1. Why is contractor selection more important than the contract?

A construction contract in return for land share (commonly known as a flat-for-land construction contract), according to the established definition of the Supreme Court, is a mixed-nature contract combining a promise to sell immovable property and a contract for work. The land owner undertakes to transfer the ownership of a portion of their land; and the contractor undertakes to construct and deliver independent units of a specific nature on this land. In other words, the land owner pays upfront and receives the consideration years later.

This is where the legal risk originates. The land owner performs their obligation (land share, site delivery, power of attorney) at the beginning of the contract; while the contractor’s obligation is spread over years. Due to this asymmetry:

If the contractor falls into financial distress, the land owner is left with only a right to claim — moreover, against a debtor with no ability to pay.

If the contractor has sold or mortgaged the shares transferred to them to third parties, the land owner’s ability to reclaim ownership is severely diminished.

Lawsuits, expert examinations, and appeal-cassation stages take years; during this time, the owner can neither live in their home nor realize the value of their land.

Basic principle: The contract ensures you are in the right. However, what enables you to collect is the financial and technical capacity of the contractor you are dealing with. Therefore, a few weeks spent on preliminary research are more valuable than a five-year lawsuit that might be filed later.

As emphasized in the Contractor Selection Guide in Urban Transformation Areas prepared by the Istanbul Builders Association (İNDER), the most common mistake made in contractor selection is to base the decision solely on the offered square meters. Embarking on a project with an unreliable company for the promise of a few extra square meters of apartment space is, in practice, the most costly choice for landowners.

2. Zero step: What owners need to do before going to the contractor

Sitting down for meetings with contractors unprepared means losing your bargaining power on the very first day. Owners must complete the following preparations before receiving offers:

2.1. Establish a “representative committee” among the owners

It is not possible for a twenty-person apartment building to negotiate with twenty different voices. A committee of 3–5 people should be selected from among the owners, and the committee’s authority (to conduct meetings, collect offers, request documents; without the power to sign) should be defined in writing. The final decision must in any case belong to the owners.

2.2. Take a legal snapshot of the parcel

Encumbered title deed record: Lien, mortgage, annotation, and declaration records must be obtained for all independent sections.

Inheritance and transfer: Title deeds held in the name of deceased owners will halt the process at the contract stage. Transfers must be completed beforehand.

Land shares: If the existing land shares are disproportionate to the value of the independent sections, this directly disrupts the distribution in the new project. If necessary, a lawsuit for correction of land shares should be brought up beforehand.

Zoning status: A zoning status certificate, plot plan, and application sketch must be obtained from the Municipality’s Directorate of Zoning and Urban Planning. No offer can be evaluated without knowing the floor area ratio (FAR), number of floors, setback distances, and abandonment obligations.

2.3. Get an independent appraisal

A report obtained from a CMB-licensed real estate appraisal firm provides a solid basis both in the negotiation of the share ratio and in the process of selling the shares of owners who do not participate in the contract under Law No. 6306. The appraisal report is the antidote to the “what the contractor gives is what it is” mentality.

2.4. Start the process before the risky building assessment

Seeking a contractor under the pressure of evacuation and demolition after the risky building assessment is finalized is against the owners’ interests. As recommended in the İNDER guide, the research and bid collection process should be initiated before the risky building assessment.

3. First filter: Building contracting authorization certificate (YAMBİS / ŞANTİYE-M)

Everyone who undertakes a work subject to a building permit in Turkey must obtain a building contractor authorization certificate number in accordance with the Zoning Law No. 3194 and the Regulation on the Classification of Building Contractors and the Keeping of Their Records (Official Gazette 2/3/2019). This number is used in building permits, occupancy permits, and construction contracts.

Records are kept through the Building Contractor Information System (YAMBİS) operated within the Ministry of Environment, Urbanization and Climate Change. The scope of the system has been expanded to include site managers and authorized construction masters, in addition to contractors, and transformed into the ŞANTİYE-M system. Inquiries can be made via yambis.csb.gov.tr .

