Sale and Leaseback Transactions in Turkish Real Estate: Legal Guide for Foreign Companies – 2026 Updated Guide

Learn how sale and leaseback transactions work in Turkey, including title transfer, lease terms, rent, tax, financing, enforcement and legal risks for foreign companies.

A sale and leaseback transaction allows a company to sell its owned real estate and lease the same property back from the purchaser. The company receives liquidity while continuing to use its office, factory, warehouse, hotel, retail property or other commercial premises.

This structure can be attractive for foreign companies operating in Turkey, but it creates two legally connected transactions: a real estate sale and a long-term lease. If either transaction is poorly drafted, the company may lose control of the property, face unexpected rent increases, become exposed to eviction proceedings or discover that the transaction does not provide the expected financial benefit.

This 2026 updated guide explains the key legal, contractual and practical risks of sale and leaseback transactions in Turkey.

How Does a Sale and Leaseback Transaction Work?

The transaction generally involves four stages:

1. The operating company owns a property;
2. The company sells the property to an investor or financing institution;
3. The purchaser pays the agreed sale price;
4. The former owner leases the property back and continues using it.

The sale and lease agreement may be signed together or as connected documents. The parties should ensure that neither document contradicts the other.

The leaseback agreement should be finalized before title transfer. A company should not transfer ownership based on an informal promise that it will later be allowed to continue using the property.

Why Do Foreign Companies Use Sale and Leaseback?

A foreign company may consider this structure to:

• Release capital tied up in real estate;
• Finance expansion or working capital;
• Reduce immediate borrowing needs;
• Continue operating from the same premises;
• Improve liquidity;
• Reorganize assets before an acquisition;
• Fund equipment, production or new investments;
• Transfer property-management responsibilities.

However, the company exchanges ownership for a contractual right of occupation. The transaction may improve cash flow but reduce long-term control over the property.

Sale and Leaseback or Disguised Financing?

One of the most important legal risks is whether the transaction is a genuine sale followed by a lease or a financing arrangement secured by the property.

The parties should ensure that:

• The sale price reflects a commercially defensible value;
• The rent is commercially reasonable;
• Ownership genuinely passes to the purchaser;
• The purchaser assumes real ownership rights and risks;
• The company does not retain unrestricted ownership-like control;
• Any repurchase option is clearly documented;
• The financial and legal documents are consistent.

If the transaction is challenged as a disguised loan or security arrangement, the parties may face disputes regarding title, repayment, interest, tax treatment, enforcement and insolvency rights.

A foreign company should obtain independent legal, accounting and valuation advice before signing.

Title Due Diligence Before the Sale

The purchaser should verify:

• The seller’s ownership;
• The exact parcel and independent units;
• Mortgages and bank security;
• Enforcement attachments;
• Easements and access rights;
• Lease annotations;
• Ownership restrictions;
• Co-ownership and inheritance claims;
• Zoning classification;
• Building and occupancy permits;
• Public project or expropriation risks;
• Environmental liabilities;
• Existing tenant or occupant rights.

The seller should not assume that the purchaser will accept title problems merely because the transaction is structured as a sale and leaseback.

Foreign Ownership and Corporate Authority

The purchaser’s eligibility to acquire the property should be confirmed before closing. Ownership restrictions may depend on the purchaser’s corporate structure, nationality, land type, location and intended use.

The selling company must also have proper authority to sell. Corporate approvals, board resolutions, shareholder decisions, powers of attorney and signatory authority should be reviewed.

If the purchaser is a related company, conflict-of-interest and related-party transaction risks may arise. The parties should document the commercial rationale and valuation.

Critical Leaseback Clauses

The leaseback agreement should clearly regulate:

Lease Term and Renewal

The company should negotiate a long enough lease term to protect its business operations. Renewal options should specify:

• The renewal period;
• Notice deadlines;
• Rent calculation;
• Conditions for renewal;
• Whether renewal is automatic;
• Grounds for refusal.

Rent and Adjustment Mechanism

The rent clause should state the currency, payment date, indexation method, review period, taxes, service charges and late-payment consequences.

