KÜHEYLAN HUKUK
Construction Contract in Exchange for Flat: Rights of the Land Owner if the Contractor is Delayed, Art. 706, TBK art. 237, 470 ff. and Form Requirement, Delay Compensation, Contract Revocation and Defective Performance in accordance with Article 473 (2026) Updated as of 2026
In the construction contract in return for land share, the land owner undertakes to transfer certain shares of his land to the contractor, and the contractor undertakes to construct the building and deliver the agreed independent sections to the land owner in return. Since the contract includes real estate transfer debt, it must be prepared in a notary public. If the contractor delays the work, the land owner can use one of the rights of delay compensation, penalty clause or withdrawal from the contract. In cases where the construction is largely completed, the Supreme Court adopts prospective termination instead of retroactive termination. Failure to reserve the right to a penalty clause in delivery may result in the loss of this receivable.
Construction contract in return for flat is also called "construction contract in return for land share" or "build-share" in practice. This contract contains two separate debt relationships: a work contract in terms of the contractor's obligation to build a building, and a promise to sell real estate in terms of the land owner's obligation to transfer his land share. The Supreme Court accepts this contract as a unique mixed contract that imposes obligations on both parties.
Most of the buildings within the scope of urban transformation in metropolitan cities such as Istanbul are being renewed with this model. Decision quorum and stakeholder rights in risky structures are subject to a separate regime.
Contracts involving the transfer of real estate are subject to TCC art. 706, TBK art. 237 and Notary Law art. It must be done formally in accordance with Article 60. For the construction contract in return for flat, this form is the contract drawn up in a notary. Contracts that are simply written or whose signatures are notarized are, as a rule, invalid.
However, the Supreme Court of Appeals has ruled that in cases where the parties fulfill their obligations to a large extent despite the contract contrary to the formal form, the claim of lack of form is within the scope of Turkish Civil Code art. may find it contrary to the rule of honesty in 2. This exception is interpreted narrowly and is evaluated separately in each concrete case. The safest thing to do is to have the contract drawn up by a notary from the beginning and annotated it on the title deed.
Constructing the building in accordance with the license, project and technical specifications Delivering the land in a condition suitable for construction
Completing the work within the time specified in the contract and receiving the occupancy Transferring the agreed land shares according to the stages in the contract
Delivering the independent sections to the land owner without any defects Giving the necessary power of attorney and consent for license and modification procedures
Fulfill rental assistance and security obligations, if any Paying the costs and fees incurred in the contract
Transfer of land shares is the land owner's greatest assurance. Gradual transfer of shares according to the progress level of construction is much safer than transferring the entire share at the foundation stage. Gradual transfer leaves bargaining power in the hands of the land owner in case the contractor abandons the work.
TBK m. According to Article 473, if the contractor does not start the work on time, delays the work contrary to the contract, or clearly shows that the work cannot be completed on the delivery date, the land owner may withdraw from the contract without waiting for the delivery date. Since determining the current status of the construction is of great importance for this purpose, it is recommended to have evidence determined through the Civil Court of Peace before the lawsuit.
If the delivery date has passed, the land owner, TBK art. It gives the contractor an appropriate period of time in accordance with Article 123 et seq. If it is not fulfilled within this period, the land owner chooses one of the following rights:
To demand performance and compensation for the damage suffered due to delay (for example, loss of rent),
To demand compensation for the damage suffered due to non-performance by giving up the performance,
To withdraw from the contract and claim the damages suffered due to the invalidity of the contract.
As a rule, withdrawal from the contract has retroactive effect; The transferred land shares are returned to the land owner, and the contractor may demand the price of the production he made in accordance with the provisions of unjust enrichment. However, the Supreme Court finds retroactive termination unjust in cases where most of the construction has been completed (in practice, approximately ninety percent or more) and accepts the prospective termination of the contract. In this case, the contractor may be entitled to a share of the land in proportion to his completion.
The most frequently requested item due to delay is the loss of rent that the land owner may obtain from the independent sections that are not delivered. The expert calculates the equivalent rental costs for each month of delay. If a certain amount is determined as a penalty for each month of delay in the contract, this amount is subject to TCO art. It can be requested in accordance with article 179.
