Real estate sale and purchase transactions involving foreign persons in Tunisia

Real estate has been considered after the independence of Tunisia as a symbol of recovering national sovereignty.

In 1857, under pressure and lobbying from the french and italian authorities, several rights including the right to own real estate has been recognized by the Tunisian Monarch to foreigners.

In 1885, four years after the « protection agreement of 1881 » between the Tunisian Monarch and the french colonisation, French authority introduced the first real estate law which introduced the real estate register including a real estate court which was in charge of the procedure of first registration of lands and other real estates in the real estate register.

French colonisation used this law to reinforce its status and strengthen its presence in Tunisia[2].

After the independence of Tunisia in 1956, Tunisian Real Estate Law becomes more restrictive and more conservative introducing several provisions sometimes prohibitting, sometimes restricting and framing real estate transactions involving foreign person.

According to the Beylical Decree[3] of June 4, 1957 on agricultural real estate transactions, all legal acts on agricultural real estate allowing access to property ; involving either Tunisians or foreigners,; are subject to an administrative authorization[4].

According to the law-decree no.13-1961 of August 8, 1961, the effects of the beylical decree has been extended to all kind of real estate in Tunisia either agricultural or not.

Over the years and in order to reinforce the economic development of the country, Tunisian legislator introduced several amendments regulating real Estate sale and purchase by foreigners making Tunisian Law less restrictive to these kind transactions on certain types of real estate.

This is a general presentation on the subject of Real Estate Sale and Purchase by foreigners in Tunisia.

I- Acquisition of Real Estates by Foreigners in Tunisia :

1. Residential Real Estate :

1.1. The obligation to have the authorization of the regional governor :

According to article 1 of the Beylical Decree of June 4, 1957 stated above, any transaction assigning the property of a real estate to foreigners including assignment for free or for a consideration, acts of partition, contribution in kind in the capital of a company, easement agreements, lease agreements for more that two years, Mortgage assignment is subject to an administrative authorization from the governor of the region where the real estate is located.

This authorization is preliminary, general and mandatory under penalty of absolute nullity[5]. In other words, the Tax administration would refuse the registration of the agreement within their system, the Real Estate Register administration would refuse the registration of the transaction in their books. Adding to that, any court could raise this nullity of its own motion.

The procedure of authorization includes even a secret security investigation within the ministry of interior.

According to article 2 of the Beylical Decree of June 4, 1957, the sale and purchase contract must include the number and date of the authorization.

In practice, before signing the sale and purchase agreement, a two-step process is recommended ; first, the conclusion of a promise to sell agreement. Then, the conclusion of the final agreement which transfers the property of the real estate.

1.1.1. The conclusion of the promise to sell agreement :

Once the foreign buyer and the seller have agreed on the details of the sale, it is recommended to conclude a promise of to sell agreement including an advance payment which varies generally between 10% and 20% of the price.

The promise to sell agreement is an agreement preparing the sale agreement. In other words, it should secure the transaction and protect the parties interests against all the risks that could occur such as the case of withdrawal of the seller from his commitment to sell, while the buyer has obtained the authorization or the case of refusal of reimbursement of the advance, following the failure to obtain the authorization.

Therefore, this agreement shall include several important details such as the final sale price; the price revision process if the parties agree on this possibility; the deadline for the conclusion of the final contract and the case of extension of the deadline; the amount, the terms of payment and reimbursement of the advance if so, the escrow or deposit clause, the penalty clause in case of abusive renunciation and the jurisdiction clause.

