A construction agreement in return for a land share is a transaction in which the landowner undertakes to transfer specified land shares to the contractor, while the contractor undertakes to construct the project and deliver agreed independent units to the landowner.
The structure may unlock the economic value of land, but a poorly drafted agreement can lead to loss of title, an unfinished project, inferior materials, missing units, occupancy permit problems and disputes with third-party buyers.
Legal nature of the agreement
The transaction combines elements of a contract for work with a transfer or promise to transfer immovable property. It is therefore assessed under the Turkish Code of Obligations, the formal rules governing immovable property and the individual terms of the project.
The contractor must build in accordance with planning law, the approved project, the agreement and its technical specification. The landowner must transfer the agreed shares according to the contractual schedule.
Required form
Because the agreement contains a transfer or promise to transfer land shares, official form is essential. An agreement containing a promise of sale should generally be executed in the statutory form before a notary. An immediate transfer of title is completed through the official land registry procedure.
A privately signed document may create serious validity and evidentiary problems. Amendments to essential terms, including unit allocation, transfer stages and completion dates, should observe the form required for the original transaction.
Registration by annotation
A properly executed promise concerning land may be annotated in the land register. The annotation strengthens the ability to assert the contractual right against persons who later acquire rights in the property.
It does not itself transfer title or remove every project risk. Mortgages, attachments, injunctions, usufruct rights and other restrictions must be reviewed separately.
Due diligence before signing
The land review should cover the current title record, all owners and shares, encumbrances, zoning conditions, development rights, access, ground conditions and obstacles to building permission.
The contractor review should cover corporate authority, completed projects, financial capacity, enforcement exposure, technical staff, contractor authorisation and references. Marketing materials and nominal share capital are not adequate substitutes for due diligence.
Should all shares be transferred in advance?
Transferring the land or the contractor's entire allocation before construction begins exposes the landowner to substantial risk. If the project stops, or the contractor transfers or mortgages the shares, recovery may require complex litigation.
A staged transfer structure is generally more controllable. Transfers may be linked to objectively verified milestones such as the building permit, foundation, structural completion, finishing works and occupancy permit. Guarantees must state their amount, duration, enforcement conditions and release triggers.
Allocation of independent units
A generic percentage is not sufficient. The allocation schedule should identify the block, floor, frontage, provisional unit number, use, approximate net and gross area, land share, storage and parking rights.
The agreement should address later renumbering, project amendments, additional development rights and any reduction in buildable area. Otherwise, the most valuable parts of the project may become the subject of dispute.
Technical specification
The technical specification should form an integral annex. Expressions such as “first-class materials” or “luxury workmanship” are too vague by themselves.
Measurable requirements should cover the structural system, insulation, façade, roof, windows, doors, flooring, heating, electrical and mechanical installations, lifts, fire systems, common areas, landscaping and parking. Where appropriate, brand, model, performance class and the criteria for accepting an equivalent product should be specified.
Permits, delivery and occupancy
A single completion period may be inadequate. Separate deadlines can be set for site handover, design approval, building permit, structural works, finishes, landscaping and the occupancy permit.
The agreement should define delivery. A protective definition may require completion in accordance with the contract and approved plans, usable common areas, a defect record and an occupancy permit, rather than treating the delivery of keys as sufficient.
Delay, rent support and penalties
Rent support, contractual penalties and delay damages should identify their start date, payment date, escalation method and duration. The agreement should also state the effect of accepting delivery with reservations.
Even without a contractual penalty, proven delay losses may be claimed where the legal conditions are met. Excessive penalties may be reduced by a court, with different considerations applying to merchants.
Contractor default
Article 473 of the Turkish Code of Obligations may allow the owner to act before the delivery date when the contractor fails to start, delays contrary to the agreement or clearly cannot complete on time for reasons not attributable to the owner.
Depending on the facts, remedies may include performance and delay damages, damages instead of performance or termination. Notice and an additional period may be required. Once construction has progressed, termination also requires a careful liquidation of completed works, transferred shares and third-party transactions.
