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

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

In Risky Plots and Reserve Building Areas: Before the Building Permit

In plots containing risky structures and in reserve building areas, the guarantee is provided before the building permit is obtained. The legislation on this matter is clear: 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 is a legal prerequisite for the building permit; a permit cannot be issued without depositing the guarantee.

Furthermore, a practical convenience is stipulated for reserve building areas: If the implementation is carried out by the same contractor by obtaining multiple building permits, the guarantee calculation is made based on the total building 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 the tiered rate based on the total area.

In Risky Areas: First Temporary, Then Final Guarantee

Timing in risky areas is two-phased. 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 in 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, such as (cash, letter of guarantee, government domestic borrowing instruments), are accepted as collateral (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 validity period of letters of guarantee is determined considering the completion date of the work (Implementation Regulation art. 13/9-ç).

Timing if Building Completion Insurance is Preferred

If the contractor chooses to take out building completion insurance instead of a guarantee, this insurance must also be obtained before the building permit is issued; because insurance is a safeguard that replaces the guarantee and is used to meet the same pre-permit condition (Law No. 6306, Art. 8/6; Implementation Regulation, Art. 13/9-ğ). Regarding how the choice of guarantee or insurance is shaped according to the financing model, the article on which model is more advantageous in urban transformation can be reviewed. In case of a dispute with the contractor, the issue of administrative termination of the contractor’s contract in urban transformation 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, the guarantee is provided before the building permit is obtained (Implementation Regulation, Art. 13/9-b and c).

Is the guarantee in a risky area provided in a single installment? No. Half of the calculated guarantee is provided as a temporary guarantee during the bidding phase, and the remaining part is provided as a definitive guarantee once the bid is approved (Implementation Regulation, Art. 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 (Implementation Regulation, Art. 13/9-c).

Where is the security deposit made? Security deposits are made to the accounting unit at the Presidency or the Administration (Implementation Regulation art. 13/9-d).

Why is Expert Legal Support Necessary?

Providing the security deposit at the right time, in the right place, and with one of the accepted values is a prerequisite for the legal progression of the process. A delay or error in these stages can lead to the inability to issue the permit and the stalling of 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 the security deposit and permitting processes are managed with an expert lawyer in the field.

2M Law Office (Attorney Meryem Günay) as we are, 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 lawyers and Tuzla urban transformation lawyers, we offer legal support to right holders and contractors in security deposit and permitting processes.