3.1. What to look for?

Attention — the “temporary contracting” trap: The temporary contracting status granted to individuals who will construct a single structure of limited size on their own land is not an adequate indicator of qualification to undertake an apartment project on the scale of urban transformation. You must inquire about the group of the company you are dealing with.

3.2. Additional condition for projects in risky areas and reserve building areas

In accordance with the sixth paragraph of Article 6 of Law No. 6306, the minimum work experience, technical equipment, and financial standing that building contractors undertaking construction work for projects to be carried out in risky areas and reserve building areas must possess are determined by the Urban Transformation Presidency. This means that in these areas, there is an additional qualification threshold beyond the general contracting certificate. If your project is within a risky area or a reserve building area, request the contractor to document that they meet this threshold.

4. Second filter: How is the contractor’s financial capability measured?

The primary reason for urban transformation projects remaining unfinished is depletion of funding. Therefore, financial review should be taken as seriously as technical review.

4.1. Corporate profile of the company

Trade Registry Gazette records: Date of establishment, title changes, changes in partnership structure, capital increases/decreases. A company that frequently changes its title or is newly established might want to “reset” its past record.

Paid-up capital: Companies with capital disproportionately low compared to the project size completely shift the risk to the landowner.

Identity of partners: It should be investigated in which other construction companies the company partners hold shares, and whether they have any past liquidated/bankrupt companies.

Warning for ordinary partnership: If the entity you are dealing with is an ordinary partnership, ensure that all partners are included in the contract as parties and jointly and severally liable. Otherwise, it becomes debatable to whom you will direct your claim.

4.2. Debt and lawsuit inquiry

Enforcement proceedings: Pending enforcement files against the company and its partners.

Bankruptcy, postponement of bankruptcy, concordat: Past or ongoing processes before commercial courts.

Pending civil lawsuits: Especially lawsuits for title deed cancellation/registration, penalty clauses, and delay compensation filed by landowners or apartment buyers in previous projects. How many lawsuits arose from a contractor’s past projects is the most honest reference.

Public procurement prohibited lists and, if any, professional chamber disciplinary records.

4.3. Financial documents you will directly request from the contractor

Balance sheet and income statement for the last three years (financial advisor approved),

Bank reference letter and available credit limit information from the banks it works with,

Findeks / credit bureau report (on a company and, if necessary, partner basis),

Certificate of no debt from the tax office and SGK,

List of ongoing construction sites and their completion rates.

Practical criterion: A contractor who says, “I won’t share these documents, it’s a trade secret” gives you the first signal of how they will behave during the contract period. Resistance to transparency is a disqualifying criterion on its own.

5. Third filter: Technical competence, reference projects, and staff

5.1. Verify reference projects through “occupancy permits”

Project visuals in a contractor’s brochure prove nothing. The only thing that needs to be verified is this: Have these projects received their building occupancy permit (iskân)? Finishing construction and obtaining an occupancy permit are different tasks; in practice, the point where landowners get most stuck is when the building is completed but its occupancy permit cannot be obtained due to violations of the license. In this case, apartments cannot be sold, condominium ownership cannot be transferred, and loans cannot be used.

Checks to be made:

Request the block-parcel information of the reference projects, and confirm the license and occupancy permit status from the relevant municipality.

Visit the projects in person; ask the homeowners there if there were delays in the delivery period, whether the technical specifications were followed, and whether defects were rectified after delivery.

Note how many months late the work was delivered according to the contract period. Past delays are the best indicator of future delays.

5.2. Staff and site organization

Site manager: It is mandatory to appoint a qualified site manager in accordance with regulations for every project. Ask who the manager will be and how many sites they are responsible for simultaneously.

Technical staff: Meet face-to-face with the civil engineer, architect, and field team to be assigned to the project before the contract.

Equipment and subcontractor policy: The extent to which work will be outsourced to subcontractors, subcontractor selection criteria, and the payment schedule for subcontractor receivables should be inquired about. Unpaid subcontractor receivables may later lead to claims for a construction lien on the building.