The parties should not assume that a foreign currency rent clause is automatically enforceable. The legal status of the parties, the property and the transaction should be reviewed before signing.

Permitted Use

The lease should authorize the company’s actual operations, including:

• Manufacturing;
• Storage;
• Office use;
• Retail activity;
• Logistics;
• Equipment installation;
• Customer access;
• Signage;
• Subcontractor activity.

A company may breach the lease if it uses the property for an activity not covered by the permitted-use clause.

Repairs and Maintenance

The agreement should distinguish between:

• Structural repairs;
• Roof and foundation repairs;
• Mechanical systems;
• Elevators;
• Heating and cooling;
• Electrical infrastructure;
• Fire systems;
• Interior repairs;
• Routine maintenance.

Unclear responsibility for major capital repairs can create significant disputes.

Alterations and Improvements

The company should be allowed to install equipment, partitions, technical systems, security infrastructure and other improvements necessary for its business.

The agreement should state whether improvements remain with the property, may be removed at the end of the lease or must be restored.

Assignment and Change of Control

The company may later be sold, merged or reorganized. The lease should regulate assignment, sublease, group-company use and change of control.

A strict prohibition may reduce the company’s value during a future acquisition.

Buyback and Repurchase Rights

Some sale and leaseback structures include a future repurchase option. This right should clearly state:

• The exercise period;
• The purchase price;
• The valuation method;
• Notice requirements;
• Conditions for exercise;
• Taxes and transaction costs;
• Financing requirements;
• Consequences of nonpayment;
• The procedure for title transfer.

An informal promise that the company will be able to buy the property back later may be difficult to enforce.

A repurchase clause should not contradict the ownership rights transferred to the purchaser.

Security and Default Protection

The purchaser may request:

• A security deposit;
• A bank guarantee;
• A parent-company guarantee;
• Insurance;
• A corporate guarantee;
• A pledge over shares or other assets;
• Financial reporting;
• Minimum financial ratios;
• Restrictions on additional security interests.

The foreign company should understand the consequences of rent default. These may include:

• Late-payment interest;
• Contractual penalties;
• Enforcement proceedings;
• Lease termination;
• Eviction;
• Acceleration of certain payments;
• Use of guarantees;
• Claims for damage or restoration.

The seller-tenant should negotiate cure periods and notice requirements before termination.

What Happens if the Company Cannot Pay Rent?

Sale and leaseback may create a fixed rent obligation even when the company’s revenue declines. If rent is unpaid, the purchaser may have rights as landlord despite having purchased the property from the company.

The company should negotiate:

• A reasonable grace period;
• Notice before termination;
• Opportunity to cure;
• Restrictions on immediate eviction;
• Restructuring discussions;
• Temporary rent adjustment mechanisms;
• Protection during approved restructuring.

Stopping payment without a strategy can put the company’s operational premises at risk.

Tax, Accounting and Valuation Risks

A sale and leaseback may have consequences involving:

• Transfer taxes;
• Value-added tax;
• Corporate tax;
• Capital gains;
• Stamp duties;
• Invoicing;
• Withholding;
• Depreciation;
• Lease accounting;
• Related-party pricing.

The accounting treatment may differ depending on whether the transaction is treated as a sale, financing arrangement or another structure.

The parties should obtain independent tax advice and ensure that the sale price and rent are supported by a professional valuation.

Existing Mortgages and Financing

If the property is already mortgaged, the existing lender may need to approve the sale or release its security.

The company should review:

• Loan agreements;
• Financial covenants;
• Consent requirements;
• Prepayment obligations;
• Release documents;
• Existing guarantees;
• Restrictions on asset sales.

Closing should be conditional upon the agreed release of existing encumbrances.

Registration and Closing Process

The transaction should coordinate:

• Execution of the sale agreement;
• Leaseback agreement;
• Corporate approvals;
• Payment of the purchase price;
• Release of mortgages;
• Title transfer;
• Delivery of possession;
• Transfer of utilities;
• Insurance arrangements;
• Rent commencement;
• Tax documents;
• Registration or annotation of long-term lease rights where appropriate.

The purchaser should not pay the full price before the conditions precedent have been satisfied.

