Flat-for-Land Construction Contracts in Türkiye: Pre-Signing Checklist for Urban Transformation, Delay Compensation and Contractor Default

A flat-for-land construction contract is a contract under which land owners undertake to transfer part of their land shares to a contractor in return for the contractor building a new building and delivering the agreed independent units to them. Because it contains a promise to transfer immovable property, it is valid only if executed before a notary in official form. In urban transformation, the contractor must provide the administration with security equal to six percent of the approximate building cost before the building permit is issued; if work does not start within one year or construction stops for six months, the contract can be terminated administratively upon a majority decision of the owners. If delivery is late, the owner may claim the contractual delay penalty or the loss of rent for each month of delay; however, an owner who accepts a late-delivered flat without a reservation cannot, as a rule, claim the delay penalty.

This article covers the form of the contract, the special rules of urban transformation, the clauses to check before signing, how delay compensation is calculated with an example, and the remedies available if the contractor is late, abandons the work, becomes insolvent, sells units to third parties or delivers a smaller or defective unit. It is based on the Turkish Code of Obligations (TCO) and on the Implementing Regulation of Law No. 6306 as amended on 4 February 2026. The majority decision and the position of a dissenting owner are discussed in Dissenting Owners in Urban Transformation, and state rent assistance in Urban Transformation Rent Assistance.

What Is a Flat-for-Land Construction Contract and How Is It Made?

A flat-for-land (land share for flats) construction contract is a mixed contract not specifically regulated by statute, combining elements of a contract for work and a promise to sell immovable property. The contractor undertakes to build the building in accordance with the project and the contract and to deliver the independent units allocated to the land owners; in return, the land owners undertake to transfer the agreed part of their land shares to the contractor.

Since the contract includes the transfer of land shares, it is subject to official form under art. 706 of the Turkish Civil Code (TCC), TCO art. 237 and art. 26 of the Land Registry Law, and it is executed before a notary in official form. A contract in ordinary written form, or a document on which the notary only certifies the signatures, does not satisfy this requirement and is invalid as a rule. The Court of Cassation may treat reliance on invalidity as contrary to good faith (TCC art. 2) where the parties have largely performed a contract that lacks the required form; however, since this exception is assessed case by case, the contract should be made in official form from the outset.

Special Rules for Contracts in Urban Transformation

A contract with a contractor for rebuilding a risky building is governed not only by the general rules but also by the special rules of Law No. 6306 on the Transformation of Areas Under Disaster Risk and its Implementing Regulation:

• Majority. The decision on the method of implementation and the agreement with the contractor is taken by an absolute majority of the co-owners calculated by their shares; the share of an owner who does not join the decision may be sold at auction.
• Contractor's security. A contractor undertaking construction on a parcel with a risky building must provide the administration with security equal to six percent of the approximate building cost before the building permit is issued (Implementing Regulation art. 13(9)). The security is returned after the occupancy permit is obtained; if the work is not completed in accordance with the contract, it is converted into cash and transferred to the party that will complete the work. Security is not required if a building completion insurance policy, whose scope is set by the Insurance and Private Pension Regulation and Supervision Agency, is taken out.
• Sales by the contractor. The contractor may sell the independent units allocated to it only with the Administration's permission and only within the level of construction progress determined by the Administration; sales above that limit require the consent of all owners. The limit no longer applies once completion has been confirmed or the occupancy permit has been issued (art. 13(10)).
• Administrative termination. If the contractor does not start work within one year or stops construction for six months, the contract can be terminated administratively without going to court (art. 13(11)).
• Exemption from fees and taxes. Contracts, transfers and registrations made under the Law are exempt from notary fees, land registry fees and stamp duty under art. 7 of the Law.

