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Legal ReviewIMPORTANT ISSUES REGARDING THE CONSTRUCTION CONTRACTS OF FLAT FOR LAND BASIS

Şubat 24, 2015by admin

Land owner signs “a construction contract of flat for land basis” (construction contract) with a contractor or with a construction company to construct a new building or reconstruct a building which is already existed. There will be some problems, if the construction contracts are prepared in an unelaborate way, or with no assistance received from experts. Consequently, the construction company or the contractor and land owners end up in court or the construction is procrastinated.

The construction contract is an agreement which is signed between land owner and contractor. The contractor undertakes the obligation of constructing independent spaces above the land with his own supplies in return of an apartment or land share which will be given by the land owner.

In the construction contract land owner undertakes the obligation of transferring the real estate shares. Due to that, these construction contracts need to be signed via the Land Registry Office or in the Notary Office. This is a legal obligation stated in “article 237 of the Turkish Code of Obligations”, “article 706 of the Turkish Civil Code”, “article 60 of the Notary Code” and “article 26 of the code of Land Register Law”. The Supreme Court of Appeals indicated in its settled opinion in the same direction (1). This is a validation rule so; the construction contracts which are signed against the rule will be void under the law. However, despite the validation rule, if the building is nearly done, the land owner cannot say “the construction contract is void, because of that; I will not give an apartment or a land”. The invalidity rule could be asserted in the beginning or in the middle of the business. It could not be asserted maliciously and say “the contract is void”, when the most of the construction is done.

First of all, to be signed and to be implemented “the construction contract”, the land, which will be used for the construction of a building, need to be convenient for a building an apartment or any other structure. For that, the land needs to be suitable for housing. If the land is not suitable for housing, “the construction contract” will be void from the beginning (2). Furthermore, the land, which will be used for the construction, will be convenient for constructing the independent spaces which is decided by the parties in the “construction contract”. Due to that, the zoning status needs to be seen in the Municipality before signing the construction contract. The conditions of the construction contract should be prepared in regard of the “zoning status”. It will be helpful for future disputes, if the plan of independent spaces, the size and the location of them are decided by the construction contract.

The plan for the construction must be confirmed by the Municipality to start the construction which is mentioned in the construction contract. If it is not decided otherwise in the construction contract, the obligation of applying to the Municipality for a confirmation is belong to the land owner. If receiving a license for the construction is an obligation of the contractor, it needs to be decided in the construction contract and the necessary successions needed to be given.

If it is not decided otherwise in the construction contract, generally, the duration of the construction starts after the day of the license is taken from the Municipality for the construction. That is way the duration of the construction must be stated in the construction contract to receive a license. Otherwise, the contractor can procrastinate the beginning of the construction. This situation can cause the land owner’s damnification. To avoid it, some provisions should be decided to clarify the sanctions if the construction cannot be ended on the date decided by the construction contract.

In the beginning of the construction, a number of land titles are transferred to a construction company or in some significant times of the construction, an apartment with construction servitude can be given to a contractor according to the construction contract. The contractor can continue to the construction by selling the apartments which is owned by him. Due to that, if the apartments with construction servitude are given late, it may cause the delay of a construction. However, transferring the land titles in the beginning of the construction will be dangerous for the land owner. The ideal way to solve this problem to transfer the land titles in according to the construction’s finishing situation. The land owners and people who buy apartments from the construction will be in a difficult situation; if the land titles are given in the beginning and the contractor sell them and leave the construction before finish it. This situation can mostly be seen during the economic crisis. Transferring one or a couple of land titles of the independent spaces in significant times during the construction can be decided by predicting the construction costs and the expected values of the independent spaces. The ideal way is to transfer one or a couple of land title of the independent spaces after the residence permit is received by the contractor.

According to the construction contract, the followings need to be decided; (i) when the construction servitude will be done, (ii) which party of the construction contract will be obliged to establish the construction servitude, (iii) which party will meet the cost of it. Moreover, these following should be decided too; (i) which party of the construction contract will pay the real estate taxes and pay the insurance costs, and (iii) if there is an employment accident, will the land owner responsible as responsible as the contractor?

The quality of the building which will be constructed, the materials which will be used in the construction and how common places and land owners apartments will be built need to be decided in details in the construction contract. It will be useful to add an appendix to the construction contract about the usage of the materials (should be decided by a team of experts) which will be used in the construction. These kinds of details should be decided to avoid and reduce the conflicts between the parties of the construction contract. The contractor can own the apartments after the residence permit is handed should be decided too.

The penalties against the party, who does not meet his obligations, should be decided to guarantee the rights of the both parties. Moreover, the abolition of the construction contract, the rights of the land owner if the construction is not finished, what could the construction company receive from the land owner, how to continue the construction with another contractor should be decided in details by the construction contract too.

During the construction, the most important issues regarding to these kinds of contracts is the rent allowances (taking or giving) regarding to the building which is destroyed.

Another important issue regarding to the construction contracts is; after the construction is completed, how the building’s or the building complex’s managing plan will be prepared. As the constructing companies already have successions, they registered their “management plan” to the land registry office. There will be some unpleasant surprises when the construction is finished and while starting to live in new apartments/apartment complex, because there are is specific management plan is prepared before regarding to the usage of common place and the costs. For this reason, “the management plan will be decided by both parties” clause must be included to the construction contract. Furthermore, some expert opinions (professional assistance) need to be used.

As a result, the issues mentioned above regarding “the construction contract of flat for land basis”, the contracts should be prepared with professional assistance and all possibilities should be included to the construction contracts.

(1) Y. 15. HD. 11. 07. 2005 T., 2004/5895 E.,2005/4170K.
(2) YHGK. 06.10.2004 T, 2004/13-420 E., 2004/443 K.