Defective or incomplete work
After delivery, the owner should inspect the work promptly and notify apparent defects within an appropriate period. Hidden defects discovered later must also be reported without delay.
Subject to Article 475, remedies may include rescission in serious cases, a reduction or free repair where repair is not disproportionately costly. Damages remain available under the general rules. For defective immovable works, Article 478 generally provides a five-year limitation period from delivery and twenty years in cases of gross fault, although the applicable period must be checked for each claim.
Termination and recovery of title
Termination may raise questions about retroactive or prospective liquidation, depending on the progress of the works and the legal grounds. This affects both the contractor’s entitlement for completed work and the fate of transferred shares.
If the contractor has transferred shares to third parties, cancellation and registration claims become more complex. A termination notice does not automatically restore the land register. Staged transfers, annotation and effective security should therefore be designed at the outset.
Purchasers from the contractor
A buyer of a unit allocated to the contractor should review the main agreement, not merely the sale document. The buyer must understand when the contractor earns the relevant unit and whether the contractor has performed its obligations.
The title record, main agreement, permits, approved plans, construction level, share transfers, mortgages and attachments should be examined together. Payment for a unit that has no completed title or remains conditional on contractor performance carries material risk.
Powers of attorney
Broad and indefinite powers of attorney in favour of the contractor are risky. Permitted acts concerning permits, plans, condominium establishment and land registry procedures should be specifically identified.
Authority to sell, mortgage, borrow, settle, release claims, substitute another attorney or amend the agreement should be excluded unless genuinely necessary and tightly limited.
Taxes, fees and costs
The agreement should allocate notary and land registry costs, permit and design expenses, building inspection fees, taxes, insurance, utilities and condominium establishment costs.
A contractual allocation does not always change statutory liability to public authorities. VAT and income or corporate tax consequences vary according to the status of the owner and the continuity and commercial nature of the transaction. Separate tax advice is appropriate.
Jurisdiction and mediation
The competent court depends on the parties, the commercial or consumer character of the transaction and the remedy claimed. These disputes do not automatically belong to one specific court in every case.
Mandatory mediation may apply to certain commercial monetary or consumer claims. Where title registration, performance, termination and damages are combined, jurisdiction and pre-litigation requirements must be assessed specifically.
Essential contractual subjects
A sound agreement should cover the land and encumbrances, party authority, unit allocation, area calculations, technical specifications, milestone schedule, staged share transfers, security, rent and penalties, defects, project changes, additional development rights, taxes, powers of attorney, third-party transfers, force majeure, termination, liquidation and notices.
Frequently asked questions
Must all landowners sign?
If the project is intended to bind the entire property, all owners must participate or be validly represented. A co-owner’s ability to deal with their own share does not mean that a whole-site development can proceed.
Does notarisation eliminate all risk?
No. It addresses form and authentication, but planning feasibility, contractor capacity, allocation, technical standards, security and the transfer schedule require separate review.
Can the contractor replace the agreed unit?
Not unilaterally as a rule. Any necessary change should preserve value, location and area and should be made in the contractually and legally required form.
Is delivery complete without an occupancy permit?
The answer depends on the agreement and circumstances. Physical use may begin after keys are delivered, but failure to obtain the occupancy permit may remain a breach and cause loss. The safest approach is to define the obligation and consequences expressly.
Can the owner terminate during construction?
It may be possible when the statutory or contractual conditions are met. Progress, contractor fault, notices, transferred titles and third-party rights must be reviewed before unilateral action.
Conclusion
The decisive issue is not merely how many apartments the landowner receives. The transfer schedule, security, project supervision and protection of title in the event of delay or termination must be designed together.
This article is for general information. A specific transaction requires review of the title, zoning records, project, agreement and the parties’ legal status.
Legal sources
6098 sayılı Türk Borçlar Kanunu — özellikle m. 112–126 ve 470–478
