yazarı lawyerfbc

açık Ağustos 11, 2026

Construction project finance is fundamentally different from ordinary corporate lending.

In a conventional corporate loan, the lender primarily relies on the borrower’s overall balance sheet, operating history and general creditworthiness. In a construction project, however, repayment may depend substantially on an asset that has not yet been completed and cash flows that have not yet been generated.

The lender is therefore financing a future legal and economic outcome.

The land must be properly owned. The zoning rights must permit the contemplated development. Building permits must remain valid. Construction must proceed in accordance with approved plans. The contractor must perform. Cost overruns must remain financeable. The project must ultimately become legally usable and commercially marketable.

For equity investors, the same risks apply from a different perspective. A project can appear highly profitable in a financial model while containing legal defects that materially reduce — or completely eliminate — the value of the investment.

For this reason, construction project finance in Turkey requires an integrated review of:

land ownership, security, zoning, construction contracts, permits, corporate structure, project revenues, insolvency risk and enforcement.

The central legal question is not merely:

“Can this project obtain financing?”

It is:

“If the project fails, what assets and rights will actually remain available to the lender or investor?”

1. Project Finance Should Begin With the Project Company

Large construction projects are frequently developed through a dedicated project company or special purpose vehicle (“SPV”).

The commercial purpose is relatively straightforward.

The land, construction contracts, financing arrangements, project revenues and investor interests can be concentrated within a specific corporate structure rather than mixed with unrelated businesses of the sponsor.

However, the existence of an SPV does not itself create legal protection.

Before financing, lenders should examine:

the SPV’s articles of association;
shareholding structure;
paid and unpaid capital;
authorised representatives;
existing financial indebtedness;
related-party transactions;
shareholder loans;
guarantees already given;
pending litigation;
enforcement proceedings;
and corporate authority to enter into the financing and security documents.

For Turkish joint-stock companies, representation is governed principally by the board of directors and authorised representatives. Articles 370–373 of the Turkish Commercial Code regulate representation powers and their registration. Article 371 also provides broad protection to good-faith third parties dealing with authorised company representatives, subject to its statutory qualifications.

For the lender, therefore, corporate-authority due diligence is not a formality.

The loan may be economically sound but legally vulnerable if security has not been executed by properly authorised parties.

2. The Land Is Usually the Most Important Security Asset

A construction project’s financial model may contain hundreds of assumptions.

But in many projects, the most valuable existing asset on the financing date is still the land.

The lender should therefore investigate:

registered owner;
complete title history where relevant;
cadastral information;
surface area;
mortgages;
attachments;
injunctions;
easements;
usufruct rights;
annotated sale promises;
construction-for-land-share arrangements;
leases;
urban transformation annotations;
and other registered limitations.

Under the Turkish Civil Code, ownership, easements and immovable security rights are registered in the land registry. The Code also expressly permits certain personal rights — including rights arising from construction-for-land-share agreements and promises to sell real estate — to be annotated so that they may be asserted against persons subsequently acquiring rights over the property.

This is particularly important for project lenders.

A mortgage analysis cannot be completed merely by confirming that the borrower appears as owner.

The lender must identify what other rights compete with the lender’s intended security position.

3. Mortgage Security Is the Core of Many Construction Financings

Turkish law permits present and certain or probable future claims to be secured by mortgage.

Article 881 of the Turkish Civil Code expressly provides that an existing claim, or even a claim that has not yet arisen but is certain or probable to arise, may be secured by mortgage. The mortgaged property does not even have to belong personally to the debtor.

This flexibility is useful in project finance because secured obligations may include:

principal;
future utilisations;
interest;
default interest;
certain costs;
contingent obligations; and
obligations arising under a wider financing structure.

However, the mortgage must be carefully structured around the Turkish degree system.

Article 870 provides that the security created by a mortgage is limited by its registered degree, and mortgages may also be created in second or subsequent degrees.

For lenders, mortgage rank is critical.

A “mortgage” is not enough.

The questions are:

What degree?

What amount?

What existing rights rank ahead of it?

Has a prior degree been reserved?

Are there arrangements governing movement into vacant degrees?

A lender financing most of the project cost while holding a weak-ranking mortgage may be carrying significantly more economic risk than the financing documents suggest.