5.3. Building inspection and independent technical consultant

In buildings where the total construction area exceeds a certain threshold, a building inspection organization is appointed in accordance with Law No. 4708 on Building Inspection. However, the responsibility of building inspection is primarily limited to the structural system and critical materials (concrete, rebar, formwork). Architectural and interior manufacturing items are outside the scope of building inspection, such as doors, parquet, joinery, kitchens, and bathrooms. Therefore, property owners should appoint an independent technical consultant (architect/civil engineer or project management firm) to monitor compliance with the technical specifications, and this consultant’s authority to enter and inspect the construction site must be written into the contract.

6. Documents to be requested from the contractor: checklist

7. Legal safeguards offered to the landowner by Law No. 6306

In urban transformation projects, there are certain legal protection mechanisms that landowners can benefit from, independent of the contract. Knowing these also provides an advantage in negotiations.

7.1. Building completion insurance or collateral requirement

The sixth paragraph of Article 6 of Law No. 6306 (amended by Law No. 7471) stipulates that the building contractor undertaking construction work in areas and parcels covered by the Law must, before obtaining a construction permit, arrange a building completion insurance policy, the scope, conditions, and implementation principles of which are determined by the Ministry of Treasury and Finance, or provide other collateral and conditions determined by the Urban Transformation Presidency.

7.2. Collateral provided to the administration before the construction permit

In accordance with the Implementation Regulation of Law No. 6306, if real persons or private law legal entities carry out development in parcels containing risky structures, it is mandatory for the contractor undertaking the construction work to provide the Administration with collateral amounting to a certain percentage of the approximate construction cost before obtaining a construction permit. This rate has been determined as 6% for risky structure parcels with the Regulation amendment dated 13/12/2024 (graduated rates apply in reserve building areas). A permit is not issued to contractors who cannot provide the collateral; this is, in fact, a pre-qualification mechanism that operates in favor of the owners.

7.3. Limit on apartment sales imposed on the contractor

According to the relevant provision of the Implementation Regulation, the sale of independent units belonging to the contractor in parcels within the scope of the Law can be made according to the construction progress level and subject to the Administration’s permission. The Administration determines the completion rate of the construction by making on-site inspections or by checking through the building inspection system, and notifies the land registry office that sales can be made at a rate below a certain margin of this rate. Sales of independent units belonging to the contractor cannot be made without a written consent from the Administration. However, for sales to be made at or above the completion rate, the consent of all owners is required.

Why is it important? This provision is a direct brake against the scenario of “the contractor selling units upfront, taking the money, and leaving the construction unfinished.” Owners can monitor the contractor’s requests for sales permits and the permits granted by applying to the Administration; they have a significant bargaining chip against a contractor requesting consent.

7.4. Possibility of ex officio termination by administrative means

According to the fourteenth paragraph of Article 6 of Law No. 6306 (amended by Law No. 7471); after an agreement is reached with all owners or a decision is made by the absolute majority of shareholders in proportion to their shares, for reasons originating from the contractor:

if the construction of the new building has not started within one year, or

if the construction work has been stopped at a certain level and construction activities are not continued with sufficient staff and equipment to complete the project for at least six months,

For the termination of contracts, a decision can be made by a simple majority of the owners, proportionate to their shares, and an application can be made to the administration. The administration makes a determination; if the conditions are met, it warns the contractor, giving them thirty days to start or continue the work. If the work is not started or continued despite the warning, the contracts are considered terminated ex officio without requiring the consent of the interested parties as of the date the thirty-day period expires. After termination, contracts annotated in the immovables registry are deleted. Rent assistance payments made by the contractor to the beneficiaries until the date of termination cannot be reclaimed.

This method is very valuable in practice because it makes it possible to proceed with a new contractor without waiting for a court decision. For details, you can review our article titled “How to Terminate a Contractor Agreement in Urban Transformation? (Ex Officio Termination Guide According to Law No. 6306)”.

8. Guarantees to be included in the contract

Legal safeguards form a base; the actual protection is provided by the guarantee architecture you include in the contract. In practice, four complementary layers are used:

9. Term, penal clause, and rent obligation

In the contract, terms should not be compressed into a single vague sentence; they should be written as three separate stages:

License period: The period for obtaining the building permit from the date of the contract signing.

