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CONSTRUCTION CONTRACTS OF FLAT FOR LAND BASIS WİTHİN THE SCOPE OF URBAN TRANSFORMATİON PROJECT Nowadays, the development of the construction industry, urban transformation debates and zoning issues brings with it many legal problems that need to be solved. The enforcement of the Law No. 6306 on "Conversion of Areas Under Disaster Relief" has increased the concerns of many landowners. Because of the enforcement of the related law; construction contracts of flat for land basis have begun to be signed between contractors and landowners. Although in practice there is a general belief that landowners are the weak side of the contract, the backbone of construction contracts of flat for land basis are in fact the land owners. Considering the disputes that are brought to the judiciary, it is seen that the contracts are mostly violated by the contractors and that the landowners mostly being the aggrieved party. It is important for the Parties to have sufficient knowledge about the possible problems encountered in the construction contracts and their solutions for the protection of their mutual rights. What is actually a Constructıon Contracts of Flat for Land Basis alias Construction Agreement In return For Land Share? Constructıon Contracts of Flat for Land Basis; the owner of the property set agrees to transfer some of his shares to the contractor by common consent in return for him constructing a building with his own materials and facilities on the land and the contractor agrees to transfer some of the predetermined independent parts of the building back to the landowner at the end of the construction. Although it is considered a simple contract by definition, these contracts incurs liability to the Parties and are especially the only guarantee of ownership rights of landowners. As above mentioned, with the enactment of Law No. 6306 promises were made almost every day by a different contractor to proprietors regarding to the lands which are under urban transformation project. This situation frightens the owners of the land and 1
drives the owners who do not know the technical and legal dimension to different kinds of adventures. For this reason, landowners whose property are in the scope of urban transformation project should make necessary investigations before signing and submitting the construction contract of flat for land basis which is prepared by the contractor, or obtain legal aid from a lawyer for the protection of their regarding the contract. The fate of the immovable property of the landowners depends on the construction contract of flat for land basis they will sign. Main Considerations in Construction Contracts of Flat for Land Basis The condition for validity; according to the legislation, construction contract of flat for land basis are valid if they are made in official form by the directorate of land registry or notary. Otherwise, the contract does not represent a legal value. If the parties settle a construction contract of flat for land basis only in the form of a ratification or a written contract, the contract will be invalid and will not bind the parties. Many landowners who do not know this legal regulation are being aggrieved. Namely; the contractor in cases where he is held liable for violating the terms of the contract; can escape from responsibility by claiming that the contract is invalid due to the fact that it is not made in the notary nor in the directorate of land registry. For this reason, the first issue that should be considered by landowners who will sign a construction contract of flat for land basis is; whether the contract is officially made in the notary or directorate of land registry. Because it should not be forgotten; construction contracts of flat for land basis which is not made official will not constitute any effectiveness before the judiciary. The Query of Zoning Status of the Contract Land; Before signing the contract, the zoning status of the land should be asked to the municipality. This query will lead the construction of an independent section on the land will be made on the basis of the 2
understanding of both sides, and possible disputes to be revealed in the future will be avoided. Guarantee; Landowners signing the construction contract of flat for land basis are required to provide the security of the landowners, from the process of performing the work until delivery, as they transfer the immovable property together with the property right. This will only be possible with the guarantee from the contractor. Even if the parties sign the contract before they start work; a guarantee must be made to ensure that the contractor fulfills his contractual commitments. The guarantee received from the contractor will be returned after the work is delivered to the landowners in accordance with the contract. In practice, guarantee returns are made at regular intervals and under certain conditions. Namely; the contractor delivers a certain amount of the guarantee to the landowners after signing the contract. This amount is proportional to the current value of the land. After completing each stage during the construction, an amount of the guarantee will return to the contractor. The parties can decide freely the terms of guarantee and return. For example; returning ¼ of the guarantee after completing rough construction or returning ½ of the guarantee after the residential usage license is issued. However, obtaining a guarantee, in any case, will be a safeguard for the landowners and will have a major impact on the completion of the work in accordance with the contract. Rental Fees; In the context of urban transformation, many landowners who entrusted their homes to contractors are residing elsewhere and paying rent, until the date of their submission. However, since it takes a long time for the contractor to complete the work and deliver it to the landowners in accordance with the legislation and the contract, rent payments should be made to the landowners within this period. These rental payments can also be freely determined between the parties according to the market value of the land specified in the 3