4. First-Ranking Security Matters Because Sale Proceeds Follow Priority

When a secured debt is not paid, Turkish law generally allows the creditor to recover its claim from the sale proceeds of the mortgaged property.

Article 873 expressly recognises the creditor’s right to obtain payment from the sale proceeds. Article 874 provides that those proceeds are distributed among secured creditors according to their ranking.

This has a direct project-finance consequence.

Consider a project with:

projected completed value: TRY 2 billion;
outstanding senior bank debt: TRY 900 million;
second-ranking lender: TRY 500 million;
distressed-sale value: TRY 1 billion.

The existence of valuable land does not mean both lenders are economically protected.

Security value must always be analysed on a priority-adjusted and distressed-sale basis.

5. A Lender Cannot Simply Take the Property Automatically on Default

A lender may prefer a clause stating:

“If the borrower defaults, ownership of the project land automatically transfers to the lender.”

Turkish property law does not permit that result merely through such a contractual provision.

Article 873 states that an agreement providing for ownership of the mortgaged immovable automatically to pass to the creditor if the debt is unpaid is invalid. Enforcement must instead proceed through the legally recognised mechanisms.

This is an important distinction for international lenders accustomed to other security systems.

Economic control, security and ownership are legally different concepts.

A lender should therefore analyse enforcement law when the financing is structured — not when default has already occurred.

6. Existing and Future Project Receivables Can Be Critical Security

The second major asset class in project finance is cash flow.

Construction projects may generate receivables from:

apartment sales;
commercial-unit sales;
rental agreements;
hotel operations;
management agreements;
insurance;
government payments;
concession arrangements;
and other project contracts.

Under Article 183 of the Turkish Code of Obligations, a creditor may generally assign a receivable to a third party without the debtor’s consent unless legislation, contract or the nature of the transaction prevents assignment.

Article 184 requires a contractual assignment of receivables to be made in writing.

Accordingly, assignment language buried in a finance agreement should not simply be assumed to create an effective security structure.

Lenders should identify:

each material receivable;
anti-assignment provisions;
required notifications;
contractual conditions;
payment mechanics;
competing assignments;
and the formal requirements for creating and perfecting the intended security.

7. The Commercial Movable Pledge Regime Expands the Security Package

Law No. 6750 on Pledges over Movables in Commercial Transactions provides another important financing mechanism.

Its express statutory purpose is to expand the use of non-possessory movable pledges, broaden the range of assets capable of being pledged and facilitate access to finance.

The law permits security over a wide range of assets, including:

receivables;
revenues;
rental income;
machinery and equipment;
stocks;
raw materials;
intellectual property rights;
commercial enterprises;
and commercial projects.

It also permits security over certain future movable assets and future contractual receivables.

For construction finance, this can be particularly useful where the project company owns:

cranes and machinery;
construction equipment;
unsold stock or materials;
contractual receivables;
lease revenues;
or other commercial assets outside the immovable itself.

The security package should nevertheless be designed asset by asset. A generic expression such as “all assets of the borrower” should never substitute for an analysis of the statutory perfection mechanism applicable to each asset category.

8. Enforcement of Movable Security Must Also Be Planned in Advance

Law No. 6750 provides specific post-default remedies.

Among other mechanisms, Article 14 provides that a first-ranking secured creditor may, under the statutory procedure, request transfer of ownership of the pledged movable through the enforcement office, subject to the detailed rules and valuation framework established by the legislation.

This differs materially from the rule applicable to mortgages over immovable property.

The lender must therefore distinguish:

mortgage enforcement over real estate

from

enforcement of registered movable security.

A project-finance security package may contain both, but they do not operate identically.

9. Project Bank Accounts Require More Than Contractual Monitoring

Project lenders commonly require all project revenue to pass through controlled accounts.

The financing documents may establish a waterfall such as:

taxes;
operating expenses;
senior debt service;
reserve accounts;
construction costs;
shareholder distributions.

This is commercially sensible, but a contractual waterfall does not by itself guarantee priority against every third party.

