Introduction
This study analyzes the legal validity of a contract signed by the temporary board of directors of a complex property with a professional service company, transferring the management of the complex property for a period of 10 years, the possibilities for the board of representatives of the complex property to terminate this contract, and generally the feasibility of 10-year binding management contracts, in light of the presented judicial decisions. The examinations reveal that the validity of the contract is not absolute, but depends on various conditions, primarily the provisions of the management plan and the mandatory rules of the Condominium Law (KMK).
1. Decisions Regarding the Invalidity of the Contract and Non-compliance with the Condominium Law
A significant portion of judicial decisions, indicate the invalidity of long-term transfers that undermine the essence of the right of condominium owners to management. The General Assembly of Civil Chambers of the Supreme Court emphasizes that even significant management affairs such as the leasing of common areas require the unanimous consent of all condominium owners (Condominium Law Art. 45) (Supreme Court HGK, 2017/2002). Similarly, it is observed that a provision in the management plan, which stipulated the transfer of all rights and powers of the condominium owners’ board of a collective building to a company for a long period such as 15 years, was annulled, and this decision became final. The Supreme Court expressed this situation as follows: “With the decision numbered 2007/234 E.-1372 K. of Ankara 10th Civil Court of Peace, Article 17/a and the temporary article of the management plan, which concern the transfer of powers granted to the Collective Building Condominium Owners’ Board to …. A.Ş. for a period of 15 years, were annulled as they constituted a clear violation of the Condominium Law, and this decision became final on 13.09.2007.” (Supreme Court 18th Civil Chamber, 2013/10734)
Furthermore, the transfer of management to an external company without a decision from the general assembly of condominium owners is considered “null and void” (Supreme Court 20th Civil Chamber, 2017/2560). It has also been stated that contracts made by a management not properly elected by the condominium owners will not have any effect in terms of collective building management (First Instance-Ankara 3rd Administrative Court, 2020/667).
2. Cases Where the Contract May Be Valid: Management Plan and Qualified Majority
On the other hand, some decisions indicate that such long-term transfers can be valid under certain conditions. The fundamental condition is that this authority stems from the management plan and/or the board of apartment owners makes a decision with a qualified majority. In a first instance court decision, the management plan giving the founding cooperative “for a period of ten years” temporary management authority was deemed valid (FirstInstance-Bakırköy 5th ATM, 2021/899).
The Supreme Court ruled that the provisions in the management plan regarding the appointment of a professional manager and considering this contract as an annex to the management plan are not contrary to the mandatory provisions of the Condominium Law (KMK) and that the court cannot interfere with this contract (Supreme Court 18th Civil Chamber, 2015/11085). However, the amendment of such management plan provisions is only possible “with the vote of four-fifths of all apartment owners” (Supreme Court 18th Civil Chamber, 2014/5474).
Some first instance court decisions clearly set forth the qualified majority required for this delegation of authority: “The Board of Directors of the main immovable property may, by obtaining the consent of the general assembly with a 4/5 majority, transfer the conduct of management affairs to a legal entity operator through a contract it will draw up.” (FirstInstance-Istanbul 16th ATM, 2022/330 and 2022/706) These decisions indicate that if the will of the apartment owners is manifested with a high ratio like 4/5, the management can be transferred to a professional company for a long term.
3. Authority of Interim Management and Termination of Contract
The powers of the interim administration also play a critical role in the validity of the contract. According to Article 73 of the Property Ownership Law (KMK), the interim administration can continue until one year after the completion of the collective structure at the latest, and this period cannot exceed ten years from the initial construction permit in any case. In cases where this period is set shorter (e.g., 5 years) in the management plan, the interim administration does not have the authority to enter into a contract exceeding this period (Supreme Court 18th Civil Chamber, 2015/3827).
Regarding the termination of the contract, it is understood that the board of representatives of the collective structure can terminate such a contract (Supreme Court 3rd Civil Chamber, 2022/7441; Supreme Court 6th Civil Chamber, 2021/114). However, termination has legal consequences. A termination made without complying with the contract terms can be qualified as “unjust termination” and may oblige the collective structure management to pay a penalty clause or compensation. Nevertheless, it should also be considered that excessive penalty clauses can be reduced by the court on the grounds that they would “cause the debtor’s economic ruin” (Regional Court of Appeals Istanbul 45th Civil Chamber, 2021/735).
An important point is that even if a 10-year management right has been granted, the right of apartment owners to hold a general meeting and elect their own managers is recognized by the courts, and this election is deemed valid (Supreme Court 5th Civil Chamber, 2021/1188). This situation indicates that the ultimate will of the apartment owners over the management cannot be entirely eliminated by long-term contracts.
Conclusion
The validity of a 10-year management transfer contract made by the interim board of the collective structure with a professional service company is not absolute and must be evaluated within the specific conditions of each concrete case.
Cases of Invalidity: If the contract is made without explicit authorization in the management plan and without a qualified majority decision (such as 4/5) of the board of apartment owners, there is a high risk of it being deemed invalid or annulled by a court decision on the grounds that it violates the mandatory provisions of the Condominium Law (KMK) and the inalienable rights of the apartment owners. Contracts made by the temporary administration for a period exceeding its legal or management plan-specified term of office may also be considered invalid.
Cases of Validity: If the contract is explicitly stipulated in the management plan or made with the approval of a 4/5 majority of the board of apartment owners, there is a high probability of it being considered valid. In this case, termination of the contract may only be possible by amending the management plan with a 4/5 majority again or by complying with the termination conditions stipulated in the contract.
Right of Termination: The collective building representatives’ board may file a lawsuit to determine the invalidity of a contract it deems unlawful, or it may exercise its right of termination by complying with the contract’s terms. However, it should not be forgotten that an unjust termination will entail legal and financial responsibility. A paper suggestion.
Why Is Expert Lawyer Support Necessary?
Collective housing management is a highly complex process in terms of its technical and legal aspects, especially in regions with dense housing projects such as Istanbul, Tuzla, Pendik, Kartal, Tepeören, and Gebze. 10-year professional management contracts carry significant legal risks in terms of the Condominium Law, provisions of the management plan, qualified majority decisions, and the limits of temporary management authorities. In the processes of preparing, terminating, or determining the invalidity of such contracts, the support of a lawyer experienced in the field of collective housing and site management is of great importance.
A collective housing lawyer, by ensuring the contract is drawn up in accordance with both the Condominium Law (KMK) and the management plan, prevents risks of annulment, compensation, or penalty clauses that may arise in the future. At the same time, they provide professional legal consultancy on protecting the rights of the unit owners’ board, limiting the powers of the temporary management, and conducting termination procedures in accordance with due process.
Therefore, in transactions related to collective housing management contracts in Istanbul, Tuzla, Pendik, Kartal, Tepeören, and Gebze regions, not proceeding without the legal supervision of an experienced lawyer is of great importance from both a legal and financial perspective.
