Construction Agreements in Return for Land Share (also known as land-share construction contracts) are hybrid contracts under Turkish civil law. They combine the characteristics of an construction contract (obligation to construct a building) and a promise to sell real estate (obligation to transfer land titles). When a contractor fails to complete the construction, deviates from the project layout, or abandons the work, landowners often seek to terminate the contract. However, terminating these official contracts involves strict, complex legal parameters.

1. Can a Construction Agreement Be Terminated Unilaterally in Turkey?

Under Turkish law, because these contracts involve property title transfers, they must be drafted officially by a notary. Therefore, neither party can terminate the agreement unilaterally through a simple declaration or notification. Valid termination requires one of the following methods:

  • Mutual Consent (Termination Protocol): The parties must sign a mutual termination agreement in official notary format.
  • Judicial Dissolution (Court Lawsuit): If mutual agreement is not possible, the party seeking dissolution must file a lawsuit in the Civil Court of First Instance to obtain a court decree of termination.

2. Retroactive (Ex Tunc) vs. Prospective (Ex Nunc) Termination

The legal consequences of a termination lawsuit depend heavily on the physical completion rate of the building at the time of the dispute:

  • Retroactive Termination: If the completion rate is low (typically under 90%), the court rules for retroactive termination. The contract is treated as if it never existed, titles are returned to the landowner, and the contractor can only claim the value of materials under unjust enrichment principles.
  • Prospective Termination: If the completion rate is 90% or higher, the principle of good faith (Article 2 of the Turkish Civil Code) prevents retroactive cancellation. The court rules for prospective termination, granting the contractor units proportional to their completed work, while the landowner can claim damages for unfinished and defective works.

3. Rights of the Landowner in Case of Contractor's Default

If the contractor fails to deliver the property within the agreed duration, the landowner can exercise several statutory options:

  • Demand specific performance (completion of the building) and claim delay compensation (loss of rent) for the duration of the delay.
  • Seek court permission for performance on behalf of the contractor (nama ifaya izin), allowing the landowner to complete the construction and charge all costs to the contractor.
  • Terminate the agreement due to default and sue for damages (either positive or negative damages depending on the nature of the termination).

4. Title Risks for Third-Party Buyers

Contractors frequently sell their designated units to third-party buyers during the construction phase. However, if the contractor defaults and the agreement is retroactively terminated, the tapu (title deed) transfers to third parties are cancelled, and the properties revert to the landowner. The Turkish Supreme Court rules that third parties cannot claim good faith protection (TMK Art. 1023), as they should anticipate that the contractor's title is dependent on the completion of the construction.

Frequently Asked Questions

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What is 'Performance on Behalf of the Contractor' (Nama İfaya İzin)?

It is a court authorization allowing the landowner to complete the unfinished construction of the defaulted contractor, paying for it using the contractor's assets or claiming the expenses from them directly.

What is the statute of limitations for construction contract disputes?

The general statute of limitations for contract disputes is 5 years from the delivery date or the date of default. If there is gross negligence or intentional fault, the period is extended to 20 years.

Can I claim both a penalty clause and loss of rent at the same time?

Unless agreed otherwise in the contract, a penal clause for delay and actual rent loss can generally be claimed together. However, this depends on whether the penal clause is defined as cumulative or alternative.

1. Court of Cassation Precedent: Without a Title Annotation, the Bank’s Mortgage Prevails

Yargıtay Hukuk Genel Kurulu - Esas: 2023/574, Karar: 2025/505 (Karar Tarihi: 10.09.2025)

Summary: Where a bank holds a mortgage over land shares transferred to the contractor as an advance to finance construction, the good-faith bank’s mortgage is protected under Article 1023 of the Turkish Civil Code unless the construction contract was annotated in the declarations section of the land registry. The General Assembly of Civil Chambers REVERSED the judgment favouring the landowners, holding that the bank’s bad faith had not been proven.

“…The acquisition of a good-faith third party who purchases a land share or an independent unit from the contractor must be protected under the ‘principle of reliance on the land registry’ pursuant to Article 1023 of the Turkish Civil Code. […] The landowner may defeat third-party good-faith claims by having an annotation entered in the declarations section of the title deed.…” (Translated excerpt; Turkish original is authoritative)
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2. Court of Cassation Precedent: Delay Damages Stop Once Actual Delivery Is Proven

Yargıtay Hukuk Genel Kurulu - Esas: 2024/170, Karar: 2025/744 (Karar Tarihi: 26.11.2025)

Summary: If the contractor fails to deliver on time, the landowner may claim delay damages under Article 125 of the Turkish Code of Obligations. However, the General Assembly held that even without an occupancy permit, if the contractor proves the units were actually delivered and used, damages run only to that date — and REVERSED the judgment that had favoured the landowners without examining this.

“…According to the settled case-law of the Court of Cassation, even where no occupancy permit has been obtained, if it is alleged and proven that the units allocated to the landowners were actually delivered and used, rented out for income, or sold to third parties, delay damages must be calculated only up to the date of actual delivery, sale or lease.…” (Translated excerpt; Turkish original is authoritative)
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3. Court of Cassation Precedent: Authorisation for Substituted Performance and Sale

Yargıtay 15. Hukuk Dairesi - Esas: 2020/1857, Karar: 2021/2027 (Karar Tarihi: 28.04.2021)

Summary: Where the contractor fails to complete the works on time, the landowner may seek authorisation to have the outstanding works completed at the contractor’s expense, together with authorisation to sell enough of the contractor’s own units to cover that cost. The Court REVERSED the judgment that had rejected this claim without properly calculating the cost of the outstanding works.

“…One of the claimant landowner’s requests is authorisation for substituted performance and for sale in order to remedy the incomplete works. […] the failure to grant authorisation for substituted performance and sale in respect of independent units corresponding to the total cost of the incomplete works was incorrect and required reversal.…” (Translated excerpt; Turkish original is authoritative)
View Full Decision (Turkish)