The legal documentation should therefore separately examine:

account-bank arrangements;
pledges or security over account receivables where applicable;
set-off rights of the account bank;
blocked-account arrangements;
withdrawal authorities;
payment instructions;
and competing creditor rights.

The objective is to convert cash-flow monitoring into an enforceable legal control structure.

10. Share Pledges Can Provide Strategic Control but Should Not Be Overvalued

Project lenders often request pledges over the shares of the SPV.

The commercial objective is to allow a lender, following an enforcement event, to obtain control of the project company rather than relying exclusively on a sale of individual project assets.

However, share security should not be treated as a substitute for asset security.

If the SPV itself has:

defective title;
invalid permits;
excessive liabilities;
tax debt;
contractor claims;
consumer liabilities;
or an unfinanceable project,

obtaining control of its shares may simply give the lender control over a distressed company.

The lender should therefore think of a share pledge as part of a layered security package, not as a complete solution.

11. Sponsor Guarantees Require Careful Legal Structuring

A lender may also seek:

completion guarantees;
cost-overrun guarantees;
shareholder guarantees;
debt-service guarantees;
or other personal security.

If the security provider is a natural person, Turkish law contains important mandatory requirements.

Article 583 of the Turkish Code of Obligations imposes formal requirements on surety arrangements, including writing, specification of the maximum liability and date, with additional handwritten requirements for the surety. Article 603 extends certain surety formalities to other personal-security contracts entered into by natural persons under different names.

For lenders this creates an important drafting warning:

Calling an instrument a “guarantee” rather than a “surety” does not necessarily eliminate mandatory Turkish-law protections where a natural person provides the security.

Corporate guarantees require a separate review of corporate authority, representation, group-company relationships and the terms of the specific transaction.

12. A Completion Guarantee Can Be More Valuable Than a Payment Guarantee

Construction lenders face a special problem.

Suppose the lender has financed TRY 800 million of a project that requires another TRY 400 million to complete.

If the sponsor defaults, a conventional payment guarantee may provide a claim against the sponsor.

But if the sponsor is also financially distressed, the lender may still own security over a half-completed building that cannot generate the expected sale or rental income.

For this reason, lenders frequently need to address completion risk separately from ordinary payment default.

A properly structured support package may deal with:

construction cost overruns;
equity injection obligations;
funding shortfalls;
completion tests;
delay;
contractor replacement;
and additional funding required before project completion.

The legal definition of “completion” should also be precise.

It should not necessarily mean merely that the concrete structure is physically finished.

13. Legal Completion Should Be a Condition of Project Completion

For a financed development, completion may need to include:

completion of physical works;
compliance with approved plans;
satisfaction of testing requirements;
completion certificates;
occupancy permit;
necessary operational licences;
condominium/title procedures;
utility connections;
insurance compliance;
and satisfaction of major contractual obligations.

Turkey’s building inspection system is based principally on Law No. 4708, whose stated objective includes ensuring construction in compliance with zoning plans, technical standards, health requirements and safety rules.

The construction-regulatory framework also continued to develop in 2026, including amendments to Law No. 4708 concerning construction and ground-related inspection concepts.

Consequently, project lenders should use current technical and regulatory due diligence rather than relying solely on documents prepared when construction first began.

14. Zoning and Building Permits Are Credit Risks

A mortgage over land is not equivalent to security over a completed development.

The economic value of project land may depend almost entirely upon its zoning and permitting status.

The lender should therefore review:

zoning designation;
implementation zoning plan;
zoning notes;
permitted density;
building height;
construction setbacks;
public-service allocations;
cadastral status;
building permit;
approved architectural plans;
permit validity;
and construction conformity.

A financing decision based on a valuation assuming 40,000 m² of saleable construction becomes unreliable if only 25,000 m² can lawfully be constructed.

In project finance:

zoning risk is collateral-value risk.

15. Construction Contract Due Diligence Is Essential

The lender should obtain the principal construction contract rather than treating it as a matter only between the sponsor and contractor.

Important matters include:

contractor identity;
contract price;
fixed-price versus adjustable price;
escalation mechanisms;
completion date;
liquidated damages;
extensions of time;
advance payments;
retention;
performance guarantees;
subcontracting;
defect liability;
termination;
force majeure;
insurance;
and dispute resolution.

