Cautionary Tales from the Turkey CIP: Avoid These 5 Common Mistakes

 

The Turkish CIP is considered one of the simplest, fastest, and most straightforward CIPs globally; the colossal number of applications is a testament to that. But just in case you thought the world’s most applied-to citizenship by investment program was devoid of pitfalls, I’ve compiled a set of illustrative anecdotes to disabuse you of such notions.

Schrödinger’s Passport

As per my calculations, based on sporadic statements from Interior Minister Süleyman Soylu, the Turkish CIP has a rejection rate of about 9%. In this instance, however, you should not interpret the word ‘rejection’ literally because the Ministry has not outright declined most of those 9% of applications. The government, you see, is not in the habit of issuing rejection letters unless an applicant’s legal representative explicitly requests it. No notification system is available, and it is up to you to keep tabs on your file. If the wait for a government response drags on for many more months than what’s customary, therefore, one of two things are most likely to have happened:

  • There was a legitimate delay, perhaps due to lack of capacity; or
  • The application has longe-since been rejected.

If your file has been rejected, it is relegated to a legal purgatory of sorts, and a situation arises in which you, simultaneously, both may or may not still be in line for a Turkish passport. There’s no way to know until you “open the box” by proactively requesting information.

You pay, or you’ll pay

One of the program’s most redeeming features is that virtually any property on Turkish shores counts as an eligible investment. But it’s still perfectly possible to acquire a qualifying property, pass due diligence muster, and still get rejected because of innocuous procedural mistakes. 

A vital requirement to qualify under the program is providing proof that the principal applicant himself has paid at least US$250,000 for a property.

One applicant, who did not fully grasp this requirement, had his brother purchase the property on his behalf. The brother transferred the funds from his account and had the deed drafted in the principal applicant’s name. This procedure, however, resulted in the CIP application’s banishment to that legal Siberia, in which it would linger as not officially rejected but not approved either. The applicant, lawyer, and developer had to resell the property and transfer the funds once more for the application to get approved, losing precious time and money along the way. This applicant was lucky, as another developer may not have agreed to undergo this tedious process, having already made their profit.  

The unseen lien

In an application that, you’d think, should be an open-and-shut case, one investor spent an astonishing US$2 million acquiring Turkish property only to see his citizenship petition rejected, ironically, because of insufficient investment. The applicant, who bought ten units and invested eight times the minimum amount, was understandably baffled. What happened?

It turned out that there were mortgages on all of the units, nearly matching the value of the purchase. These mortgages were excluded from the title deeds because of the outstanding debts of the developer. 

When there is a mortgage on a title deed, the government values the property to be the purchase price minus the mortgage value. For instance, if a property is sold for US$250,000 but has a mortgage of US$120,000 pertaining to it, the government values the property at US$130,000. Only once the mortgage is fully paid is the property valued at its original purchase price.

In this unfortunate investor’s case, the value of the US$2 million acquisition net of mortgages was less than US$200,000. As a consequence, he did not meet the minimum investment criteria for an application that would have gone above and beyond in any other circumstance.

But no cigar

The Ministry of Urban and Environmental Affairs (MUEA) rejected a case of an investor who purchased a property worth US$250,000 because it did not meet the investment criteria. There were no mortgages this time around. Rather, the rejection resulted from a property valuation report gone awry.

While the property’s purchase value was US$250,000, the authorized appraiser returned a valuation of US$245,000, just US$5,000 short of the mark. This variance had occurred because of short-term fluctuations in the exchange rate between the US dollar and the Turkish lira, the latter famous for its rollercoaster-esque caprices. The investor then had to supplement his purchase with an additional US$30,000 acquisition, and you can bet your last lira it was not a penthouse in Taksim. 

Buying property for US$10-30,000 above the minimum can mitigate the risk of property valuations dropping before the Ministry gets a look at your application. Better safe than sorry.

The mediocre broker

It is splendid when the stars align; complete application, sufficient investment, and proper property valuation. But what happens when a middle-man messes that up?

An investor using a broker’s help transferred half of the investment amount to the developer and half to the broker, the latter agreeing to transfer it to the developer on the investor’s behalf. 

As alluded to earlier, officials at the Ministry of Interior are sticklers for the rule that says investors must themselves pay the seller directly, and in their own names.

An investor can use an intermediary in the form of a lawyer armed with an ironclad power of attorney (POA). A broker who does not have the authority to act on the investor’s behalf legally does not factor into the equation. This procedure leads to a merry-go-round of reselling, repurchasing, and re-transferring amounts to meet the requirements.

The Turkish CIP’s greatest power is also its Achilles heel; as the open market allows investors to pick and choose almost any type of property, it also creates a chaotic ecosystem that is difficult to navigate. 

More Opinion

Post Grid lazy load

İsrafil Kahraman recounts five anecdotes of investors who had their Turkey citizenship applications rejected because of simple mistakes.

When Nuri Katz was asked how big his company is compared to others int he business, he didn’t know how to answer. So instead, he wrote an article for IMI in which he offers a more nuanced response.

Angie Rupert writes about how vaccinations, an immigration-friendly government, and a forecast post-pandemic consumption boom could spur a new wave of immigrant entrepreneurs.

 

The post Cautionary Tales from the Turkey CIP: Avoid These 5 Common Mistakes appeared first on Investment Migration Insider.