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Key to Bring Down The Prices of Housing: Application of “Golden Land Share”

Key to Bring Down The Prices of Housing: Application of “Golden Land Share”

Land share is one of the most basic concepts in the Property Ownership Law of Houses, and this conception is found when many relationships and institutions are described. The share is allocated to independent sections of Turkish Property Law (TPL)(TPL a. 2/d). But when “land ownership” is defined in the law, it is described as “land share ownership and a private property related with the common places in the main real estate property” (TPL a. 3/1). In contrast, “construction servitude” is defined as an easement type related to the land share (TPL a. 3/2).

The land share, which has such a centralized significance, has a decisive influence on many subjects. For example,

  • Flat owners have the right to benefit from common areas with a proportion of shares (TPL a. 16/2).
  • Unless otherwise provided with an agreement, flat owners will participate ratio of their land shares at common expenses (TPL a. 20/1/b),
  • Board of Property Owners convenes regarding the number of flat owners and land shares with the absolute majority of the flat owners and decides by a majority of votes (TPL a. 30),
  • The manager is assigned by the majority of the flat owners regarding both the number and land shares (TPL a. 34/4),
  • Useful innovation and additions to common areas will be decided by a majority of flat owners and landowners (TPL a. 42/1),
  • If the main real estate is expropriated, the expropriation value of each independent section is separately appraised and paid to the owner of the property owner, considering the land share and its attachments, which are linked to the expropriation value (TPL a. 46/7).

We can extend this list further. But the examples we talked about here are sufficient to show the central importance of the concept of “land share” in our condominium regime.

Regarding how the land shares with such a crucial role are determined, the act stipulates that each independent section’s “location and size” will be the basis. In case of violation of this rule, the courts can be opened and edited in the land share in the case of a revision. It is stated that the land share cannot be changed due to the increase or decrease in the value of the related independent sections in the future (TPL a. 3/2).

In practice, the flat area where each independent section is located, considering the frontage (landscape) and the “betterment” depending on these, and the gross square meters are taken into consideration, the land shares are calculated. The notable element in this system is that the value of the land easement is taken without considering any other criterion than the “location” and “size”, which are the “objective” criterion for the land shares.

It was clearly stated that the changes that occurred later in the value would not be a reason to change the land share. In this way, it is considered that the location and frontage of the same size and independent parts of the same amount of land share are taken to receive the share. In cases where this essence is not observed, the court changes this “imbalance” de jure.

Is This an Arrangement That Fits The Realities of Economic Life?

This question can be positively answered as it observes the provision of justice among flat owners of this regulation, which at first sight considers objective equality. However, some problems are experienced in practice.

For example, changes in the function of the independent sections (a ground flat which is a residence converted into a working place), the changes that occurred in the front line of the main real estate, changes in the landscape due to other buildings that have been demolished or reconstructed. Changes in the value increase or decrease due to the newly opened or closed roads due to the transformation of the zone from the residence into the workplace or other functions from the workplace are ignored in this system. It would not be wrong to say it caused injustice in time. The law’s land share regulations adopt a more static attitude and cause inequity over time because they do not observe the dynamic economic processes.

However, from the perspective of financing the issue, it will also be seen that such an arrangement constitutes an obstacle to afford the housing need with more economical costs. Because, since the current arrangement obliges the allocation of land shares in the same amount to three up to five up to certain size apartments and the land cost in the housing production process, it is equally reflected all the housing buyers. But with a simple legal modification, if this obligation is lifted and the system of free land allocation to the first owners or owners is adopted, the cost of the land should be reflected some units less so that the prices of those units can be reduced.

For instance, each apartment of a building with 100 apartments generally has a 1/100 land share in the current system. When the open determination system runs, 99 apartments may be assigned 1/1000 land share even if one or a few apartments have 901/1000 land shares. So, while 99 apartments only will have 1/1000 of land share, the rest of land costs may be imposed on one or a few independent sections by a procedure called “golden land share”. This golden land share may be sold to institutional investors with sizable investments or to financial institutions given credit as collateral while using project finance.

Open determination system may be beneficial for more than one reason as:

  1. Customers with low-level purchasing power may buy houses more economically.
  2. Purchasing rate of the public may increase.
  3. The unfair competition by land price costs between the private and public sectors, which is TOKI, may be removed.
  4. Institutional investors may focus their investments on fewer assets in the secondary market.
  5. As one of the classic project finance models, hypothecate may be used less often, going to operation economy.
  6. The assets that real estate development and investment companies cannot keep in the financial statement because of the “build & sell” model’s nature may become available to keep it and make the size of assets bigger.
  7. Become specifiable of the management company, which is vital to save the brand value of projects created by real estate development and investment companies and secure common interests by management pattern instead of each apartment owner’s different priorities.
  8. At varied projects, a building block that is the centre of gravity and attraction may share land and voting power more than its space on land so that this block may tip the balance on decisions.

It is possible to list more benefits. However, the abovementioned reasons are enough to show that free determination on the rate of share land and “golden land share” is worthy of discussion.

If this regulation runs, it is better to divide common costs not based on land shares but based on usage area. So, dividing costs derived usage at the rate of usage area provides fairness. While building administration function, operation of administration real estate shall occur on a more professional level if the investor had golden land share affects decisions strongly.

The leading reasons for developing and managing real estate, which is less professional and institutional than western competitors, are condominium regimes and equal distribution. Execution of open determination land share and golden land share shall provide us with institutional management in the long term and pick up in the real estate and building sector in the short-run, which incurs economic crisis.

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