Construction period: The period from obtaining the permit until actual delivery.

Occupancy permit period: The period for obtaining the building use permit from actual delivery.

A separate delay penalty should be defined for each stage. The most functional model in practice is this: in case of delivery delay, a monthly market rent payment for each independent section (without an upper limit, until actual delivery) and, if the occupancy permit is not obtained on time, an additional fixed monthly penal clause. It should not be forgotten that if the penal clause is excessively determined, the judge may reduce it in accordance with Article 182/3 of the Turkish Code of Obligations (TBK); therefore, a deterrent but defensible amount should be preferred.

Common mistake: Setting a ceiling on delay rent, such as “maximum 4 months”. This gives the contractor the message that the delay becomes free of charge after the fourth month and completely eliminates its deterrent effect. If you are going to set a ceiling, make sure to state that the right to terminate arises if the ceiling is exceeded.

Technical specifications: the sole legal basis for quality

The technical specifications must be signed as an integral annex to the contract, and each page must be initialed. Its content should include:

Brand, model, and class information of the materials to be used (elevator, joinery, glass, thermal insulation, steel door, ceramic, fixtures, kitchen, heating system);

Characteristics of common areas (entrance hall, shelter, parking lot, roof terrace, landscaping);

Heat, sound, and water insulation standards;

Energy performance certificate obligation;

must be clearly stated. Expressions such as “equivalent,” “similar,” or “counterpart” must be removed from the specifications; otherwise, a “this is also equivalent” discussion is inevitable upon delivery. A clause should be added stating that brand changes can only be made with the written consent of the owners and in the upper segment.

Allocation sketch and “tolerance” clause

Apartment allocation must be shown in the contract appendix floor by floor, unit by unit, and with m² specified. Tolerance clauses commonly encountered in practice, such as “±5% change can be made in the project,” work unilaterally against the landowner. The following limits should be placed on this clause:

Tolerance must be mutual and should only cover changes due to compulsory zoning/licensing;

The location and facade of the independent sections allocated to the landowner must be kept outside the scope of tolerance;

Provisions granting the contractor unlimited merging/splitting authority in their own apartments should not be accepted, as they will disrupt the balance of common areas and land shares.

Prohibition of transfer

It must be stipulated in the contract that the contractor cannot transfer their rights and obligations arising from the contract to a third party without the written consent of the owners. Otherwise, the contractor you meticulously selected may transfer the work to a company you don’t know at all.

9. The 14 most common grievances and their antidotes in practice

10. 20-item final checklist before signing the contract

Is the contractor’s YAMBIS/ŞANTİYE-M registration active, and is the document group sufficient for the project?

What is the number of construction sites they are simultaneously managing and their completion rates?

Have the commercial registry records, capital, and partnership structure been examined?

Has an inquiry regarding bankruptcy/composition with creditors/enforcement been made for the company and its partners?

Have lawsuits filed from previous projects been investigated?

For reference projects, has the occupancy permit been confirmed by the municipality?

Have at least two completed projects been visited on-site, and have their residents been spoken with?

Have a bank reference letter and the balance sheets for the last three years been obtained?

Who are the site manager and technical staff, and have they been met?

Will the contract be annotated in the land registry? (Is the annotation clause explicitly stated in the text?)

For the license / construction / occupancy permit, have separate deadlines and separate sanctions been stipulated?

Will the delay rent accrue until actual delivery? If there’s a cap, does the right to terminate arise?

Have the amount of the bank guarantee letter, its return stages, and duration been clarified?

Is a construction guarantee mortgage being established on the shares to be transferred to the contractor?

Is the company partner signing as a personal guarantor?

Is the technical specification brand/model-based, and has the phrase “equivalent” been removed?

Is the distribution diagram, numbered, storey-based, and with m² details, an annex to the contract?

Are there sale/mortgage/release powers in the power of attorney? (There should not be.)

Have the common areas, facade/advertising revenues, and management plan been regulated?

Why is expert legal support necessary?

