After the earthquakes of 1999 and 2023 in Türkiye, building inspections, retrofitting practices and seismic regulations were all tightened, as we explained in further detail in Construction Insights January 2025. Legislative amendments adopted in 2024 made it easier to strengthen risky buildings and sped up decision-making procedures.
The Law on the Transformation of Areas at Risk of Disaster numbered 6306, also brought new incentives (such as interest free loans and relocation grants) and introduced requirements like the use of sustainable building materials. Cooperation with local authorities and the private sector became mandatory, and oversight mechanisms were reinforced.
One key concept that emerged alongside this shift is “urban transformation”. Urban transformation is a comprehensive process that approaches urban spaces in their social, economic and physical dimensions aiming to turn them into healthy, livable areas through interventions such as demolition, reconstruction and rehabilitation. After the major earthquake of 2023, the topic returned to the agenda and prompt measures were taken. Construction of new buildings began, and “construction contracts in exchange for land share” were concluded between landowners and contractors.
Construction contracts in exchange for land share are popular today since they offer mutual advantages to both the landowner and the contractor. The landowner gains property without incurring construction costs, while the contractor avoids the expense of buying the land. Especially in large cities and regeneration zones, rising land values over tme make access to buildable plots increasingly difficult for contractors. Through these contracts, both parties profit from the value of the completed development. For this reason, construction contracts in exchange for land share have become one of the most preferred contract types in the current market.
Legal nature of a construction contract in exchange for land share
A construction contract in exchange for land share is hybrid in nature, combining elements of both a contract for work and a preliminary agreement to sell real property. While the landowner allows the contractor to build on the land, the contractor promises to hand over a portion of the building (the independent units) to the landowner. As it contains a promise of real-estate transfer, the contract must be executed in the official form prescribed by Article 60 of the Notary Law and Article 12 of the Turkish Code of Obligations.
Practical problems and legal debates
One common practical issue is the contractor’s transfer of the land shares received from the owner to third parties, either through a real estate presale agreement (Real estate sales promise agreement – taşınmaz satış vaadi sözleşmesi) or via assignment of receivables. These transfers sometimes occur before the completion of the construction, and the same independent unit may be promised to multiple buyers. If the contractor defaults and the main contract is terminated, serious legal uncertainty and unjust sufferings arise for third parties trying to secure ownership.
According to the opinion long adopted by the Turkish Supreme Court, in the event of termination of a construction contract in exchange for land share due to the contractor’s fault, transfers of immovable property made to third parties based on this contract were deemed invalid, and a claim of improper registration was asserted against third parties on the grounds that the contractor had not acquired ownership. This stance conflicted with the land registry reliance principle set out in Article 1023 of the Turkish Civil Code. The Turkish Supreme Court’s approach offered little protection for bona fide third-party buyers and was widely criticised in doctrine.
Review by the Constitutional Court
An individual application on this issue was previously brought before the Constitutional Court but was rejected by a three-to-two vote. The decision, numbered 2014/12321 and dated 20 July 2017, concerned claims by third parties who had bought land shares from a contractor under a construction contract in exchange for land share. Applicants argued that their property rights and their right to a trial within a reasonable time had been violated. The owners of a property in Bakırkoy, Istanbul, had signed a contract with a contractor in 1985. The land shares transferred to the contractor were later purchased by the applicants. When the contractor failed to finish the building, the owners terminated the contract and sought cancellation of the title records. Courts have ruled for the termination of the contract and the cancellation of the land registry records due to the contractor’s failure to fulfill their obligations. These rulings were also upheld by the Turkish Supreme Court. The Constitutional Court ruled that the applicants' right to property had not been violated. In its reasoning, the Court stated that the applicants were considered parties to the contract as successors of the contractor, and that the termination of the contract and the cancellation of the land registry records due to the contractor’s failure to fulfill their obligations were lawful. The Court also emphasised that the interference had a clear legal basis and was foreseeable. The applicants further claimed that the length of the proceedings breached their right to be tried within a reasonable time, but the Constitutional Court found both the property-rights and reasonable-time complaints inadmissible and dismissed the application.
Turkish Supreme Court’s unification decision and its legal impact
These debates have led to significant grievances in practice and have drawn serious public criticism. Most recently, the Grand General Assembly for the Unification of Judgments of the Supreme Court issued a decision on May 16, 2025, changing the prevailing jurisprudence. According to this decision:
“In the event of retroactive termination of a construction contract in exchange for land share, claims of good faith by third parties who purchased immovable property from the contractor may be considered; and it shall be the responsibility of the landowner to prove that the third party was not acting in good faith.”
With this decision, third parties who acquired independent units from the contractor are no longer automatically deprived of their property rights solely because the contract was terminated due to the contractor’s default. The rights of such third parties will now be assessed within the framework of the principle of reliance on the land registry, as guaranteed by Article 1023 of the Turkish Civil Code. This new approach adopted by the Turkish Supreme Court reflects the necessity of upholding the principle of legal certainty and protecting bona fide third parties.
Conclusion
A significant paradigm shift has occurred in construction law with the unification decision of the Turkish Supreme Court. This new approach is of great importance in preventing grievances arising from the termination of construction contracts in exchange for land share. It aims to prevent loss of rights frequently experienced in practice by bona fide third parties and ensures a legal framework in line with the principles of the rule of law, reliance on the land registry, and the right to property. This development also marks a critical turning point in terms of transaction security within the construction sector.
If you would like to discuss this article further, please contact Burcu Özkan Düzyol or Ömer Faruk Gürol.