1.1.2. The application for the authorization:

The application for the authorization is not a formal procedure. It must include several documents. The documents to present are not mentioned within a law. An indicative checklist has been prepared by the administration. The documents included within this list shall vary depending on the governorate. The application includes generally:

– 5 duplicates of the application for authorization completed and signed;

– minutes of a bailiff including a statement of fact relating to the property;

– a certificate of property or a judgment or any other legal document certifying the ownership of the property;

– the tax clearance of the seller;

– a municipal taxes receipt relating to the property;

– the promise to sell agreement;

– a power of attorney to the person who introduces the application;

– the identity documents of the seller and the buyer;

– the municipal certificate of completion of the works;

– the property situation plan (scale 1/5000);

– the construction plan made by an architect;

– any document proving the origin of the property of the seller (if the seller is a foreigner he must provide the authorization of purchase which has been granted to him);

– a certificate relating to the purpose of the land on which the house was built.

If the transaction involves legal persons, the application must include also the following documents :

– the articles of incorporation of the company (whether it is seller or buyer);

– the nationality of the company and its legal representative;

– the identity documents of the legal representative of the company

– the minutes of appointment of the legal representative and the official publication if so;

– a statement of the reasons of purchase.

Other governorates such as Nabeul governorate shall request additional documents such as a certificate from the municipality proving that the land is a building plot or a certificate from the regional administration for agricultural development indicating the verification report as to the conformity of the work to the building permit or even a criminal record of the buyer.

1.2. Establishment conventions: an exceptional regime

Tunisia maintain particular and historical relations with certain close countries such as Libya, Algeria and Morocco. People of these countries share approximately the same history and the same culture. Many families from these countries travelled to Tunisia hundred years ago and established themselves in many regions. The same, many Tunisian families also travelled to these countries longtime ago and established themselves in there.

In order to take into account this particularity, Tunisia concluded with a few number of countries including Lybia[6] and Algeria[7] bilateral international conventions allowing the citizens from both countries to own real estates in the other relevant country without obtaining the administrative authorization.

However, since 1994 and during several years, Tunisian authorities refused to apply the provisions of these conventions even though international conventions and treaties are higher standards than national law according to the constitution[8]. Therefore, even for the people of these countries the authorization applied.

Since about 8 years, the administrative practice changed and Tunisia decided to apply the conventions with Libya and Algeria.

According to a service note of the real estate register administration no.24-2018 of June 14, 2018, Libyans and Algerians who are not resident in Tunisia are allowed to buy real estate in Tunisia, other than agricultural land, without a prior authorization of the governor provided that:

– the value of the property must not be less than three hundred thousand dinars.

– payment must occur in foreign currency and in accordance with the Tunisian exchange law and regulations.

1.3. The authorization of the Central Bank of Tunisia for non-resident foreign persons

According to article 20 of Decree no 77-608 of July 27, 1977 on the conditions for the application of Law No 76-18 of January 21, 1976 amending and codifying the legislation on foreign exchange and trade, the purchase of real estate by a non-resident is subject to authorization by the Central Bank of Tunisia, in accordance with foreign exchange legislation. This authorization is less formal and the procedure is less complex.

Any foreign person non-resident in Tunisia who intends to buy a real estate must:

– open a non-resident account in foreign currencies or convertible dinars, in the bank of their choice;

– import the currencies to pay the advance and then the purchase price;

– ask his bank to provide an investment sheet specifying that funds from abroad are intended for the acquisition of real estate. It is necessary to obtain the investment sheet after the transfer of funds because in case, the buyer decide to resale the property and ask to repatriate the price of sale, this investment sheet mandatory to obtain the authorization to repatriate the price of sale. In the event that the buyer cannot or forget to obtain the investment sheet, it is recommended to obtain a certificate from the bank stating all these details.

2. Industrial and touristic land and premises: Freedom of purchase in the framework of investment operations

Since 2005 and in order to encourage foreign investment, the Tunisian legislator amended the Beylical decree of June 4, 1957. According the law no.40-2005 amending article 7 of the Beylical decree of 1957, acquisition or lease by foreigners of land and premises built in industrial areas and land in tourist areas, and for the realization of economic projects are exempt from prior authorization.

After the revolution, the new legislation on investment was more clear and explicit. According to article 5 of the law no. 2016-71 of September 30, 2016, on the law on investment, investors are free to acquire, rent or exploit non-agricultural real estate in order to realize or pursue direct investment operations subject to compliance with the provisions of the Land Use and Urban Planning Code and land use plans.

