The intersection of property law and the law of obligations rarely produces a scenario as complex, economically devastating, and socially prevalent as the “Construction Contract in Return for Land Share” (Arsa Payı Karşılığı İnşaat Sözleşmesi). Driven by urban transformation initiatives (Kentsel Dönüşüm) and the high value of real estate, landowners and construction companies frequently enter into these agreements.
On paper, the mechanism is brilliantly simple and mutually beneficial: the landowner provides the raw, valuable plot of land, and the contractor provides the labor, materials, and architectural expertise to construct a modern building. In exchange for the construction, the landowner transfers a certain percentage of the land shares (which correspond to specific independent units or flats) to the contractor.
However, a massive legal and financial crisis erupts when a highly common industry practice goes wrong. Contractors, often needing immediate liquid capital to fund the heavy costs of construction materials and labor, “sell” their designated, yet-to-be-built flats to third-party buyers. In the Turkish real estate market, this is colloquially known as “buying from the dirt” (topraktan satış).
But what happens when the contractor collects the money from these third-party buyers, perhaps completes 30% of the building, and then goes bankrupt, absconds, or simply abandons the construction site? The landowner is left with a concrete skeleton on their property, and third-party buyers are left clutching title deeds to flats that do not physically exist.
This comprehensive guide will dissect the legal mechanics of this crisis, integrate it into daily life scenarios, explore the established jurisprudence of the Supreme Court (Yargıtay), and provide a definitive legal roadmap for the landowner to reclaim their property.
🏗️ Part 1: The Daily Life Scenario – The Anatomy of a Construction Disaster
To truly understand the legal doctrines at play, we must first map out how this situation unfolds in daily life. Abstract legal theories of Eşya Hukuku (Property Law) and Borçlar Hukuku (Law of Obligations) mean little without a concrete scenario.
The Protagonists
- The Landowner (Mr. Yılmaz): A retired civil servant who owns a highly valuable, albeit old, detached house on a 1,000-square-meter plot in a rapidly gentrifying district.
- The Contractor (BuildCo Construction): A mid-sized construction firm promising luxury apartments, modern amenities, and a swift delivery time of 18 months.
- The Third-Party Buyers (Ahmet and Ayşe): A newlywed couple looking for an affordable path to homeownership, lured by the discounted prices of buying an “off-plan” or “unfinished” apartment.
The Agreement
Mr. Yılmaz and BuildCo sign a formal Construction Contract in Return for Land Share at the Notary Public. They agree to demolish the old house and build a 10-flat luxury apartment complex. The sharing ratio is 50/50. Mr. Yılmaz will receive 5 flats, and BuildCo will receive 5 flats.
To help BuildCo secure financing, Mr. Yılmaz agrees to an “Advance Title Deed Transfer” (Avans Tapu Devri). He transfers the title deeds of BuildCo’s 5 future flats to the company’s name before the foundation is even laid.
The Trap Springs
BuildCo immediately places advertisements for their 5 flats. Ahmet and Ayşe, seeing a great deal, purchase one of these flats directly from BuildCo. They go to the Land Registry (Tapu Sicil Müdürlüğü), pay BuildCo their life savings, and receive a title deed showing they own a share of the land corresponding to Flat #7.
Eight months later, the construction stalls. The foundation is poured, and the first-floor columns are erected, bringing the total construction completion rate to roughly 25%. BuildCo’s owner files for bankruptcy and vanishes.
Mr. Yılmaz is horrified. His valuable land is now occupied by an unfinished, decaying concrete structure. Even worse, when he checks the land registry, he sees that 5 shares of his land are officially registered to strangers like Ahmet and Ayşe.
Who owns the land? Can the newlywed couple claim their flat? How can Mr. Yılmaz clear his land registry of these strangers and find a new contractor? The answers lie deep within the Turkish Code of Obligations.
⚖️ Part 2: The Legal Anatomy of the Contract
Before addressing the solution, we must define the legal nature of the relationship. The Construction Contract in Return for Land Share is not explicitly defined in a single article of the Turkish Code of Obligations (TCO). It is a “Mixed-Nature Contract” (İsimsiz/Karma Sözleşme).
It combines elements of two distinct legal frameworks:
- Work Contract / Construction Contract (Eser Sözleşmesi): The contractor promises to create a “work” (a building) free from defects and deliver it on time.