Insolvency and Enforcement Risks

If the seller-tenant later becomes insolvent, the purchaser may have to enforce rent claims while the company tries to preserve its business premises.

If the purchaser becomes insolvent, the company’s lease rights may also become commercially uncertain. The parties should evaluate:

• Security arrangements;
• Lease registration;
• Guarantees;
• Insolvency termination provisions;
• Set-off rights;
• Step-in rights;
• Asset protection;
• Continuity of utilities and access.

A leaseback should be drafted with the possibility of financial distress in mind.

2026 Practical Due Diligence Checklist

Before signing, the foreign company should:

1. Obtain an independent valuation;
2. Verify title and encumbrances;
3. Review zoning and permits;
4. Confirm foreign ownership eligibility;
5. Check environmental and structural risks;
6. Review existing financing;
7. Obtain corporate approvals;
8. Draft the sale and leaseback documents together;
9. Negotiate rent and renewal protections;
10. Regulate repairs and improvements;
11. Protect against sudden eviction;
12. Clarify taxes and transaction costs;
13. Secure any repurchase right;
14. Prepare default and restructuring procedures;
15. Coordinate title transfer and lease commencement.

Lawyer Fırat Fesih Kaya can assist with legal due diligence, sale and leaseback agreements, title transfer, lease protection, corporate approvals and enforcement-risk analysis.

Conclusion

A sale and leaseback transaction can provide valuable liquidity while allowing a foreign company to remain in control of its operating premises. However, the company gives up ownership and becomes dependent on the leaseback agreement.

The sale price, rent, term, renewal rights, repairs, repurchase option, default provisions, tax treatment and title protections should be negotiated together. A carefully drafted structure can reduce the risk of losing operational control or facing unexpected financial claims.

Frequently Asked Questions (FAQ)

1. What is a sale and leaseback transaction in Turkey?

It is a transaction in which a company sells its real estate and immediately leases the same property back from the purchaser.

2. Can a foreign company use a sale and leaseback structure?

A foreign company may be able to use this structure, subject to corporate, ownership, tax, title and transaction requirements.

3. Does the company lose ownership after the sale?

Yes, unless the transaction includes a valid future repurchase right. After the sale, the company’s right to occupy the property generally depends on the lease.

4. Can the purchaser evict the company if rent is unpaid?

Potentially, yes. The lease, default provisions, notice requirements and applicable enforcement procedure must be reviewed.

5. Should the sale agreement and leaseback agreement be signed together?

Usually, they should be coordinated and signed as connected documents so that the property sale is not completed without effective lease protection.

6. Can the company negotiate a repurchase option?

The parties may agree on a repurchase mechanism, but the price, exercise period, conditions and title-transfer process must be clearly drafted.

7. What happens if the property has an existing mortgage?

The mortgage should be released or dealt with through the closing arrangements. The purchaser and seller should coordinate with the lender before payment and title transfer.

8. Can the rent be denominated in foreign currency?

The enforceability of a foreign currency rent clause depends on the parties, property, transaction structure and applicable restrictions. It should be reviewed before signing.

9. Can a sale and leaseback be treated as a disguised loan?

It may be challenged if the transaction does not reflect a genuine commercial sale and lease relationship. Valuation, rent, ownership rights and financial documents should be consistent.

10. Does a foreign company need legal advice before signing?

Yes. The transaction combines real estate, lease, corporate, financing, tax and enforcement risks, making professional legal review highly advisable.

This article is provided for general informational purposes only and does not constitute legal advice. We recommend consulting a lawyer about your specific circumstances to avoid any loss of rights.

Expert Legal Support

Sale and leaseback transactions require careful coordination between property ownership and long-term occupancy rights. Fırat Fesih Kaya Law Office provides legal assistance to foreign companies in sale and leaseback structures, title due diligence, commercial leases, corporate approvals, financing risks, repurchase rights and real estate disputes throughout Turkey and abroad.

For a case-specific legal assessment, contact our office:

Lawyer: Fırat Fesih Kaya
Call: +90 312 434 22 22
WhatsApp: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Office: Mevlana Boulevard No:221, Yildirim Tower, Office No:148, Balgat, Cankaya, Ankara, Turkey