In land share (floor equivalent) construction contracts, the most frequent tension arises when the contractor demands the land share collectively as soon as the foundation (ground floor) permit is obtained, instead of phase by phase. If the contractor acquires the share early and then leaves the construction unfinished or sells the apartments, the landowner may lose both their home and their guarantee. This article elaborates on the construction guarantee mortgage that protects the landowner against contractors who refuse gradual transfer, the gradual release (fek) of this mortgage, the 6306 sales permit mechanism, the risk of corrective registration, and the approach of the Supreme Court on the matter.

Problem: The Contractor Demands All Shares

Contractors demand the early transfer of all land shares for financing and ease of sale. If gradual transfer (transfer in stages such as foundation, rough construction, fine craftsmanship, and occupancy permit) is rejected and the share is transferred collectively upon the foundation, ownership passes to the other party before the construction is even completed, and the landowner loses their strongest bargaining chip.

In this case, a balanced solution is to accept the transfer, but simultaneously with the transfer, to place a first-degree collateral mortgage in favor of the land owner on the independent sections allocated to the contractor, and to release this mortgage as the construction progresses. Thus, the contractor acquires ownership, but the apartments are encumbered with a mortgage.

Solution: First-Degree Construction Collateral Mortgage

The land owner, when the floor easement is established, establishes a first-degree and first-priority maximum (ceiling) mortgage in their favor on all independent sections allocated to the contractor. The contract includes a clause stating ‘transfer and assignment will not be completed without establishing a mortgage on these independent sections’; the mortgage and transfer are made simultaneously.

The mortgage constitutes the guarantee for claims arising from the construction’s completion in accordance with the license and project, being habitable and complete, as well as delay compensation, penal clauses, and defects. The maximum amount is determined not to be lower than the fair market/payment schedule value of each independent section.

Legal Basis of the Mortgage (Turkish Civil Code Art. 881, 883)

Turkish Civil Code Art. 881 allows for the establishment of mortgages even for claims that have not yet arisen but are likely to arise; the property subject to the mortgage does not even need to be owned by the debtor. For this reason, a collateral mortgage can be established on the contractor’s apartments for the land owner’s potential claims due to incomplete/defective performance, delay, and penal clauses.

According to Article 883 of the Turkish Civil Code (TMK), when the receivable ends, the owner can request the cancellation of the mortgage. Phased release, on the other hand, is a mechanism established by contract: as the agreed construction phase is completed, the mortgage on the independent sections corresponding to that phase is lifted. Since the mortgage is a guarantee for the landowner’s contractual performances, release cannot be requested before the performance is fulfilled.

How is Phased Release Staged

The lifting of the mortgage is linked to the actual physical level of construction. That each phase is fully completed is documented by the building inspection firm’s progress assessment report / payment certificate; only then is the mortgage on the relevant independent sections lifted. The most valuable apartments remain mortgaged until occupancy.

The secure method is to write a release schedule based on a specific number of apartments instead of a percentage: it is clearly specified in the contract how many apartments’ mortgages will be lifted at each stage and which apartments will remain mortgaged until occupancy. This way, ‘percentage’ disputes are avoided.

Release Stages and Typical Percentages

The typical staged release model reflected in contracts and court decisions is as follows. (This is a contractual model, not a statutory one; parties may agree on different rates/stages.)

In an apartment-based setup, the same logic is applied to the number of apartments; the most valuable independent sections (e.g., top-floor apartments) are held as collateral until an occupancy permit is obtained. Tying the final installment to the occupancy permit condition has also been adopted in Supreme Court practice.

Rule of Concurrent Performance and Occupancy Permit Condition (Turkish Code of Obligations Art. 97)

The removal of the mortgage for the final installment is generally tied to the condition of an occupancy permit (building use permit). According to the Supreme Court, the removal of the mortgage on the last independent section is subject to the occupancy permit condition; the mortgage cannot be lifted before this condition is met.

Furthermore, obtaining an occupancy permit alone does not constitute acceptance of the work. In Supreme Court practice, if there are incomplete or defective works, according to the rule of concurrent performance in Article 97 of the Turkish Code of Obligations, the entire mortgage is not lifted without paying for these works or holding their equivalent as collateral. In practice, the court determines the cost of incomplete/defective work through inspection and expert assessment, then leaves a sufficient number of independent sections as collateral to cover this cost, and lifts the mortgage on the remaining ones.