A weak construction contract can materially weaken the financing.

For example, a financial model may assume a fixed construction price while the underlying contract allows extensive price escalation.

Likewise, a completion model may assume delivery by December while the construction contract contains broad extension-of-time rights.

Legal review must therefore reconcile the finance model with the construction contract.

16. Lenders Should Seek Direct-Agreement and Step-In Protection Where Appropriate

A project lender may face serious loss if a key contractor terminates immediately after borrower default.

Accordingly, sophisticated financings may use direct agreements with important project counterparties.

Depending on the project and contractual structure, a direct agreement may require the contractor or other counterparty to:

notify the lender of borrower default;
provide a cure period;
refrain temporarily from terminating;
recognise a permitted substitute;
or cooperate with a lender enforcement or restructuring process.

However, “step-in rights” should never be assumed to exist automatically.

They must be contractually designed and must also respect any statutory, regulatory, licensing and consent requirements applicable to the relevant project.

A bank cannot simply become a construction contractor or project operator by writing the words “step-in right” into a facility agreement.

17. Pre-Sales Can Finance the Project — and Create Competing Risks

Residential developers frequently finance construction partly through sales made before project completion.

For a lender, pre-sales can be beneficial because they provide early project cash flow.

But they may also create legal obligations competing with the lender’s security.

The Turkish Civil Code permits rights arising from real estate sale promises to be annotated in the land registry, making the annotated rights enforceable against persons who subsequently acquire rights over the property.

Accordingly, the lender should review:

existing pre-sale contracts;
annotated promises;
deposits received;
unit allocation;
buyer payment schedules;
mortgage release arrangements;
developer refund obligations;
and whether the financing assumes units are “unsold” when contractual rights have already been granted.

18. Mortgage Release Mechanics Must Be Established Before Unit Sales

A major development may begin with one mortgage over the entire project parcel.

Later, condominium units may be created and sold individually.

The loan documents should anticipate this.

Article 889 of the Turkish Civil Code regulates allocation of security where mortgaged property is divided or parts are transferred, subject to the statutory framework.

Commercially, the lender and developer should agree in advance:

minimum release price;
release ratio;
mandatory debt prepayment;
permitted sales;
procedures for releasing individual units;
and the effect of subdivision or condominium establishment on the mortgage.

Without a clear release mechanism, the lender may block project sales — or the developer may pressure the lender into releasing collateral without sufficient repayment.

19. Insurance Proceeds Should Be Included in the Security Analysis

Construction projects may suffer catastrophic loss from:

earthquake;
fire;
flooding;
structural collapse;
equipment failure;
or other insured risks.

The Turkish Civil Code contains specific provisions protecting mortgage creditors in relation to insurance proceeds. Article 879 provides, in principle, that matured insurance compensation may only be paid to the owner with the consent of all mortgage creditors, subject to the statutory restoration exception.

Lenders should nevertheless review insurance contracts directly and establish appropriate contractual protections concerning:

insured parties;
lender status;
loss-payee provisions;
reinstatement;
assignment of insurance claims where appropriate;
proceeds accounts;
deductibles;
and termination or amendment of coverage.

20. Foreign-Currency Financing Requires Separate Regulatory Review

Cross-border construction finance frequently involves USD or EUR debt.

Turkish foreign-exchange legislation regulates the ability of Turkish residents to use foreign-currency loans and includes eligibility conditions and statutory exceptions.

The current official foreign-exchange legislation is maintained by the Ministry of Treasury and Finance under the framework of Decision No. 32 and the Capital Movements Circular. The official text includes, among other rules, the well-known foreign-currency income framework and exemptions applicable to specified borrowers and transactions.

Accordingly, an international lender should not assume:

“The borrower wants a EUR facility, therefore we can simply document a EUR loan.”

The borrower, purpose, lender, currency, utilisation method and applicable exemption must be checked against the currency-control legislation effective on the utilisation date.

This is particularly important because foreign-exchange regulation can be amended relatively quickly.

21. Currency Mismatch Is Also a Legal Structuring Issue

Even where foreign-currency borrowing is legally permitted, the project may carry substantial mismatch risk.