In other words, the foreign investor has the opportunity to acquire land or premises for the implementation of industrial or services projects. For the implementation of an economic project, he is free to buy land or premises located in touristic or industrial zones and the transaction does not require a prior authorization.

The administrative circular no. 44 issued by the Prime Minister on August 22, 2005, clarified the provisions of law no. 40-2005. It clarified the real estate operations exempted from the authorization and the conditions related to the real estate concerned with exemption. According to this circular, the foreign investor is exempted from the authorization in the following cases:

-When the foreign investor acquires or leases land located within industrial or tourist areas;

-When acquiring or renting premises in industrial zones;

-When he is a seller and lessor of real estate in the context of complementary projects defined in accordance with a program contract with the Ministry in charge of foreign investment.

Also, the transfer of property of lands or premises located in industrial or touristic zones[9] resulting from the merger, demerger, change of legal form, companies’ gathering, transfer of the company or branches of companies with a majority of foreign capital shall be exempted from the authorization provided that they maintain the economic activity.

3. Agricultural lands: the last prohibition

Agricultural lands are considered as the last bastion of sovereignty. Although the Tunisian legislator opted overtime for a more liberal approach as to residential, touristic and industrial real estate, acquisition of agricultural lands by foreigners is always prohibited.

Tunisian authorities engaged advocacy and tried several times to amend the law and lift the ban in the framework of investment regulations, however, many individuals and organizations voiced their disapproval to any amendment.

It is important to mention that, at the time of the independence, Tunisia hardly negotiated an agreement with France to recover the fertile agricultural lands. These agreement were indispensable condition of its independence and sovereignty food: these are the Protocols of October 13, 1960 and March 2 1963. These protocols consisted of a “buy-back” procedure of Tunisia’s own agricultural land via a loan granted by France. The Tunisian Government should receive from the French Government up to a sum of one billion francs, “as a participation in Tunisia’s economic and social development program, “and then allocate these funds to purchase from French farmers of these rural properties and compensate these last . Tunisia indebted to France to buy back its own most fertile farmland[10].

The promulgation of the law no.64-5 of May 12, 1964 constituted the real divergence towards the imposition of state sovereignty over most of its lands, especially agricultural real estate. According to article 1 of this law “Only arable or Tunisian nationals can own agricultural land”

Later on in 1969, the law no 69-56 of September 22, 1969 confirmed the same trend.

According to article 1 of the law no 97-33 of May 26, 1997 amending the law no 69-56 of September 22, 1969 on the reform of agricultural structures, the right of ownership of agricultural land may only belong to ‘natural persons of Tunisian nationality or cooperatives, public corporations, civil and limited liability companies whose partners are natural persons of Tunisian nationality and to corporations established in accordance with the provisions of the law no. 89 -43 of March 8, 1989 on the conditions of exercise of agricultural activities by corporations.

According to article 5 of the same law, the exploitation of agricultural land by a company in whose capital foreigners participate can only be done by way of lease and without the land being subject of contribution to the capital of the company.

These particularities prove that there is a real estate public order within Tunisian Law.

II-              The sale of real estate by foreigners in Tunisia

As the provisions of article 1 of the Beylical decree of 1957 was general and applicable to all the transactions involving a foreign person, same as the purchase, the sale of real estate by foreigners is in principle subject to an authorization too.

International bilateral conventions have been concluded between Tunisia and the following countries: Algeria-Morocco-Libya-France[11]-Italy[12].

These bilateral agreements introduced more flexibility. They exempted, under certain conditions, the owners (or their heirs) from the authorization of the governor. The conditions of exemption vary mainly according to the date of acquisition or construction of the property (before the independence in 1956 or after) and according to the nationality of the buyer (Tunisian or foreign).

It is also important to mention that, the transfer of proceeds from the sale of Tunisia to the country of residence of the seller is subject to the authorization of the Central Bank of Tunisia.