The process of contractor selection and the construction contract in exchange for land share in urban transformation is a multi-layered field where areas such as  administrative law  (Law no. 6306 and its Implementing Regulation, risky structure determination, license, collateral),  property law  (land registry, annotation, mortgage, floor easement),  law of obligations  (contract for work, default, penalty clause, compensation), and  condominium law  intersect. A single sentence added to or removed from an article can result in millions of liras in loss or gain of rights.

2M Law Office provides holistic legal support to landowners and unit owners in the fields of urban transformation law, condominium law, and real estate law. The services provided in this context include:

Preparation of the preliminary review (due diligence) report for contractor candidates regarding legal, financial, and registry aspects,

Analysis of incoming offers and preliminary protocols in favor of the landowner, and preparation of counter-texts,

Drafting of the construction contract in exchange for land share and technical specifications article by article, and managing notary processes,

Structuring of the letter of guarantee, construction collateral mortgage, personal suretyship, and land registry annotation,

Conducting owner meetings, and call and notification procedures in accordance with Law No. 6306 legislation,

Management of the share sale process for owners who do not agree with the simple majority decision,

Execution of notice, evidence determination, and preliminary injunction processes during the construction phase,

Preparation and follow-up of administrative ex officio termination applications within the scope of Article 6/14 of Law No. 6306,

Filing and handling of lawsuits for contract termination, title deed cancellation and registration, delay compensation, penal clauses, and costs of incomplete/defective workmanship.

Our office, based in Tuzla, operates in the regions of Tuzla, Pendik, Kartal, Maltepe, Ataşehir, Ümraniye, Sancaktepe, Sultanbeyli, Çekmeköy, Kadıköy and Üsküdar as well as Kocaeli, Gebze, Darıca and Çayırova, under the service headings of Istanbul urban transformation lawyer, Tuzla urban transformation lawyer, construction contract for a share of flats lawyer, construction contract for a share of land lawyer, contractor agreement termination lawyer, condominium law lawyer and real estate law lawyer.

Frequently Asked Questions

How do I find out if the contractor has an authorization certificate?

Inquiries can be made through the Construction Contractor Information System operated under the Ministry of Environment, Urbanization and Climate Change (yambis.csb.gov.tr). Ask the contractor for their authorization certificate number in writing; be sure to confirm that the registration is active and that the document group meets the scope of your project.

Is it mandatory to draw up the contract at a notary?

Yes. Since a construction contract in return for a land share also involves the sale of real estate, it must be executed in an official form, typically as a notarized deed. Ordinary written contracts are generally invalid; although the Court of Appeals may reach conclusions based on the performance rate and the rule of honesty in some cases, this is an uncertain and risky ground.

Is it mandatory to annotate the contract in the land registry?

It is not legally mandatory, but it has become practically mandatory. After the Unification of Jurisprudence Decision dated 16.05.2025, numbered E.2024/1, K.2025/2, the title deeds of good-faith third parties who acquire apartments from the contractor are protected. The annotation prevents third parties from claiming good faith, thereby protecting the landowner’s right of recourse. It should also be remembered that the real effect of the annotation is limited to five years.

What kind of guarantee should I ask from the contractor?

Instead of a single guarantee, a layered structure should be established: a bank guarantee letter (with staggered refunds), a construction guarantee mortgage on the shares/apartments transferred to the contractor, a personal guarantee from the company’s main partner, and building completion insurance under Article 6/6 of Law No. 6306. These layers work together, not instead of each other.

Can the contractor sell their own apartments before the construction is finished?

On parcels covered by Law No. 6306, the sale of independent units falling to the contractor’s share can be made according to the progress level of the construction and subject to the Administration’s permission; sales cannot be made without written consent from the Administration. For sales at or above the completion rate, the consent of all owners is required.

What can I do if the contractor never starts construction?

After an agreement is reached with the owners or a decision is made by the absolute majority of shareholders based on their shares, if construction has not started within one year due to reasons attributable to the contractor (or if the work has been stopped and not resumed with adequate personnel and equipment for at least six months), a termination decision can be made by the absolute majority of owners and an application can be made to the administration. If the work is not started despite the administration’s thirty-day warning, the contract is considered terminated ex officio. This method allows proceeding with a new contractor without waiting for a court process.