For example:

Loan:

EUR

Construction costs:

TRY + EUR

Apartment sales:

TRY

A weakening TRY may increase the debt burden while project revenues remain predominantly TRY-denominated.

The facility agreement may therefore include:

currency hedging requirements;
minimum hedging ratios;
reserve accounts;
financial covenants;
mandatory prepayment;
or additional sponsor-support obligations.

Currency risk should thus be examined simultaneously as:

financial risk + covenant risk + default risk.

22. Cost Overruns Are One of the Largest Construction Finance Risks

A lender agrees to provide TRY 1 billion on the assumption that the project costs TRY 1.3 billion.

The sponsor contributes TRY 300 million equity.

After twelve months, expected completion cost becomes TRY 1.7 billion.

The project is now short TRY 400 million.

The key legal question is:

Who must fund the difference?

A strong project-finance structure should clearly address:

committed equity;
equity-first requirements;
cost-overrun support;
subordinated shareholder funding;
contingency budgets;
additional sponsor contributions;
and lender discretion regarding further utilisation.

Without those provisions, the lender may face an unattractive choice:

lend more money

enforce against an incomplete project.

23. Loan Drawdowns Should Follow Construction Progress

Construction loans are generally safer when funds are advanced against objectively verified progress rather than simply at the borrower’s request.

Conditions for utilisation may include:

valid permits;
no default;
equity contribution;
engineer’s certificate;
construction progress;
invoices;
updated cost-to-complete report;
absence of material liens;
continued insurance;
and confirmation that remaining committed financing is sufficient to reach completion.

The legal documentation should coordinate these conditions with the technical monitoring process.

A lender receiving monthly engineering reports but having no contractual right to stop further drawdowns gains little practical protection from those reports.

24. Financial Covenants Should Reflect a Development Project, Not an Ordinary Company

Traditional corporate metrics may not adequately measure construction risk.

Project-finance covenants may instead monitor:

loan-to-cost;
loan-to-value;
minimum equity;
cost-to-complete;
presales;
minimum sales prices;
debt-service reserves;
completion milestones;
and permitted distributions.

The central principle should be:

Sponsor equity should not leave the project before the lender has reasonable confidence that the project can complete and repay the debt.

Distribution restrictions and cash waterfalls are therefore often as important as headline interest rates.

25. Concordat Can Materially Delay Security Enforcement

One of the most significant risks for a project lender is borrower financial distress.

Turkey’s concordat regime has special consequences for secured creditors.

Under Article 295 of the Enforcement and Bankruptcy Law, during the definitive concordat period, proceedings for enforcement of secured claims may in principle be commenced or continued, but preservation measures cannot be taken and the secured asset cannot be sold during that period.

This is extremely important for project finance.

A lender may hold a valid first-ranking mortgage and still face a period during which actual realisation of the security is legally restricted.

Therefore:

secured does not mean immediately liquid.

Liquidity timing must be incorporated into downside analysis.

26. Security Value Should Be Tested Under Insolvency Conditions

A project that is worth TRY 3 billion on successful completion may have a radically different value:

halfway through construction;
after permits expire;
after the main contractor leaves;
during concordat;
after pre-sale claims emerge;
or during compulsory enforcement.

Lenders should therefore obtain valuations reflecting more than the optimistic “completed project value.”

Relevant scenarios may include:

current land value;

as-is construction value;

forced-sale value;

cost to complete;

and

stabilised completed value.

A mortgage valuation based only on successful completion can create false confidence.

27. Intercreditor Arrangements Become Essential in Multi-Lender Projects

Large projects may involve:

senior bank debt;
mezzanine debt;
shareholder loans;
supplier financing;
contractor credit;
bond financing;
and guarantees.

The parties should determine:

ranking;
payment subordination;
security priority;
enforcement control;
standstill;
turnover of recoveries;
voting rights;
amendments;
and release of security.

Without a coherent intercreditor structure, creditors may have commercially inconsistent enforcement incentives.

One lender may want to finish the project.

Another may want immediate enforcement.

Another may control a strategically important security interest.

Project-finance documentation should anticipate this before distress arises.

28. Shareholder Loans Should Not Quietly Compete With Senior Debt

Sponsors frequently inject funds as shareholder loans rather than pure equity.