- Promise to Sell Real Estate (Gayrimenkul Satış Vaadi): The landowner promises to transfer ownership of a specific portion of the real estate as payment for the construction.
Because it involves the promise to transfer real estate, the contract must be executed officially before a Notary Public (Düzenleme Şeklinde). A standard written contract between the parties is legally void.
The Core Principle: “Synallagmatic” Obligations
This is a mutually binding (tam iki tarafa borç yükleyen) contract. The obligations are interconnected. The landowner’s obligation to transfer the title deed is strictly dependent on the contractor’s obligation to finish the building in accordance with the contract, architectural projects, and zoning laws.
🔄 Part 3: The Legal Mechanics of “Selling from the Dirt”
How is it legally possible for the contractor to sell a flat that does not exist yet?
When the contractor signs the agreement with the landowner, the contractor acquires a Personal Right (Şahsi Hak)against the landowner. This personal right is the claim to demand the transfer of the title deeds once the building is completed.
Under the Turkish Code of Obligations, a person can transfer their legal claims or receivables to a third party without the debtor’s (the landowner’s) consent. This mechanism is called the Assignment of Receivables (Alacağın Temliki).
The Contractor’s Sleight of Hand
When BuildCo “sells” Flat #7 to the newlyweds Ahmet and Ayşe, they are not actually selling a physical property (a Real Right / Ayni Hak). Instead, they are assigning their personal right (their expectation to receive the flat from the landowner) to the third party.
Here is the most critical legal rule governing this entire crisis: In an assignment of receivables, the assignee (the third-party buyer) steps precisely into the shoes of the assignor (the contractor).
The third party cannot acquire more rights than the contractor had. Because the contractor’s right to keep the title deed is entirely conditional upon finishing the building, the third party’s right to keep the title deed is equally conditional. If the contractor fails to build, the contractor’s right vanishes—and by extension, the third party’s right vanishes instantly.
🛑 Part 4: Contractor Default and the Critical “90% Rule”
When the contractor abandons the site at 25% completion and the contractual deadline passes, the contractor falls into Default (Temerrüt). Under general contract law, when one party defaults, the other party has the right to terminate the contract.
However, terminating a real estate construction contract is not as simple as tearing up a piece of paper. The legal consequences of termination depend entirely on how much of the building has been completed.
The Landmark Jurisprudence: The 1984 Supreme Court Unification of Judgments
In construction law, the Supreme Court (Yargıtay İçtihadı Birleştirme Kararı 1984/3 E., 1984/1 K.) established a strict threshold that governs the fate of unfinished buildings.
The Supreme Court divided contract termination into two distinct categories based on the Rate of Physical Completion (Fiziki Tamamlanma Oranı):
1. Prospective Termination (İleriye Etkili Fesih) – If Completion is Above 90%
If the contractor completes a substantial portion of the building—generally accepted by the Supreme Court as 90% or higher—and then defaults, the landowner cannot erase the contract as if it never existed. The law deems it economically wasteful and contrary to good faith (dürüstlük kuralı) to completely strip the contractor of their rights when the building is nearly finished.
In this scenario, the contract is terminated prospectively. The contractor keeps the title deeds proportional to the 90% they completed. Consequently, any third parties who bought flats from the contractor are generally protected, as the contractor earned those shares.
2. Retroactive Termination (Geriye Etkili Fesih / Dönme) – If Completion is Below 90%
This is the scenario in our daily life example (25% completion) and the most common disaster. If the building is abandoned at an early or intermediate stage, the landowner has the right to terminate the contract retroactively.
Retroactive termination (Sözleşmeden Dönme) is a legal nuclear bomb. It annihilates the contract from the moment it was signed. Legally, the contract is erased from history.
The Legal Consequences of Retroactive Termination:
- The parties must return everything they received from each other.
- The contractor must return any advance title deeds (Avans Tapu) they received.
- The landowner is legally viewed as having never transferred those shares.
But what about the third-party buyers who now hold those title deeds?
⚔️ Part 5: The Landowner’s Ultimate Weapon – Corrupt Registration and Cancellation
In our scenario, Mr. Yılmaz terminates the contract retroactively because the construction is only 25% complete. Because the contract legally “never existed,” the legal foundation for BuildCo acquiring the title deeds evaporates.
In Property Law (Eşya Hukuku), every transfer of a real estate title deed must be based on a valid legal reason (Geçerli bir hukuki sebep). This is the Principle of Causality (İllilik Prensibi).