Clauses to Check Before Signing

Disputes arising from flat-for-land construction contracts usually stem from issues left open at the signing stage. Before the contract is signed, at least the following should be regulated clearly and measurably:

• Allocation list and project. Which independent unit each owner will receive should be tied, with its block, floor, frontage and number, to the project attached to the contract. The contract should state whether areas are net usable or gross, and any price difference to be paid by an owner who wants a larger unit should be specified with its amount and due date.
• Periods. The periods for starting construction and for delivery should be written together with the date from which they run (the contract date, the date of vacating the building or the building permit date). Delivery should be defined as the delivery of an independent unit for which the occupancy permit has been obtained and condominium ownership has been established, and the force majeure events that extend the period should be listed restrictively.
• Delay penalty. The amount payable per independent unit for each month of delay in delivery should be set with regard to the comparable rent and with an adjustment mechanism.
• Contractor's rent. The rent the contractor pays during construction is separate from state rent assistance; its amount, increase, start date and continuation until delivery should be written into the contract. The relationship between this payment and rent assistance is explained in Urban Transformation Rent Assistance.
• Staged transfer of land shares. The land shares allocated to the contractor should be transferred not all at once but according to the progress of construction. For example, a schedule of twenty percent when the building permit is issued, thirty percent when the shell is completed, thirty percent when the finishing work is completed and the remaining twenty percent when the occupancy permit is obtained may be agreed. The contract should also state who determines the level of progress and on what document.
• Security. The security under the Regulation is given to the administration and used for completing the work; owners cannot rely on it directly for delay penalties or rent claims. The contract may therefore provide additional security such as a performance bond issued by a bank, a mortgage in favour of the owners over the units allocated to the contractor, or retention of part of the contractor's share until the occupancy permit is obtained.
• Technical specification. The brand, class or quality level of the materials, and the features of common areas such as lifts, parking and thermal insulation, should be set out in a specification attached to the contract.
• Costs. The contract should state which party bears the costs of demolition, the project, the permit, building inspection, utility connections and the occupancy permit.
• Contractor's qualifications. The contractor's building contractor authorisation certificate number, whether its certificate group matches the size of the project, its trade registry record and the authority of the person signing the contract should be checked.

How Is Delay Compensation Calculated?

If the contractor does not deliver the independent unit on the contractual date, the land owner may claim the delay penalty if one was agreed, and otherwise the rental income lost during the delay (loss of rent). The loss of rent is the comparable monthly rent of the unit that should have been delivered multiplied by the number of months of delay; in litigation, the comparable rent is determined by a court-appointed expert.

As a hypothetical example, the owners of a ten-unit building agreed to transfer half of their land shares to a contractor in return for each of them receiving one flat in the new building. The delivery period is 24 months from the building permit date, and the contractor delivered the flats 8 months after that period ended.

• If a delay penalty of TRY 20,000 per unit per month was agreed, each owner may claim 8 × 20,000 = TRY 160,000, and the ten owners TRY 1,600,000 in total.
• If no delay penalty was agreed and the expert sets the comparable monthly rent of a flat at TRY 25,000, each owner's loss of rent is 8 × 25,000 = TRY 200,000.

The amounts in the example are hypothetical; the actual amount depends on the contract and on the comparable rent determined by the expert. The following rules directly affect the result:

• Reservation. Under TCO art. 179(2), an owner who accepts a late-delivered flat without a reservation cannot, as a rule, claim the delay penalty. The reservation should be stated expressly in the delivery report or in a written notice given at the time of delivery.
• Loss exceeding the penalty. If the owner's loss exceeds the delay penalty, the contractor must also pay the excess unless it proves that it was not at fault (TCO art. 180(2)).
• Reduction. The judge may reduce a penalty considered excessive (TCO art. 182(3)); however, a contractor that is a merchant cannot request a reduction on the ground that the penalty is excessive (Commercial Code art. 22).
• Use. Once an independent unit has actually been taken over and used, or transferred to a third party, the delay ends for that unit.

What Remedies Exist If the Contractor Is Late or Abandons the Work?

If the contractor misses the delivery date or abandons the construction, the land owner may use the general remedies of default and withdrawal from the contract; if the contract falls under Law No. 6306, administrative termination is also available.

Default and Withdrawal Under the General Rules

If a fixed delivery date was agreed, the contractor falls into default when that date passes, without any need for a notice (TCO art. 117(2)). In the event of default, after giving the contractor a reasonable period (TCO art. 123), the land owner may choose one of the following remedies (TCO art. 125):

• Demand completion of the construction together with delay compensation,
• Waive performance and claim compensation for the loss caused by non-performance,
• Withdraw from the contract and claim compensation for the loss arising from the contract becoming ineffective.

If work is not started on time, or is delayed to such an extent that it clearly cannot be completed by the delivery date, the land owner may withdraw from the contract without waiting for the delivery date (TCO art. 473(1)).

