18 May 2016
FORM OF LAND SHARE-BASED CONSTRUCTION CONTRACTS
I found it necessary to conduct this examination regarding the common issues and disputes that arise in the validity of land share-based construction contracts. First, it is essential to define what a land share-based construction contract is. It is as follows:
A land share-based construction contract is a bilateral, consideration-based, mixed contract that imposes obligations on both parties. In this contract, the property owner transfers or undertakes to transfer a certain share of the land as payment, and in return, the contractor undertakes to create a building (structure).
A land share-based construction contract is a type of agreement in which the contractor takes on the task of constructing a building on the landowner's plot of land with financing provided by the contractor, while the landowner promises to transfer the ownership of a portion of the independent units in the building to the contractor as payment.
This contract can be defined as follows.
In practice, the common questions we encounter and are asked are “How can this contract be arranged, and how can we protect our rights when arranging it?” As we will examine in detail below, through this contract, the contractor (builder) undertakes to obtain a certain share of the land from landowners and, in return, provide the landowners with agreed-upon apartments in the building being constructed, without receiving any additional payment. The key point to note is that this contract involves the transfer of the landowner's land (or existing building) for construction, and the property may be demolished for urban transformation or as per the agreement. If this contract is not arranged according to the legal requirements specified in the law, disputes may arise, and the contract may be rendered invalid, causing the landowners to lose their rights.
FORM OF LAND SHARE-BASED CONSTRUCTION CONTRACT
In a land share-based construction contract, two contracts are intertwined: one is the "construction contract," which is not subject to any formal requirements and can be arranged as a simple written contract. The other is the "contract that causes the transfer of ownership of real property," which must be executed in a public manner according to the Turkish Civil Code (TMK), Article 706, the Turkish Obligations Code (TBK), Article 237, the Title Deed Law, Article 26, and the Notary Law, Article 60. Therefore, land share-based construction contracts must be executed as a “public deed” at the notary. The purpose of the public form is to ensure the contract’s validity. In other words, a land share-based construction contract arranged between the contractor and the landowners in a simple form will not be valid.
EXCEPTION TO THE FORMAL REQUIREMENT OF THE CONTRACT
As mentioned above, land share-based construction contracts must be executed in the form of a public deed at the notary. However, there are exceptional cases where the contract will still be valid even if it has not been arranged at the notary.
If the contract is made in a simple form between the parties, but the contractor has fully or to an unrefusable extent (the Supreme Court criteria is 90%, but it should be evaluated according to the nature of the case) fulfilled his obligation (the duty to create a building), the landowner can no longer claim the contract’s invalidity. Such behavior would be considered abuse of rights under TMK, Article 2.
If the transfer of the real property, which was agreed upon as payment to be given to the contractor, has been carried out by transferring the title of the property to the contractor, the contract, which was initially invalid, will become valid.
In these two exceptional cases, the court will accept the contract's validity, even if the formal requirements for its arrangement were not met. I strongly recommend that contracts made with contractors in this context be arranged as public deeds at the notary.
Av. Hüseyin Orkun ALSULU