Because the underlying construction contract has been retroactively destroyed, the title deeds held by BuildCo—and subsequently transferred to the newlyweds Ahmet and Ayşe—lose their valid legal reason.
In the eyes of the law, the registration of Ahmet and Ayşe in the Land Registry is now classified as a Corrupt Registration (Yolsuz Tescil).
The Lawsuit: Tapu İptali ve Tescil Davası (Title Deed Cancellation and Registration)
To physically and legally reclaim his land, Mr. Yılmaz must file a specific lawsuit.
- The Plaintiffs: The Landowner(s).
- The Defendants: The lawsuit must be filed as a joint case against both the Contractor and all Third-Party Buyers holding the disputed title deeds.
- The Demand: The court is asked to confirm the retroactive termination of the contract, cancel the corrupt registrations (title deeds) held by the third parties, and re-register those land shares back into the name of the landowner.
During this lawsuit, the court will appoint expert engineers (Bilirkişi) to examine the construction site, officially calculate the physical completion rate, and confirm that it falls below the Supreme Court’s critical threshold (usually below 90%).
🛡️ Part 6: The Third-Party Buyer’s Dilemma – Why “Good Faith” Fails
At this point in the legal process, the third-party buyers (Ahmet and Ayşe) will inevitably raise a powerful defense. They will point to Article 1023 of the Turkish Civil Code (TMK), which guarantees the Protection of Good Faith (İyiniyetin Korunması).
Article 1023 states: “The acquisition of a real right by a person who relies in good faith on the records of the land registry is protected.”
Ahmet and Ayşe will argue: “We checked the official state Land Registry. The state records said BuildCo owned Flat #7. We trusted the state. We paid our money in good faith. We didn’t know BuildCo would abandon the construction. Therefore, the law must protect our title deed.”
In almost any other real estate transaction, Ahmet and Ayşe would win. But not in Flat-for-Land Contracts.
The “Prudent Buyer” Doctrine (Basiretli Alıcı / Kötüniyet Karinesi)
The Supreme Court has consistently and ruthlessly stripped third-party buyers of their “good faith” defense in these specific scenarios. The legal reasoning is profoundly pragmatic and based on objective reality.
The Supreme Court states that purchasing an “off-plan” or unfinished apartment is intrinsically risky. When Ahmet and Ayşe bought the flat, they could visually see that the building was not finished. They either knew, or as prudent citizens should have known, that they were not buying a standard, unconditional property.
They were buying a property subject to a Construction Contract. They should have known that the contractor’s right to that property was merely a temporary “Advance Title Deed” (Avans Tapu) conditional upon the completion of the building.
Because they knew the building was unfinished, the law presumes they accepted the risk of the contractor failing to finish it. Therefore, the Supreme Court rules that third parties purchasing unfinished flats from contractors cannot legally claim good faith under Article 1023.
The court will rule in favor of the landowner, cancel the title deeds of the third parties, and return the land entirely to Mr. Yılmaz.
What is the Third Party’s Remedy?
Are Ahmet and Ayşe simply left destitute? Legally, no; practically, it is a difficult road.
Once they lose the title deed to the landowner, their only legal remedy is to turn around and sue the contractor. They must file a lawsuit for Unjust Enrichment (Sebepsiz Zenginleşme) or breach of contract, demanding the refund of their purchase money plus interest and damages.
However, because contractors who abandon sites are frequently bankrupt or have hidden their assets, collecting this money is notoriously difficult in practice. This is why the phrase “buying from the dirt” is considered a high-risk gamble.
🛠️ Part 7: Advanced Scenarios and Legal Nuances
While the primary rule is clear—retroactive termination destroys third-party rights—the law is nuanced. Several exceptions and complex scenarios can arise during litigation.
1. What if the Third Parties Decide to Finish the Building Themselves?
In some cases, the contractor abandons the building at 75% completion. The landowner files for retroactive termination. The third-party buyers, terrified of losing their investment, band together and tell the court: “We will pay the remaining 25% out of our own pockets to finish the building, just let us keep our deeds.”
The Supreme Court actually allows this under the principle of Performance by a Third Party (Üçüncü Kişinin İfası). If the third parties hire their own contractors, complete the building according to the original project, and obtain the occupancy permit (İskan), they fulfill the original contractor’s obligation. The condition is met, and they are allowed to keep their title deeds.
