The Infringement of the Right of Pre-Emption

Introduction

The right of pre-emption, regulated under Articles 732–735 of the Turkish Civil Code, aims to maintain economic balance among co-owners and prevent unwanted third parties from joining the ownership. It often arises in disputes over the transfer of co-owned immovable property. This right is either statutory or contractual, and its exercise is bound by strict time limits and formalities. Controversies in case law often involve disguised sales, registering a transfer as a donation, or breaching the notification obligation.

This study aims to examine the legal nature of the right of pre-emption, the conditions for its exercise, and the practical problems encountered in its implementation.

Keywords: Right of Pre-emption, Statutory Right of Pre-emption, Contractual Right of Pre-emption, Co-ownership, Constitutive Right, Statutory Right, Obligation Attached to Property, Forfeiture Period, Fraudulent Transactions.

1.    The Legal Character Of The Right Of Pre-Emption

The right of pre-emption is a constitutive right which grants the beneficiary the authority to demand the transfer of ownership of the subject property to themselves for the agreed price through a unilateral declaration of intent, in the event that the obligor sells the property to a third party. Fundamentally, the right of pre-emption is categorized into: (i) the contractual right of pre-emption, and (ii) the statutory right of pre-emption. Accordingly, the right will be examined under these two headings.

A.   Contractual Right Of Pre-Emptıon

The contractual right of pre-emption is, in essence, a personal claim. Therefore, it produces legal consequences only between the parties to the contractual relationship. The enforceability of this right is contingent upon its annotation in the land registry. Like the statutory variant, the contractual pre-emption right is also a constitutive right; it can be exercised only once and is extinguished upon its use, with no possibility of reassertion.

Both the statutory and contractual rights of pre-emption may be exercised only upon the fulfillment of certain legal conditions.

B.   Statutory Right Of Pre-Emption

The statutory right of pre-emption is a constitutive right that entitles a co-owner, in the case where another co-owner intends to sell their share of a co-owned immovable to a third party, to acquire that share with priority through a lawsuit. This right may be exercised only by initiating a constitutive legal action, and if granted, the court’s decision results in the transfer of the relevant share to the pre-emption right holder.

2.    Conditions For Exercising The Right Of Pre-Emption

C.   Conditions For Exercising The Contractual Right Of Pre-Emption; The Fundamental Requirement for Exercising the Contractual Right of Pre-emption is the Existence of a Valid Pre-emption Agreement

The existence of a valid pre-emption agreement is of paramount importance for the exercise of the contractual right of pre-emption. A pre-emption agreement is a contract executed between the person claiming the right and the owner of the immovable property, granting the right holder the priority to purchase the immovable should it be offered for sale.

The agreement must be in written form to be valid; a private written document (non-notarized) is sufficient to satisfy this requirement. However, the pre-emption agreement must contain both objective and subjective essential elements.

For example, the objective essential elements include the clearly identified parties and the property subject to the right of pre-emption. The pre-emption price is not considered an essential element of the contract, and therefore the agreement may be validly concluded even if no price has been determined.

2.2.        Conditions For Exercising The Statutory Right Of Pre-Emption

D.   The Statutory Right of Pre-emption Applies Exclusively to Immovables Held in Co-ownership

The statutory right of pre-emption applies only in the context of co-owned immovable properties. It is not applicable to other forms of ownership, such as condominium ownership or joint ownership (gemeinschaftliche Eigentum).

However, pursuant to Article 8 of the Condominium Law, in independently owned units where condominium or construction servitude has been established, if one co-owner sells their share to a third party, the other co-owners may still exercise the statutory right of pre-emption.

E.    The Statutory Right of Pre-emption Arises Only Upon the Full or Partial Sale of a Share in the Property

The statutory right of pre-emption can only be exercised where a share of the immovable is sold. It does not apply in cases involving the sale of the entire property or a specific portion thereof.

This is because when the entire property or a defined part of it is sold by the unanimous decision of all co-owners, the co-ownership relationship is thereby deemed to have been terminated in whole or in part by mutual agreement.

F.     The Statutory Right of Pre-emption Applies Exclusively to Sales Made to Third Parties

The statutory right of pre-emption may only be asserted against third-party purchasers who acquire the share from a co-owner. If the share is acquired by another existing co-owner, no pre-emption action may be brought against such a person.

G.    The Statutory Right of Pre-emption Must Be Exercised Through a Lawsuit Filed by the Co-owner Against the Third-party Purchaser

Pursuant to Article 734(1) of the Turkish Civil Code, the right of pre-emption is exercised by filing a lawsuit against the purchaser. The action and its procedural requirements will be discussed in detail in the subsequent section.

3.     The Pre-Emptıon Lawsuit

H.   Definition And Nature Of The Pre-Emptıon Lawsuit

A pre-emption lawsuit is a constitutive type of legal action filed by the right holder against the third-party purchaser to exercise their pre-emption right. Upon a successful claim, the court orders the transfer of the sold share and the registration of ownership in the name of the claimant. By its nature, the pre-emption lawsuit is not classified as an action for performance (action in personam) or declaratory judgment, but as a constitutive action that alters legal status.

I.      Parties To The Pre-Emption Lawsuit

The plaintiff in a pre-emption lawsuit is the co-owner(s) of the immovable property, other than the co-owner who sold their share to a third party. The defendant is the purchaser of the share, i.e., the new owner of the relevant portion of the property.

J.    Forfeiture Periods In The Pre-Emption Lawsuit

The pre-emption lawsuit must be brought within specific forfeiture periods. The right of pre-emption is extinguished if not exercised within three months from the date the sale is notified to the right holder, and in any case, within two years from the date of the sale itself. Both the three-month and two-year periods are statutory forfeiture periods.