That can be commercially convenient but legally important.

The senior lender should determine:

whether shareholder debt is permitted;
whether interest can be paid;
whether principal can be repaid;
whether it is subordinated;
whether payments are blocked during default;
and whether shareholder claims must be assigned or pledged.

A project model may show “30% sponsor contribution,” but if much of that contribution can legally be withdrawn as debt before completion, the senior lender’s actual risk may be substantially greater.

29. Lenders Must Check for Public and Statutory Liabilities

Private security does not make public-law risk disappear.

The project company may incur liabilities relating to:

taxes;
social security;
employees;
construction regulation;
environmental obligations;
municipal charges;
administrative fines;
and other statutory obligations.

Law No. 6750 itself expressly preserves the operation of public receivables legislation and social security legislation in relation to the security regime.

The lender should therefore investigate outstanding public liabilities when evaluating both project cash flow and enforcement risk.

30. Foreign Governing Law Does Not Replace Turkish Security Formalities

International project-finance facilities may contain foreign governing-law clauses and international arbitration provisions.

However, choosing foreign law for financing obligations should not be confused with creating and perfecting security over Turkish assets.

A Turkish land mortgage, Turkish registered movable pledge, Turkish corporate security or Turkish receivable security must be analysed according to the mandatory rules applicable to that asset and perfection mechanism.

Accordingly, a typical cross-border financing may require:

international facility documentation

together with

Turkish-law security documents.

The lender should therefore avoid assuming that a single foreign-law “all-assets security agreement” automatically creates effective security over every Turkish project asset.

31. Lenders Should Distinguish Contractual Rights From Proprietary Security

This is one of the most important legal distinctions in project finance.

A loan agreement may state:

“The borrower shall not sell the land.”

That is a contractual covenant.

A registered mortgage is proprietary security.

A facility agreement may state:

“All project revenue shall be paid to the lender.”

That is not necessarily the same as a properly established assignment or pledge of those receivables.

A shareholder may promise:

“I will not transfer my shares.”

That is not automatically equivalent to perfected share security.

A construction lender should therefore repeatedly ask:

“Do we have a promise, or do we have a perfected security right?”

The difference becomes critical when other creditors appear.

32. Investors Face Different Risks From Lenders

Debt and equity investors do not occupy the same position.

A lender typically has:

contractual repayment rights;
interest;
security;
covenants;
enforcement rights;
and defined maturity.

An equity investor ordinarily participates in the residual value of the business.

Consequently, equity is exposed first when:

construction costs increase;
sales prices decrease;
the project is delayed;
interest expense increases;
or project value declines.

An investor should therefore investigate the lender documentation itself.

Equity investors need to know:

maximum debt;
interest;
financial covenants;
lender consent rights;
distribution restrictions;
default triggers;
sponsor guarantees;
enforcement rights;
and dilution or additional-equity requirements.

A project can be profitable at the asset level yet still produce little return to equity if the financing structure gives most project economics to lenders.

33. Refinancing Risk Should Be Considered From the Beginning

Some construction loans mature before full stabilisation of the development.

The financial plan assumes:

construction loan → project completion → refinancing.

This can be dangerous.

Refinancing depends on future:

interest rates;
asset values;
rental occupancy;
sales;
lender appetite;
regulation;
and project performance.

A borrower should therefore not confuse expected refinancing with committed financing.

The legal documents should clearly determine what happens if refinancing cannot be obtained by maturity.

34. Events of Default Must Focus on Project Failure, Not Only Non-Payment

A construction facility should usually address more than simple failure to pay interest.

Potential events of default may include:

invalid security;
loss of title;
material zoning change;
permit cancellation;
abandonment of construction;
contractor termination;
material project delay;
insolvency;
concordat application;
unauthorised additional debt;
unauthorised asset sale;
breach of pre-sale controls;
insurance failure;
material litigation;
misrepresentation;
and failure to meet agreed completion tests.

The objective is to give the lender the ability to respond before the project has lost all recoverable value.

35. Enforcement Strategy Should Be Designed Before Signing

A good lender should ask at closing:

If the borrower defaults tomorrow, what exactly do we do?