contract. However, in practice, many contractors abstain from paying rent and so the landowners who do not know their legal rights are accepting these situations. The settlement of covering the rent compensation and removal expenses by the contractor will provide assurance for the landowners until the job is delivered. Even if the contractor delays the delivery of the work in contradiction to the contract, the rental payments of the landowners who reside elsewhere during this period will be paid by the contractor. Delivery; It is necessary to link the conditions of the contract such as; turnkey, obtaining residential usage license and cutting off the relationship with all public institutions. On the other hand, in the construction contracts for flat floors, the starting time, delivery date of the work and the delivery arrangement should be clearly stated. Delivery of the works to landowners should be decided as "TURNKEY" in the construction contracts of flat for land basis. If these terms of delivery are not stipulated by contract, it will be unclear how long the landowners will hand their land to the contractors and when the landlords will get their land back. This situation will cause prolongation of work, and landowners victimization. For this reason; the duration of the construction, termination authority of the contract in case of delay and the penal clause should be arranged in such a way that there will be no place of uncertainty for both parties. In this manner, the legal and criminal liability of the contractor who does not fulfill these conditions will continue accordingly to the contract. Penal Clause; A construction contract of flat for land basis must contain penal clauses. The parties which are signing a valid construction contract of flat for land basis are issuing statements and undertake many obligations in the contract. However especially the penal clauses which are not predetermined or determined on an insignificant value for the contractual obligations, causes the contract to be non effective on the contractors. For this reason contractors easily violate their contractual obligations.the penal clause is one of the most important elements of the construction contract of flat for land basis.the penal clause will ensure that the contractors remain contractually bound and the rights of the landowners being protected. 4
Duration of construction permit and Hypothec; A maximum period of time must be set forth for the contract to obtain the construction permit. The construction period begins upon receipt of license. Determining a time limit for obtaining the construction license will increase the contractor's contractual bound. However, it should be considered that; by obtaining the construction license it will be possible to establish a construction servitude before construction on the land starts and so the contractor will be able to sell the independent sections of the contract agreed upon before the construction starts, as the road to the establishment of the floor easement will also be opened on the plot before the construction starts. This situation poses risks for landowners. Therefore; the contractor s independent sections should be hypothecated by contract and the hypothec should be gradually removed in accordance with certain stages of the construction. In addition to the above, other issues that landowners should pay attention to: It should be clearly stated that the construction project will be drawn by the contractor and the construction license fees and expenses shall belong also to the contractor. Especially the material to be used regarding the quality of the construction should be decided between the parties and if necessary the technical specifications to be prepared by using specialists should be determined with the contract. This will be the guideline for future disputes regarding the quality of the construction. During the course of construction, insurance contracts must be made to ensure that the taxes and SSI premiums will be paid and the loss and damages that may be incurred to the personnel and third parties be covered by the contractor. In this context, the responsibilities of all personnel working during construction must belong to the contractor, and this should be clearly stated in the contract, because the landowners which are also the employers of construction contracts of flat for land basis will be held responsible for the damages if the provision is not included in the contract.for this reason, it must be clearly stated in the contract that the contractor has undertaken the responsibilities arising from all the damages and losses related to the job security. Lastly, it must be clearly indicated 5
which contracting party has undertaken the branch fees of the residence permit, electricity, water and natural gas. The delivery of the building will be made after each of these licenses are received. If it is not decided that the costs will belong to the contractor, residence license, electricity, water, natural gas subscription fees are paid by each apartment owner. In conclusion; The construction contract of flat for land basis are organized as part of the construction period which usually starts by destroying the existing structures within the scope of urban transformation project by the landowners has great importance in terms of the fulfillment and timing of the actions of the parties.for this reason, it is necessary to regulate the provisions in detail and precisely determine the construction period.in particular, it would be useful to bound the contractor with serious penalties and financial obligations if the contractor does not comply with the construction schedule, does not perform the necessary work for the required materials and fail to fulfill legal obligations after construction. Please contact us for detailed information about the content in our newsletter about Constructıon Contracts Of Flat For Land Basis Within The Scope Of Urban Transformation Project www.bshkpartners.com Disclaimer: This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Whilst BSHK&HATİP Law Office makes every effort to ensure accurate and up to date content, nothing in this article should be considered as legal advice. Contact Mustafa Çağrı Hatip cagri.hatip@bshkhatip.com BSHK LAW Office Büyükdere Cd. Yapi Kredi Plaza C Blok No:40-41 Kat 17 Levent / Istanbul Acıbadem Mah. Çeçen Sk. Akasya Acıbadem AVM 25/A Kule İş Merkezi K: 21 D: 91-95-96 Üsküdar / İSTANBUL 6