K.   Deposit Of The Pre-Emption Price In The Lawsuit

To conclude the lawsuit successfully, the plaintiff must deposit the pre-emption price at a location designated by the court and within a time frame also determined by the court. The pre-emption price consists of the agreed sale price plus the title deed transaction fees borne by the buyer.

The law mandates that the pre-emption price be deposited in cash, meaning that a bank guarantee letter is not acceptable. However, depositing a letter of guarantee instead of cash is permitted if the defendant does not raise any objection.

4.    Prevention Of The Exercise Of The Right Of Pre-Emption: Fraudulent Transactions (Muvazaa)

Fraudulent transactions (muvazaa) refer to situations where parties reach an agreement to conclude a legal transaction that does not reflect their true intent, with the aim of misleading third parties. Fraudulent transactions is generally categorized into two types: absolute and relative.

In absolute fraud, the parties have no real intention to perform a legal transaction, and the appearance of one is merely for deceptive purposes. Relative fraud, on the other hand, involves the concealment of the parties' actual intention behind a superficially different transaction.

To circumvent the exercise of the pre-emption right, parties may employ methods such as registering the transaction as a donation or barter instead of a sale, or inflating the stated price beyond its actual value. The following sections of this paper will analyze how both absolute and relative fraudulent transactions are used to frustrate the exercise of the right of pre-emption.

4.1. Absolute Fraud (Mutlak Muvazaa)

In cases of absolute fraud, the parties do not intend to carry out any real legal transaction. The key elements of absolute fraud include a sham transaction, an agreement of fraud (muvazaa), and an intent to deceive.

This form of fraud most commonly appears when a debtor transfers assets to a third party with the aim of evading creditors. Within the context of pre-emption, the obligor may pretend to sell their share to a third party in order to provoke the pre-emption holder into exercising their right.

Upon discovering the fraudulent transaction, the pre-emption right holder may choose to withdraw their claim or pursue other legal remedies following the judgment. These remedies may include recovering the paid price or asserting that the mistaken assumption about the legal nature of the transaction justifies correction. Alternatively, the holder may seek annulment of the fraudulent transaction and request the cancellation of the associated improper registration in the land registry.

4.2.        Relative Fraud (Nispi Muvazaa)

The establishment of a legal transaction that conceals the parties’ true intent and thereby prevents the exercise of the right of pre-emption falls within the scope of relative fraud (nispi muvazaa). In such cases, the parties may disguise an actual sale agreement as a donation in order to prevent the pre-emption right holder from exercising their right. Conversely, to enable the exercise of the right, they may present an actual donation as a sale.

One of the most frequently encountered examples of relative fraud in practice is when a transaction that is, in substance, a donation is presented as a sale. In such arrangements, although the parties reach a consensus on executing a contract, they simultaneously conclude a second, concealed contract that differs in nature, terms, or parties and does not reflect their true intention.

Within the concept of relative fraud, the obstruction of the right of pre-emption generally arises in relation to either the price stipulated in the sale contract or the legal nature of the transaction. The parties may, for instance, present a sale contract as a donation in order to circumvent the right of pre-emption, or they may present an actual donation as a sale to simulate the appearance of a valid transfer subject to pre-emption.

In cases where the contract is concluded in a fraudulent manner, the legal relationship giving rise to the right of pre-emption includes a concealed agreement mutually agreed upon by the parties. To disguise this concealed transaction and mislead third parties, the parties enter into a formally distinct and misleading transaction. Accordingly, the apparent contract and the concealed agreement differ both in terms of legal cause (causa) and content.

For example, in a co-ownership context, although a sale contract may have been genuinely executed between the obligor co-owner and the purchaser, the parties may register the transaction in the land registry as a donation or barter—transactions that do not give rise to a statutory pre-emption right. The purpose of such fraudulent conduct is to obstruct the pre-emption right of the other co-owner. However, if the pre-emption right holder can prove that the apparent transaction does not reflect the true intent of the parties and that an actual sale took place, they may exercise the pre-emption right based on the concealed transaction. In such cases, the right holder may argue that the contract was fraudulent and that the true nature of the transaction was intentionally concealed to deprive them of their statutory right.

Another common scenario involves fraudulent transactions that are formally presented as sales but are, in substance, donations. This is particularly prevalent in inheritance law disputes, where such transactions—referred to as muris muvazaası under Turkish law—are employed with the intent of disinheriting certain heirs.

In such situations, a pre-emption right holder who is also an heir may claim that the registered transaction, although presented as a sale, is in fact a donation lacking the requisite legal formalities. On that basis, they may seek the annulment of the transaction.

Another form of relative fraud occurs when the declared sale price is deliberately and substantially inflated in order to dissuade the pre-emption right holder from exercising their right. By overstating the price, the parties aim to create the illusion of an excessive financial burden, thereby discouraging the rightful holder from initiating a pre-emption claim.

Nevertheless, in cases where the declared consideration is significantly higher than the true sale price, the pre-emption right holder may still assert their right. If the holder can demonstrate that the price was fraudulently exaggerated with the intent of deterring the exercise of the pre-emption right, they may request that the transaction be evaluated on the basis of its actual value and seek to exercise their right accordingly.

Conclusion

The right of pre-emption, a constitutive legal right with strict formal requirements, protects co-owners in cases of co-ownership. In practice, it is often undermined by collusive acts such as disguising sales as donations or barter, misstating the sale price, or other forms of absolute or relative collusion.

Despite these obstacles, the right can still be exercised if the true nature of the transaction is proven. To protect it effectively, both legal doctrine and judicial practice must closely examine such acts and avoid interpretations that weaken its essence.