A Comment on the Uncertain Situation that arose as a result of the Constitutional Court's annulment of the legal regulation regarding the collection of the entire value increased due to the change in the Zoning Plan
Zoning law encompasses all public works activities necessary to determine the settlement areas constructed or planned on a plot of land and to demarcate the boundaries of official settlements for service institutions. Therefore, in our Turkish legal system, these matters are regulated by Zoning Law No. 3194, which has been in effect since 1985.
This being the case, a new concept, the Valuation Increase Share (VAP), was introduced into our lives with the addition of Article 8 to the Zoning Law by Law No. 7221 dated February 14, 2020. The implementing regulation regarding the valuation increase share concept entered into force on September 15, 2020, and the conditions for its implementation were determined.
What is Capital Gain Share?
The value increase share can be defined as the "increased value" in the value of a land plot if a property owner implements a zoning plan amendment on a parcel-by-parcel basis for their property, resulting in an increase in the property's value. The implementation regulation dated September 15, 2020, stipulates that the value increase share (DAP) will be applied to: On zoning islands with a surface area of at least 1,000 square meters or more; The use of cultural facilities, social, and technical infrastructure required for plan amendments that increase the island's population, building density, number of floors, or building height, or that introduce a function change, will be covered within a radius of up to 500 meters from the island's center, and will be implemented through a function change on a parcel-by-parcel basis.
If all owners of a plot of land or land request a change to the zoning plan, and if there is a value increase between the old and new zoning plans, a value increase share (DAP) is established to pay the public for this increase. If the owners apply for a zoning plan change, an annotation is made in the property's land registry stating that the property is subject to a value increase.
How is Capital Gain Share Calculated?
Following an application to the Municipality where the property is located, a plan change report is prepared by licensed institutions under Capital Markets Law No. 6362. According to the implementation regulation, this report must be obtained by two CMB-licensed appraisal firms. The municipality is paid a fee determined by the CMB-licensed appraisal firm's tariff, depending on the nature of the property, and the property's increased value resulting from the plan change is calculated. If there is an excessive difference between the reports of the two CMB-licensed appraisal firms, a third CMB-licensed firm will obtain a report to resolve the difference between the two previous reports. Furthermore, the implementation regulation specifies that the objection period for these appraisal reports is five days from the date of notification to the addressee.
The valuation to be carried out by CMB licensed valuation firms is carried out in accordance with the "value assessment principles" defined in Article 11 of the Expropriation Law No. 2942.
When Should the Capital Gain Share Be Paid?
The calculated value increase share must be paid to the Ministry of Environment, Urbanization and Climate Change by the property owner until the property license is obtained, but in any case, upon the property's first sale. If the calculated value increase share is not paid, obtaining a license is not possible, and therefore, construction activities cannot begin. Furthermore, if the calculated value increase share is not paid within the specified year, is paid at the time of the license or sale, and therefore the calculated year changes, the value increase share (DAP) increases according to the revaluation rate determined under Article 298 of Tax Procedure Law No. 213.
What Did the Constitutional Court Say About This Regulation?
The fourth paragraph of Annex 8 of the Zoning Law No. 3194 was as follows: "The entire increased value of the land whose value increases as a result of the zoning plan amendment to be made on a block-by-block basis upon the request of all property owners shall be taken as the capital increase share. The principles of value determination specified in Article 11 of Law No. 2942 shall be observed in determining the capital increase share." Here is the provision in this article : “…the entire increased value…” The expression was annulled by the Constitutional Court's decision dated 18.05.20243 and numbered 2020/42, Decision numbered 2023/99. This annulment decision of the Constitutional Court was published in the Official Gazette dated 04.10.2023, and it was decided that the aforementioned annulment decision would enter into force nine months after its publication in the Official Gazette. In other words, in this case, the date would be 04.07.2024. This decision is very important because of this and an uncertain situation has emerged after this annulment decision of the Constitutional Court.
Reason for applying to the Constitutional Court: It was claimed that there was no public interest in paying the entire value of the land, which increased as a result of the zoning plan change to be made on a block basis upon the request of all the real estate owners, as a capital increase share, and that transferring the entire value increase share resulting from the zoning plan change to the public restricted the right of ownership, and that the rule was unconstitutional.
The Constitutional Court, however, issued the aforementioned annulment decision on the following grounds: While zoning activities and plans contribute to the city's economy and the creation of a healthy environment by influencing or directing public investments in the city or its surroundings, they also affect the economic value of the property owned by the individual. Considering the purpose of zoning activities, public and social benefits, rather than individual benefits, should be prioritized in the preparation of zoning plans. Therefore, it is understood that there is a legitimate public interest-based purpose in transferring the increased value of land resulting from the zoning implementation to the public as a capital gains share.
Furthermore , public and individual benefits should be reconciled as much as possible in zoning-related activities and plans, and owners should not be burdened with excessive or disproportionate burdens. In this context, a comparison should be made between the benefits the owner receives from the zoning implementation and the portion of the increased value of the land transferred to the public as a capital gains share. Therefore , if there is a clear imbalance between the increase in the property's value resulting from the zoning implementation and the value of the portion transferred to the administration, the burden placed on the owner is likely to be excessive and disproportionate.
The public's high share of the increase in value of a property resulting from public development projects, without any effort or expense, is not always sufficient to conclude that an excessive burden is imposed on the individual in terms of property rights. However, while the share of the increase in value of certain individuals' assets resulting from development activities serves the purpose of generating financing to ensure the uninterrupted operation of public services aimed at meeting public needs, it has been concluded that taking the entire increase in value as a share exceeds reasonable and acceptable limits and imposes an excessive burden on the owner.
In this case, it was concluded that the rule requiring the entire increased value of the land to be taken as a capital gains share was unreasonable and unacceptable, imposed an excessive burden on the owner, disrupted the fair balance that should be maintained between the public interest and the owner's property rights to the detriment of the owner, and therefore constituted a disproportionate restriction. For the reasons explained above, the Constitutional Court ruled that the rule was unconstitutional and should be annulled.
Comment
“…the entire increased value…” by the Constitutional Court The annulment of the expression is a perfectly legal interpretation. Because while property owners who wish to have a zoning plan prepared for a property have difficulty paying the fees required by municipalities to CMB-licensed firms, based on criteria determined within the framework of CMB legislation and the nature of the property, demanding payment of the entire value increase share calculated based on the property's square meter as a result of this transaction would have caused the owners to pay amounts significantly exceeding their budget limits.
Zoning plans are already being developed by municipalities, and these plans sometimes violate the principle of equality in development, or the existing zoning plan does not provide sufficient space for construction. When property owners enter a construction process, the contractor is obligated to build within the framework of the zoning plan determined by the municipality. Therefore, when property owners request a zoning plan amendment on a parcel-by-parcel basis to obtain more building space, they are required to pay the entire value increase share (DAP) due to the Constitutional Court's justifications mentioned above. This is unlawful and places an excessive burden on property owners.
Because the Constitutional Court's annulment decision will take effect on July 4, 2024, property owners must pay all capital appreciation shares calculated before this date. Therefore, we recommend that property owners who wish to apply for capital appreciation shares to acquire more construction space on their property wait until July 4, 2024.
Following this annulment decision of the Constitutional Court, there is still uncertainty as to how the value increase share will be paid, and we believe that this issue will be clarified with a regulation or legal arrangement as of 04.07.2024.