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Legal ReviewPRE-EMPTION RIGHT

February 24, 20150

The pre-emption right is regulated in our Civil Code as the lien (legal pre-emption right) in common property and contractual pre-emption right where a person assigns a pre-emption right to a third person by a contract without a common property relationship. The scope of the right of pre-emption is to let the owner of the right to claim the sale of a real estate to himself in case if the owner of the real estate sales his real estate or his share in a common real estate to a third person. Another reason for the regulation of the lien in common properties in our code is to prevent third persons to enter into common property relationship.

We will focus on legal pre-emption right in this article as all the provisions on lien will be valid for the use, derogation of contractual pre-emption right as well. We will briefly mention exceptional provisions regarding the contractual pre-emption right only.

As the pre-emption right applies to selling relationships only, it does not apply to other transfers, such as executive auctions. In common property, every shareholder has a legal right of lien. In case in a shareholder dies, his inheritors can use the right of lien only in common because of the collective property relationship among them. Also the Turkish high Court reached a similar decision:

“While using the right of lien, if the share which the plaintiff relies on is subject to collective property, all the collective owners shall bring the action jointly or other shareholders shall approve the action brought by a shareholder. In case if the approval of all shareholders is not obtained, the probate court gives a time extension to the plaintiff for nomination of a representative according to the article 640 of the Turkish Civil Code. In case if the representative is another person from the plaintiff, plaintiff ceases to be plaintiff ant the action is followed through the representative. This issue is related with the right to claim and it should be considered by the judge ex-officio. Approval can be granted either by a declaration in the hearing, or submitting an approval document the signature on which is affixed by notary, or by issuing a power of attorney for the attorney who follows the case..” (Y. 6. HD, 06.12.2005 T., 11323/11273)”

After the reform in the Civil Code in 2002, the right of pre-emption can be used only through an action. Again, the Code had set forth some time limits for the right to action. The right of pre-emption shall be used within three months of the notification of the sale through notary and within two years in any case. This time limit is definite and cannot be suspended or interrupted, and the judge will consider it ex-officio. The 6th Civil Chamber of the High Court has calculated the three years “according to the date on which the notification is drafted” in its decision no. 10.06.2004 T., 4456/4387. Even though the date of notification through notary is considered, in case if the owner of the right learns of the sale of the subject of the right of pre-emption in any way, the time limit will start to count. The 6th Civil Chamber of the High Court puts in its decision no. 31.1.2006 T., 10546/554 that “The case is on the demand of annulment of the sale of the share subject to lien and its registration. Lien is a right which assigns to shareholders the right to buy a share of a real estate subject to common property in priority in case of a sale of a share or a portion of it to a third person. Buyer and seller shall notify the sale to other shareholders through notary. The right of pre-emption expires in three months from the notification of the sale to the owners of right and within two years of the sale in any case. This time limit is definite and it shall be considered by the judge ex-officio. As the sale of the share of real estate subject to the lien to the defendant is not notified through notary to the plaintiff shareholder, the court shall accept that the case is submitted within the time limit according to the date on which the plaintiff is informed of the sale and the court shall study the merits of the dispute.

Notary will make the sale notification on the demand of the seller or the buyer according to the Notary Code and the relevant by-law otherwise the notification will be null and void. Notification to legal or contractual representatives of the owners of the right of pre-emption does not satisfy the requirement of notification, unless if the representative has a special power to receive such notification.

The owner of the lien can claim its right against the third person if the registration is made, in case if the registration is not made he will claim his right against the owner of the shareholder who sells his share to third person. Before deciding on the registration of the share in the name of the owner of the lien, the owner of the lien shall deposit in cash the price in the sale contract and the buyer’s part of the registration taxes within the time limit and to the chair to be determined by the judge. The High Court is of the same opinion:

“The case is on the demand of annulment of the sale of the share subject to lien and its registration. The defendant buyer cannot claim for the determination of the price for lien as he did not notify the claimant of the sale through notary and thus, caused to the pass of the time between the date of the sale and the date of the case by his own fault. The lien shall be executed on the price as in the registries, taxes and expenses.

In this case, the court shall grant a time limit to the plaintiff for depositing the price of lien which is composed of the sale price as in the registries, taxes paid by the defendant because of this sale and expenses, and the court shall decide accordingly. (Y. 6. HD, 19.9.2006 T., 5698/8806).”

Even in case if the price of the sale made to third person is shown lower than the effective price, the owner of the right of pre-emption uses his right on the price mentioned in the land registries. For this reason, while buying a share of a real estate subject to common property, to show the effective sale price in the registry would protect the buyer from the future claims of the lien owners.

In the practice, use of the lien by co-owners may create problems in sales of the land shares or providing them against construction. For this reason, in practice, agreements are made on derogation from lien in general or on derogation regarding a particular sale transaction only. Derogation from lien would be valid only if made in the form prescribed by the code and annotated in the land registry. Derogation regarding a particular sale shall be made in written form and this written agreement may be made before or after the sale.

In common property, not all the shareholders must necessarily use their rights of lien. The right arises only for those who use their right of lien. The right of lien of a common owner who does not use it in a sale expires only regarding that sale transaction; however he is entitled to use his right in a succsessive sale of a share by a shareholder to a third person. Contractual pre-emption right: As it is assigned by a contract, the owner of the right may use his right of pre-emption in the case of the sale of the real estate to a third person. As the contractual pre-emption right entitles its owner to a claim, it can be claimed against singular successors only if it is annotated in the land registry and within the limits and conditions of the annotation. If it is not annotated, the rignt can be claimed only against the owner with whom the contract is made and to universal successors. The annotation remains effective for 10 years unless otherwise agreed. It is also possible to derogate from the contractual pre-emption right. According to the article 213/2 of the Turkish Code of Obligations, contractual pre-emption right can be assigned by a written contract. As mentioned above, regulations regarding other issues on the use of the contractual pre-emption right are the same as the use of lien rights.

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