Lawyer in Turkey: Buy back Guarantees

Friday, July 1, 2011

Buy back Guarantees

Western European countries operate what is referred to as the buyback guarantee. An estate agent or project developer guarantees a purchaser that they will buy back their property within a specified period, often for the same amount that was paid plus a modest profit. This effectively guarantees the estate agent the sale of a property, whilst the purchaser doesn't have to worry about any potential loss in value.

In Turkey such arrangements have no legal standing, despite them being used by estate agents in the sale of (often incomplete) properties. Purchasers/investors buy properties using a buyback guarantee because they believe that at the very least they stand to get their purchase money back, and in the majority of cases with some profit too, as was promised by the estate agent.

It's a sad fact that the party making the promise is usually a foreigner too, meaning that the purchaser has no reason to question the worth of the agreement. Besides which, buyback schemes like the one described above have long been reality in Western European countries. Unsuspecting purchasers are oblivious to the fact that it simply isn't so in Turkey. Under Turkish law buyback guarantees aren't worth the paper they're written on. However, this doesn't necessarily mean that the seller involved won't honour the agreement. After all they risk losing their reputation, a prison sentence and, in the event of not possessing a work permit, deportation.

Regardless of this, purchasing on the basis of a buyback guarantee can lead to problems later on, as witnessed in my practice. There are some estate agents who, on the specified date, have no, or never had any, intention of buying the property back for the purchase price, let alone for any more. Especially not in difficult economic times, when the entire property market is feeling the pinch. Purchasers get a deafening silence when they request their money back.

I can hear the reader thinking to themselves 'surely that's fraud?' Absolutely. The betrayal of a purchaser's confidence is tantamount to fraud. The person acting in the capacity of estate agent or project developer, who made such promises and didn't keep them, can be criminally prosecuted for fraud and deception. This type of situation must not go unpunished, despite the purchaser only really wanting their purchase sum back.

Should the selling party fail to honour the guaranty stated in the buyback agreement, a court of law can declare the entire contract of purchase null and void on the basis of 'fraud' and 'deception'. In other words the contract of purchase never existed in law and the transactions can be reversed. The purchaser can reclaim the purchase sum paid and the seller gets the Tapu (title deeds) back, should these have been provided.

To avoid such potential disappointment and trauma, I urge purchasers to ensure they only enter into bona fide contracts of purchase or investments by having any proposed purchases reviewed by lawyers.

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