The answer should identify:

which security can be enforced;
in what order;
whether an acceleration notice is required;
how mortgages are enforced;
how movable security is realised;
what happens to project receivables;
whether key contracts survive;
whether contractor step-in is available;
whether permits can continue;
whether additional funding is required to preserve value.

A security package that looks impressive in a closing checklist may be commercially weak if the lender has no practical path to preserve and realise the project.

36. Construction Project Finance Due Diligence Checklist

Before financing or investing in a Turkish construction project, the legal review should ordinarily cover at least:

A. Borrower / SPV

incorporation;
articles of association;
shareholders;
authorised signatories;
existing debt;
shareholder loans;
corporate approvals;
litigation;
insolvency indicators.

B. Land

title deed;
ownership history;
cadastral status;
mortgages;
attachments;
injunctions;
easements;
annotations;
third-party rights.

C. Zoning and Permits

zoning plan;
implementation plan;
plan notes;
building rights;
building permit;
approved project;
permit validity;
special licences;
occupancy strategy.

D. Construction

EPC/construction agreement;
contractor capacity;
contract price;
price escalation;
completion date;
delay penalties;
performance security;
defects;
termination;
force majeure;
subcontractors.

E. Finance Documents

facility agreement;
utilisation conditions;
interest;
maturity;
repayment;
financial covenants;
information undertakings;
events of default;
mandatory prepayment.

F. Security

land mortgage;
share pledge;
receivable assignment;
movable pledge;
account security;
insurance security;
guarantees;
sponsor support.

G. Project Revenue

unit sales;
pre-sale contracts;
rental contracts;
revenue accounts;
minimum sales prices;
payment collection;
cash waterfall.

H. Insurance

construction all-risk cover;
third-party liability;
earthquake and natural-disaster cover;
lender protections;
insurance proceeds.

I. Insolvency

existing creditor claims;
prior enforcement;
concordat exposure;
bankruptcy scenario;
priority;
enforceability of security.

J. Exit

project completion;
refinancing;
unit sales;
mortgage releases;
investor exit;
enforcement scenario.

Red Flags for Lenders and Investors

The following statements should trigger additional due diligence:

“The mortgage will be established after the first drawdown.”

“The land is owned by another group company, but that is not a problem.”

“The project company has no assets except the future project.”

“The existing bank will release its first-ranking mortgage later.”

“The building permit is currently being renewed.”

“The remaining construction cost will be financed from future apartment sales.”

“The sponsor does not want to provide a cost-overrun undertaking.”

“The contractor and developer are related companies, so we do not need a detailed construction contract.”

“The receivables are assigned under the loan agreement, so no additional documentation is needed.”

“The lender can automatically take ownership of the land if there is a default.”

“There is a mortgage, so concordat will not affect enforcement.”

Each of these statements can conceal material legal or recovery risk.

Conclusion: Project Finance Is Ultimately About Recoverability

A construction project may have:

valuable land,
an experienced developer,
a strong business plan,
attractive projected returns,
and substantial future sales.

None of those factors alone makes the financing legally secure.

For lenders, a construction loan is fundamentally a question of whether the financing can be repaid from project cash flow and what can be recovered if that cash flow never materialises.

Turkish law offers lenders a broad security toolkit.

Mortgages may secure existing and future claims, and mortgage priority determines access to enforcement proceeds.

Receivables may generally be assigned in writing under Articles 183–184 of the Turkish Code of Obligations, while Law No. 6750 permits security over a wide range of present and future movable assets, revenues and contractual claims.

But security must be properly created, perfected and understood.

A contractual promise is not necessarily a proprietary security interest.

A mortgage is not necessarily first-ranking.

A first-ranking mortgage does not necessarily mean immediate enforcement, particularly during concordat.

An impressive development is not necessarily legally complete.

And a financially attractive project is not necessarily financeable if its land rights, permits, contractual structure or security package are defective.

For lenders and investors, the central principle should therefore be:

Do not finance the projected value of the development until you understand the legal value of the land, contracts, cash flows and security that exist before completion.

In construction project finance, the quality of the security package is measured not on the day the loan is signed.

It is measured on the day the project fails.

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Construction Project Finance in Turkey: Legal Risks for Lenders and Investors