When is the contractor’s guarantee provided in urban transformation? Is the guarantee deposited before or after the building permit, and at which stage is it mandatory? All details.

In the urban transformation process, “when” the guarantee will be provided is as important as “how much” will be provided. This is because the guarantee is a prerequisite linked to a specific stage of the process, and if this stage is skipped, construction cannot legally commence. In this article, we explain at which stage and in what order the guarantee must be provided, and the timing difference between a risky area and a risky parcel.

In Risky Parcels and Reserve Construction Areas: Before the Building Permit

In parcels containing risky structures and in reserve construction areas, the guarantee is provided before obtaining the building permit. The legislation is clear on this matter: The contractor undertaking the construction work must provide the guarantee to the administration before obtaining the building permit (Implementation Regulation Art. 13/9-c and b). Therefore, the guarantee constitutes a legal prerequisite for the building permit; the permit cannot be issued without the guarantee being deposited.

Furthermore, a practical convenience is foreseen in reserve construction areas: If more than one building permit is obtained and implemented by the same contractor, the guarantee calculation is made based on the total construction area, provided that all building permits are issued on the same date (Implementation Regulation Art. 13/9-b). This allows the contractor to benefit from a graduated rate based on the total area.

In Risky Areas: First Provisional, Then Final Guarantee

Timing in risky areas is two-staged. Half of the calculated collateral is provided as temporary collateral along with the risky area proposal (Implementation Regulation art. 13/9-a). If the risky area proposal is not approved by the President and published in the Official Gazette, the temporary collateral is returned to the relevant party. If the proposal is approved and published, the temporary collateral is returned, and a definitive collateral of the calculated amount is provided (Implementation Regulation art. 13/9-a).

Form and Place of Collateral Provision

Collateral must be provided not only at the right time, but also in the right place and in the right form. Values specified in Public Procurement Law No. 4734 are accepted as collateral (such as cash, letters of guarantee, government domestic borrowing instruments) (Implementation Regulation art. 13/9-ç). The provided collateral is deposited with the accounting unit at the Presidency or the Administration (Implementation Regulation art. 13/9-d). The term of letters of guarantee is determined taking into account the completion date of the work (Implementation Regulation art. 13/9-ç).

Timing if Building Completion Insurance is Preferred

If the contractor prefers to obtain building completion insurance instead of a guarantee, this insurance must also be obtained before the building permit is issued; because the insurance is a security that replaces the guarantee and is used to meet the same pre-permit condition (Law No. 6306, Article 8/6; Implementation Regulation, Article 13/9-ğ). The article titled which model is more advantageous in urban transformation can be reviewed to understand how the choice between a guarantee or insurance is shaped according to the financing model. The subject of administrative termination of a contractor’s agreement in urban transformation in case of a dispute with the contractor should also be known. The current text of the relevant legislation can be accessed via the Legislation Information System.

Frequently Asked Questions (FAQ)

When is a guarantee provided in urban transformation? In risky parcels and reserve building areas, a guarantee is provided before the building permit is obtained (Implementation Regulation, Article 13/9-b and c).

Is the guarantee provided in a single installment in risky areas? No. Half of the calculated guarantee is provided as a provisional guarantee during the offer stage, and the remaining portion is provided as a definitive guarantee once the offer is approved (Implementation Regulation, Article 13/9-a).

Can a permit be obtained without depositing a guarantee? No. The guarantee is a prerequisite for the building permit; a permit cannot be issued without it being deposited (Implementation Regulation, Article 13/9-c).

Where is the guarantee deposited? Guarantees are deposited with the accounting unit at the Presidency or the Administration (Implementation Regulation, Article 13/9-d).

Why is Expert Lawyer Support Necessary?

Providing the collateral at the right time, to the right place, and with one of the accepted values, is a prerequisite for the legal progress of the process. A delay or error in these stages can prevent the issuance of the license and halt the project. Urban transformation is a multi-layered process where administrative law, real estate law, and contract law intersect, and even a single procedural error can lead to significant loss of rights. For this reason, it is of great importance that collateral and license processes are managed by an expert lawyer in the field.

As 2M Law Office (Attorney Meryem Günay), we provide services across Turkey, especially in Istanbul, where urban transformation is most intense; in Istanbul’s priority transformation districts of Tuzla, Pendik, Kartal, Maltepe, Ümraniye, Ataşehir, Kadıköy, Sancaktepe, and Küçükçekmece, as well as in Kocaeli’s Gebze and Darıca regions. As Istanbul urban transformation lawyer and Tuzla urban transformation lawyer, we offer legal support to rights holders and contractors in collateral and license processes.