Here, it is necessary to draw attention to a loss of rights that occurs very frequently in practice. If the land owner does not clearly state that he reserves the right to demand a delay penalty when taking over the independent sections, it may be concluded that the performance is accepted without reservation and a penalty clause may not be requested. For this reason, the phrase "our rights to delay penalties and compensation are reserved" must be written in the delivery report.
After delivery, the land owner must review the independent sections and notify the contractor of any defects he detects within the appropriate time. Hidden defects must be reported immediately as soon as they occur. TBK m. According to Article 475, the land owner; If the defective work does not require rejection, a price reduction in proportion to the defect, or excessive expense, it may exercise one of the rights to free repair. Statute of limitations for defects related to immovable structures, TBK art. In accordance with Article 478, it is five years from the delivery, and twenty years if the contractor has a serious fault.
Contractors can sell their share of the independent sections while construction continues. These persons are deemed to have taken over the title deed transfer of the contractor from the land owner. The land owner can also claim against these people the same defenses that he can put forward against the contractor (for example, that the contractor has not fulfilled his debts). If the contract is terminated with retroactive effect before the contractor completes the work, those who buy flats from him will not be able to request title deed from the land owner and will have to apply to the contractor.
For the construction of a building with 12 flats in Kartal, a contract was signed in the form of a notary arrangement in 2023, and the delivery date was determined as 30 June 2025. The contract stipulates a penalty of 25,000 TL per flat for each month of delay. As of October 2026, the rough construction was completed, the finishing works remained at forty percent, and there has been no work on the construction site for months.
The deadline passed more than fifteen months ago. Land owners must first document the level of construction by obtaining evidence, and then give the contractor an appropriate period of time with a notary notice. Since the construction level is well below ninety percent, retroactive return and return of land shares may be requested at the end of the period. Alternatively, it may be considered to keep the contract standing, have the work completed by another contractor, and claim a delay penalty and loss of rent. Which method to choose should be determined by taking into account the financial situation of the contractor and sales made to third parties.
The contract was signed with a lawyer, not a notary. Is it valid?
As a rule, it is invalid. However, if the parties have fulfilled their obligations to a large extent, the allegation of lack of formality may not be heard due to the rule of honesty. This evaluation is made according to the concrete event.
What happens if the contractor goes bankrupt?
Land shares that have not yet been transferred are protected. In terms of transferred shares, requests for withdrawal from the contract and cancellation of title deed are evaluated together with the bankruptcy administration.
In which court is the lawsuit filed?
Depending on whether the parties are merchants or not and the nature of the dispute, the Civil or Commercial Court of First Instance has jurisdiction. If money is claimed in commercial cases, mediation may be mandatory before the case.
If rental assistance is not paid, can it be requested separately?
If agreed in the contract, rental assistance is an independent obligation of the contractor and unpaid amounts can be claimed separately.
Do not make the contract in the form of a notarized arrangement and settle for an ordinary written document.
Transferring all land shares to the contractor at the beginning of construction.
Leaving the construction level open to discussion without having evidence determined before the case.
Not reserving the right to delay penalty when receiving the flats.
Delaying notification after noticing hidden defects.
A construction contract in exchange for flats is a high-risk legal relationship in which the land owner ties his most valuable asset to a long-term project. Establishing the contract correctly, gradual transfer of land shares, determining the guarantees and using the correct optional right in case of delay greatly reduces the losses of the land owner.
Küheylan Law Firm takes care of the legal security of the project at every stage by supporting the land owners and contractors, from the negotiation and drafting of the contract to the warnings during the construction process, from the detection of evidence to termination and compensation cases.
Important Legal Notice: This guide has been prepared for general information purposes and does not constitute legal advice. Legislation and Supreme Court practice may change over time; The unique circumstances of each dispute require a separate legal assessment. Küheylan Law Firm cannot be held responsible for the consequences that may arise from transactions based on this text.
KÜHEYLAN HUKUK