Construction Contracts in Exchange for Land Share (Flat-for-Land Agreements): Legal Framework, Common Risks, and Dispute Scenarios 

Construction contracts in exchange for land share (commonly referred to in Turkish as “Kat Karşılığı İnşaat Sözleşmeleri”) are among the most frequently used contractual models in Turkey’s real estate and urban development sectors. These hybrid contracts govern legal relationships between landowners and contractors, whereby the contractor undertakes to construct independent units (e.g., apartments) in return for a share in the completed building, allocated to the landowner.

This legal guide outlines the governing legal basis, formal requirements, common contractual risks, remedies, and litigation practices under Turkish law, with reference to the Turkish Code of Obligations, the Turkish Civil Code, and relevant court precedents.

1. Legal Nature and Statutory Framework

Flat-for-land contracts are sui generis (hybrid) contracts combining elements of:

• a contract for work (eser sözleşmesi) regulated under Turkish Code of Obligations (TCO) Art. 470 et seq., and
• a preliminary contract for sale of immovable property, governed by TCO Art. 237 et seq.

These agreements often include provisions for the transfer of title over real property; therefore, they must comply with the mandatory form requirements for real estate transactions.

Governing legislation:

• Turkish Code of Obligations (TCO)
• Turkish Civil Code (TCC), Art. 706
• Land Registry Law (Art. 26)
• Notary Law (Art. 60 and 89)

Under Turkish law, any contract involving the transfer or promise of immovable property must be executed in an official form—either before a notary or through a land registry officer—to be legally valid.

2. Formal Requirements and Risk of Invalidity

Failure to execute the contract in notarized or land registry format renders it null and void insofar as it concerns the transfer of immovable property rights. Oral or merely written (private) agreements are not enforceable in terms of conveyance.

However, Turkish case law suggests that if the contractor (developer) has substantially fulfilled their obligations, the landowner may be precluded from invoking the lack of form due to the principle of good faith (dürüstlük kuralı), particularly where performance is evident and accepted.

3. Rights and Obligations of the Parties

Obligations of the Landowner:

• Delivering the land ready for construction in accordance with zoning laws
• Assisting with permits and development approvals
• Facilitating the title transfer of the contractor’s designated units

Obligations of the Contractor:

• Constructing the independent units according to specifications and in a timely manner
• Ensuring zoning and permit compliance
• Delivering completed units within the contractual time frame
• If delay occurs, compensating the landowner under TCO Art. 112–125
• Fulfilling any contractual penalties or liquidated damages

4. Common Legal Disputes and Risk Areas

1. Delay in Delivery

Landowners often claim delay penalties or seek termination under TCO Art. 125 where construction is not completed on time.

2. Defective or Incomplete Construction

If the units are not built in accordance with the contract or building codes, the landowner may claim repair, price reduction, or damages under TCO Art. 474 et seq.

3. Failure to Meet Formal Requirements

Non-notarized contracts may be deemed null and void, and title transfer cannot be enforced against third parties.

4. Lack of Collateral

Failure to secure performance guarantees (e.g., bank letter of guarantee, completion bonds) can result in significant risk to landowners if the contractor abandons the project or becomes insolvent.

5. Third-Party Sales Commitments by Contractor

Contractors may promise units to third parties before completion. If the landowner terminates the contract, those third parties may attempt to enforce rights under TCC Art. 1023, which protects bona fide acquirers.

5. Termination and Legal Consequences

Flat-for-land contracts may be terminated:

• By mutual agreement of the parties
• By court decision upon the contractor’s breach of material obligations (e.g., delay, poor workmanship, insolvency)

Following termination:

• Each party is obliged to return what was received
• A property appraisal may be required to calculate restitution and any compensation due
• Partial construction work may be evaluated under unjust enrichment principles or quantum meruit

6. Jurisdiction and Legal Remedies

• Court of First Instance (Asliye Hukuk Mahkemesi): Primary forum for most disputes
• Commercial Court (Asliye Ticaret Mahkemesi): If either party qualifies as a merchant under the Turkish Commercial Code
• Venue: Usually the court where the immovable property is located

7. Preventive Legal Measures and Best Practices

To minimize risk:

• Execute the contract in notarized or land registry form
• Obtain bank guarantees, insurance, or promissory notes from the contractor
• Clearly define the schedule, specifications, and unit allocation plan
• Include well-drafted provisions for penalties, default, and dispute resolution
• Limit the contractor’s right to promise or sell units to third parties without landowner consent

Construction contracts in exchange for land share are widely used but legally complex arrangements in Turkish real estate law. Formal requirements, performance guarantees, delivery timelines, and termination provisions must be drafted with precision. Failure to do so may result in costly and protracted legal disputes.

At Türeli&Ceylan Law Firm, we provide full legal support throughout the lifecycle of these contracts—from drafting and negotiation to dispute resolution and litigation. If you are planning a construction project or wish to secure your interests in such an arrangement, contact us for a legal consultation.