2. The Issue of Defective Work (Ayıplı İş)
Completion rate is not just about pouring concrete. If the contractor claims the building is 95% finished, but the expert report reveals massive structural defects, poor quality concrete, or deviations from the architectural plan that require demolition, the court will adjust the completion rate. A building that is 90% complete visually, but structurally unsound, may be legally assessed at a much lower completion rate, allowing the landowner to terminate retroactively.
🗝️ Part 8: Ironclad Preventive Measures for Landowners
The legal battle to cancel title deeds (Tapu İptali ve Tescil Davası) is arduous, expensive, and can drag on in Turkish courts for 3 to 7 years. During this time, the landowner’s property is frozen with injunctions (İhtiyati Tedbir), and the unfinished concrete shell continues to rot and rust.
The ultimate solution is not winning the lawsuit; the ultimate solution is drafting a contract that prevents the crisis entirely. Landowners must treat the initial contract negotiation with extreme caution, utilizing these advanced legal mechanisms:
1. The Ultimate Shield: Progressive Title Deed Transfer (Kademeli Tapu Devri)
The greatest mistake a landowner can make is transferring the contractor’s share of the title deeds upfront. Never grant an Advance Title Deed (Avans Tapu) for the entire project.
Instead, the contract must strictly enforce a progressive transfer schedule directly tied to verifiable construction milestones. For example:
- 0% Transfer at the signing of the contract.
- 10% of Contractor’s Shares transferred upon excavation and pouring the foundation.
- 20% of Shares transferred upon completion of the rough construction (concrete skeleton and roof).
- 20% of Shares transferred upon completion of exterior facades and windows.
- 30% of Shares transferred upon completion of interior installations, flooring, and landscaping.
- The Final 20% (The Guarantee Shares): This is crucial. The final portion of the contractor’s deeds should neverbe transferred until the municipality issues the official Occupancy Permit (Yapı Kullanma İzin Belgesi / İskan).
By using this method, if the contractor abandons the site at 25% completion, they only hold a tiny fraction of the deeds, significantly minimizing the legal mess and leaving the landowner with enough remaining shares to easily hire a new contractor to finish the job.
2. Mandatory Land Registry Annotation (Sözleşmenin Tapuya Şerh Edilmesi)
The Construction Contract in Return for Land Share should be officially annotated (Şerh) onto the declarations section of the land registry.
This acts as a legally binding, public warning system. Any third-party buyer who checks the land registry before buying a flat will clearly see that the property is subject to a construction agreement. It utterly destroys any potential argument of “good faith” by third parties, making a future cancellation lawsuit incredibly straightforward.
3. Bank Guarantee Letters (Teminat Mektubu)
Before signing the contract, the landowner should require the contractor to provide an unconditional, irrevocable Bank Guarantee Letter equivalent to the estimated cost of the construction.
If the contractor defaults, the landowner does not have to worry about the contractor going bankrupt. The landowner simply goes to the bank, cashes the guarantee letter, and uses those liquid funds to hire a secondary contractor to complete the abandoned building.
4. Punitive Penalty Clauses (Cezai Şart)
The contract must include distinct penalty clauses for delays. Typically, this is calculated as a specific monetary amount (or equivalent rental value) for every single day or month the project is delayed past the delivery date. This deters the contractor from prioritizing other projects and provides financial compensation to the landowner while they seek legal remedies.
🏛️ Conclusion: The Balance of Power
The Construction Contract in Return for Land Share is a delicate balancing act between the property rights of the landowner and the commercial ambitions of the contractor. When this balance is shattered by a contractor who sells “from the dirt” and then abandons the project, the law undeniably steps in to protect the original source of the value: the landowner.
Through the mechanisms of retroactive termination and the classification of third-party deeds as corrupt registrations, the Turkish legal system ensures that a contractor cannot give away what they have not yet earned. While the plight of the third-party buyer is sympathetic, the legal doctrine of the “prudent buyer” firmly places the burden of risk on those who gamble on unfinished concrete rather than on the landowner whose property was hijacked.
For anyone navigating this landscape, the lesson is clear: legal protection does not begin in the courtroom after the disaster has struck. It begins at the Notary Public, with a meticulously drafted contract, a refusal to grant advance title deeds, and a deep understanding of the strict mechanics of the law of obligations.
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