Can I unilaterally terminate the contract by sending a notary warning?

No. According to Supreme Court precedents, unilateral termination notices sent without the other party’s acceptance generally do not produce legal effect; the contract remains valid until a court decision is issued or the parties agree on termination. Administrative ex officio termination under Law No. 6306 is an exception to this.

Am I obliged to give a power of attorney to the contractor?

It is practically necessary to grant a limited power of attorney for procedures such as permits, project approvals, and subscriptions. However, the power of attorney must be transaction-based and time-limited; powers for sale, mortgage establishment, release, waiver, settlement, and credit utilization should generally not be granted. A significant portion of the grievances in practice arise from unlimited general powers of attorney.

What can I do if a different apartment than the one specified in the contract is delivered?

If the allocation drawing is an annex to the contract, this constitutes a breach of contract: specific performance, compensation for defective/incomplete work or value difference, and a penalty clause can be demanded if stipulated in the contract. Therefore, it is of vital importance that the drawing is appended with apartment numbers, floor numbers, and square meter values, and that the tolerance clause is limited.

If I sign the delivery report, do I lose my rights regarding defective work?

A delivery report signed unconditionally may be interpreted against you in terms of claims to be made later. Therefore, the phrase “subject to the reservation of all my legal rights regarding defective and/or incomplete works” must be added to the delivery report, and identified deficiencies should be documented with photos and videos. For latent defects, the provisions of the Turkish Code of Obligations regarding defects in construction contracts also apply separately.

Can I look for a contractor before having a risky structure assessment done?

Yes, and this is what is recommended. Searching for a contractor under the pressure of eviction and demolition after the assessment is finalized weakens the owners’ bargaining power. The process of research, bid collection, and legal review should be initiated before the risky structure assessment.

Conclusion

In urban transformation, the most powerful moment for the landowner is the moment before signing. After the signature is made and the land share is transferred, the only thing left is the right to sue — and the right to sue often remains on paper against a contractor without financial power.

Therefore, the order is as follows: pre-research → elimination → collateral architecture → contract in the form of notarized arrangement → annotation in the land registry. If any of these five steps are skipped, the protective value of subsequent steps decreases significantly. Especially after the Unification of Jurisprudence Decision published in the Official Gazette dated 18.07.2025, the land registry annotation is no longer an optional detail but the primary line of defense for the landowner.

For a pre-contract legal review, you can contact 2M Hukuk Law Office with your project-related documents (land registry records, zoning status, contractor offer, preliminary protocol, and contract draft).

Main sources used

Law No. 6306 on the Transformation of Areas Under Disaster Risk (as amended by Law No. 7471) — Ministry of Environment, Urbanization and Climate Change

Implementation Regulation of Law No. 6306 — Ministry publication

Construction Contracting Information System (YAMBIS) — yambis.csb.gov.tr

Regulation on the Classification and Registration of Construction Contractors (OG 2/3/2019)

Grand General Assembly of the Court of Appeals for Unification of Jurisprudence, 16.05.2025, E.2024/1, K.2025/2 (OG 18.07.2025, No. 32959)

İNDER, Contractor Selection Guide in Urban Transformation Areas with Questions and Answers

Land Registry Law No. 2644, Art. 26; Turkish Civil Code No. 4721, Art. 2, Art. 3, Art. 1009, Art. 1023; relevant provisions of the Turkish Code of Obligations No. 6098; Zoning Law No. 3194; Law on Building Inspection No. 4708

Legal Disclaimer: This article has been prepared for general informational purposes only and does not constitute legal advice or attorney services. Legislation and case law are constantly changing; the information contained in the article is current as of its publication date. The Court of Appeals decision details mentioned in the article have been compiled from open sources, and must be verified with their full text via the UYAP / Court of Appeals Decision Search system before being used in any petition, opinion, or publication. Since each dispute contains unique facts, you should definitely consult an attorney before taking any steps regarding your specific case.