation in question, it will not be possible for the court to make a decision without the pre-emption fee being deposited. At this point, it is also necessary to clarify whether the pre-emption fee can be given as a letter of guarantee. The General Assembly of the Court of Cassation, in its Merits No: 2009/6-221, and Decision No: 2009/265, Dated 17.06.2009 ruled as follows:

“During the discussion at the General Assembly of the Court of Cassation, it was discussed whether the provision in question, which imposes an obligation on the pre-emption right holder to deposit the sales price and the title deed expenses incurred by the buyer in cash to the place to be determined by the judge, is of a mandatory nature; as a result of the evaluation, the predominant opinion was that the provision in question is not of a mandatory nature, and that in a pre-emption case, if the defendant party explicitly consents, this obligation can be fulfilled by presenting a letter of guarantee.”[5]

[1] Güneri, O. (2021). KANUNDAN DOĞAN ÖNALIM HAKKI İLE SÖZLEŞMEDEN DOĞAN ÖNALIM HAKKI VE BU KAVRAMLARIN MUKAYESESİ. Yeditepe Üniversitesi Hukuk Fakültesi Dergisi, 18(2), p. 1356.

[2] Güneri, O. (2021). KANUNDAN DOĞAN ÖNALIM HAKKI İLE SÖZLEŞMEDEN DOĞAN ÖNALIM HAKKI VE BU KAVRAMLARIN MUKAYESESİ. Yeditepe Üniversitesi Hukuk Fakültesi Dergisi, 18(2), p. 1358.

[3] Court of Cassation 6th Civil Chamber, Merits No. 2005/8551 and Decision No. 2005/8234, Dated 19.09.2005.

[4] Güneri, O. (2021). KANUNDAN DOĞAN ÖNALIM HAKKI İLE SÖZLEŞMEDEN DOĞAN ÖNALIM HAKKI VE BU KAVRAMLARIN MUKAYESESİ. Yeditepe Üniversitesi Hukuk Fakültesi Dergisi, 18(2), p. 1359.

[5] The General Assembly of the Court of Cassation, in its Merits No: 2009/6-221, and Decision No: 2009/265, Dated 17.06.2009.