The issue is regulated by the provisions of article 1 of the code on exchange and foreign trade, articles 19 and 20-1 of the decree 77-608 and the notice of exchange no.5-1982 of the minister of plan and finances relating to of non-residents and the circular to authorized intermediaries’ n ° 2018-14 on non-resident accounts.

The application for the authorization of transfer of sale’s proceeds must be accompanied by the following documents:

-four duplicates of the application form FI;

– A copy of the authorization or references to the eventual agreement of the Central Bank of Tunisia relating to the initial acquisition by the non-resident purchaser, or, failing that, a document as a regularization for the acquisition of the property;

– a copy of the contract of sale duly signed by the contracting parties and registered in the tax administration

-a copy of the authorization of the Governor of the region where the property in question is located;

-a copy of the statement of the open suspense account in the name of the seller housing the proceeds of transfer to be transferred;

-a copy of the certificate of ownership on behalf of the new purchaser;

– a certificate of regularization or exemption from the tax situation established in the name of the seller,

-all documents justifying the seller’s residence abroad if he is a natural person

– a copy of the seller’s legal file if he is a non-resident legal person established in Tunisia.

Despite all these particularities and restrictions, Tunisia introduced important incentives to foreigners to encourage them to invest in residential real estate. Since 2007[13], any acquisition of a real estate by a non-resident foreigner in foreign currency is registered under the fixed duty whereas Tunisian residents pay approximately between 3 and 10%[14] as registration taxes. This incentive was extended to non-resident Tunisians, only in 2016 in the framework of the finance act of 2016[15].

[1] LL.M of Law, Certified attorney at Law.

[2] In ten years, 429211 Ha of the agricultural lands has been transferred to foreign persons. In 1958, foreigners owned 724000 Ha of all the registered lands.(Kamel Charfeddine ; Propriété d’immeuble, terre à terre, available on http://www.urdri.fdspt.rnu.tn/articles/etranger/etranger_charfeddine.pdf)

[3] Before the establishment of the republic, the Beylical decree was considered as the equivalent of the parliamentary law

[4] Art 1 of the Beylical Decree of 4th June 1957

[5] Art 2 of the Beylical Decree of 4th June 1957

[6] Establishment agreement of 14th June 1961

[7] Establishment agreement of 26th July 1963

[8] The rationale behind is the condition of reciprocity. This conditions was specifically mentionned within the convention. Under the Tunisian constitution of 1959 (article 32), it is also a condition to consider an international convention higher as a norm than a national law. In 1994 and 1995, two administrative circulars established that the condition of reciprocity is not applied by the other parties to the conventions and decided the suspension of the conventions although the conventions themselves did not provide for any sanction in case of non reciprocity. It is important to mention that several decisions of the real estate court decided the registration of the transaction and ignored the circulars and declined the position of the Real estate register administration ( for eg. decision no.460 of 11th November 2000, decision no.356 of 29th April 2000…)

[9] or areas considered as such according to Tunisian urban development law

[10] Thierry Hubert. La cession à la Tunisie des terres des agriculteurs français – protocoles franco-tunisiens des 13 octobre 1960 et 2 mars 1963. In: Annuaire français de droit international, volume 9, 1963. pp. 933-952.

[11] Law no. 98-104 of 18th December 1998, ratifying an exchange of letters dated 20 October 1997 between the Republic of Tunisia and the French Republic on the settlement of the issue of French real estate in Tunisia.

[12] Law no. 2000-5 of 24th January 2000, ratifying the exchange of letters dated 24 July 1999 between the Government of the Republic of Tunisia and the Government of the Italian Republic concerning the final settlement of the issue of Italian real estate in Tunisia acquired or built before 1956.

[13] Article 34 of the finance act of 2007.

[14] The finance act of 2017

[15] Article 82 of the finance act of 2016.

Share

Add Your Comments

Your email address will not be published. Required fields are marked *