The effect of withdrawal depends on the stage the construction has reached. In the practice of the Court of Cassation, if the construction is about ninety percent complete or more, the contract can, under the principle of good faith, be terminated only with future effect, and the contractor may become entitled to land shares in proportion to the work completed. If the construction is below that level, the contract ends retroactively and the land owner may claim the return of the land shares transferred to the contractor through an action for annulment of title and registration.

Administrative Termination in Urban Transformation

For contracts under Law No. 6306, owners may also request administrative termination of the contract without going to court. Under art. 13 of the Implementing Regulation, this route is available in two cases:

• Work not started within one year. Construction of the new building must not have started within one year for reasons attributable to the contractor. For contracts signed before the risky building determination became final, the period runs from the date it became final; for contracts signed afterwards, from the date the contract was signed with the last owner; and where the decision was taken by absolute majority, from the date of that decision.
• Construction stopped for six months. Construction must have stopped at a certain stage, and for at least six months there must have been no work with the crew and equipment needed to finish the project.

Termination requires a decision of the owners by an absolute majority calculated by shares, performance by the owners of their own contractual obligations, and the absence of any court or administrative decision preventing the start of work. With the decision, a written application is made to the Provincial Directorate or the Administration; the contractor is asked to submit information and documents within fifteen days, and the site is inspected. If the conditions are found to be met, the contractor is given thirty days to start or resume work. If work with adequate crew and equipment does not begin within that period, the contracts between the owners and the contractor are deemed terminated without the consent of the parties concerned.

Rent paid by the contractor to the owners up to the termination date cannot be reclaimed. The owners may then agree with a new contractor, again by absolute majority; the former contractor's claims relating to the work it carried out are assessed separately under the general rules.

If the Contractor Becomes Insolvent

If the contractor becomes insolvent, for example through bankruptcy or unsuccessful attachment proceedings, the land owner may suspend its own performance, in particular the transfer of land shares not yet transferred, until the contractor's performance is secured. If no security is provided within a reasonable period, the owner may withdraw from the contract (TCO art. 98).

At this stage, the measures taken when the contract was made offer the owners the most protection. If land shares were transferred in stages, the shares not yet transferred remain the owner's property and cannot be attached by the contractor's creditors. The security under the Regulation, or a building completion insurance policy, is also used to have the construction completed by another contractor. Recovering shares already transferred to the contractor depends on whether they have been passed on to third parties and on the position of those acquirers, and may be more difficult.

If the Contractor Sells Units to Third Parties

The contractor may sell the independent units allocated to it under the contract to third parties while construction is ongoing; it may not dispose of the units allocated to the land owners. For buildings under urban transformation, such sales depend, as explained above, on the Administration's permission and the progress of construction.

A person who buys a flat from the contractor in an unfinished building, as a rule, acquires the contractor's claim against the land owner. The land owner may therefore raise against that person the defence that the contractor has not performed its contractual obligations (TCO art. 188). Anyone considering buying a flat from a contractor should first check whether the Administration has permitted the sale and how far construction has progressed.

If the Flat Is Smaller Than Agreed or Defective

When an independent unit is taken over, it should be inspected, and any defects found should be notified to the contractor within a reasonable period; defects that cannot be detected by an ordinary inspection should be notified as soon as they appear (TCO arts. 474 and 477). It is important that the date and content of the notice can be proven.

In the event of a defect, the land owner may request a price reduction in proportion to the defect or, if it does not involve excessive cost, repair at the contractor's expense, and may also claim compensation for its loss (TCO art. 475). Since withdrawal from the contract is not available for buildings constructed on land that can only be removed at excessive loss, claims for price reduction, repair and compensation are the main remedies in practice. Delivery of a flat smaller than stated in the contract is also a defect, and the market value of the missing area may be claimed.

For defects in immovable structures, the limitation period for claims against the contractor is five years from delivery; if the defect results from the contractor's gross fault, the period is twenty years (TCO art. 478).

Frequently Asked Questions

Conclusion

A flat-for-land construction contract ties the land owners' property to the contractor's performance for a long period. Executing the contract before a notary in official form, and writing the allocation list, a fixed delivery date, the delay penalty, the staged transfer of land shares and security into the contract before signing, prevents a significant part of later disputes. If the contractor is late or abandons the work, administrative termination specific to urban transformation is available alongside withdrawal and compensation under the general rules; making a reservation on delivery and notifying defects in time are decisive for preserving these rights.