Law No. 6306 Sales Permit and the 10% Rule

According to Article 6/13 of Law No. 6306 and Article 13/10 of the Implementation Regulation, the sale of the contractor’s share to third parties is subject to the permission of the Administration (municipality). The Administration determines the completion rate of the construction and permits the sale of independent sections/shares at ‘a rate 10% below this rate’; the sale of the entire property becomes free with an occupancy permit or a ‘construction completed’ document. For sales at or above the completion rate, the consent of all owners is required.

The phrase ‘a rate 10% below this rate’ is open to two interpretations: a subtraction in percentage points (e.g., 50% → 40%) or one-tenth of the rate (e.g., 50% → 45%). Due to this ambiguity, instead of writing an abstract rate in the contract, the formula ‘to the extent permitted by the municipality’s sales permit letter’ is preferred; this avoids rate disputes in case law and aligns the release schedule with the administrative mechanism.

Risk of Registration by Correction (Tashihen Tescil) and TKGM Directive

A critical implementation point: According to the directive of the General Directorate of Land Registry and Cadastre, if floor easement has been established in the name of the land owner and the transfer level specified in the contract has been reached, the independent sections allocated to the contractor can be registered in the contractor’s name by correction (tashihen), without requiring the consent of the land owner.

The crucial point protecting the landowner against this is as follows: If the contract, apart from construction level/production provisions, contains a ‘unilateral transfer prohibition’ or a ‘special condition involving a commitment to establish real or personal rights’ (for example, a provision like ‘transfer and assignment will not be completed without establishing a mortgage on these independent sections’), the administration and land registry offices cannot fulfill the request for correctional registration. In other words, a properly drafted mortgage/special condition also closes the path to unilateral registration without requiring consent.

Disputes Arising in Practice and Case Law

In lawsuits for the release of collateral mortgages, the court determines the physical level of construction through on-site inspection and expert assessment, checks whether the stage conditions in the contract have been met, and only lifts mortgages corresponding to the completed stage. Prominent case law line:

The most common mistake in practice is for the landowner to lift the mortgage without waiting for the occupancy permit or by leaving incomplete/defective works unsecured; this means the guarantee is virtually annihilated.

Representative Group Approval

The lifting of the mortgage at each stage must be subject to the written approval of the Representative Group, which is composed of the landowners. The mortgage on no independent section can be lifted without documenting the completion of the stage and obtaining group approval; however, once a stage is completed, the group cannot withhold approval without just cause. It is vitally important that this approval authority is not left to the contractor through a power of attorney given to the contractor.

Common Mistakes

• Leaving the mortgage until after the transfer — the transfer and the mortgage must be simultaneous; otherwise, an unsecured gap will arise.
• Granting the authority to release (the mortgage) to the contractor — if the authority to release is not limited in the power of attorney, the mortgage can be lifted without waiting for a stage.
• Not linking the final installment to the occupancy permit — without the occupancy permit condition, the guarantee loses its function.
• Writing the ratio vaguely — it should be linked to the municipality’s sales permit criteria or the net number of apartments.
• Not including a special condition — the provision ‘transfer is not completed without the establishment of a mortgage’ also correctly closes the risk of unilateral registration.

Why is it Important to Manage the Process Correctly in These Contracts?

The correct establishment of a construction collateral mortgage at the right rank/priority, the adaptation of the release schedule to the construction level and the municipality’s sales permit, the inclusion of special conditions in the contract such as ‘transfer is not completed without the establishment of a mortgage’, and the limitation of power of attorney authorities are technical tasks. Even if a wrongly structured mortgage appears as security on paper, it actually remains non-functional.

In release disputes, the court determines the physical level with on-site inspection and expert testimony, and applies Article 97 of the Turkish Code of Obligations (TBK) on simultaneous performance; the process turns in favor or against, depending on how the contract is written.

2M Law Office provides legal support to landowners in disputes related to construction contracts in exchange for land share and apartment share contracts in regions with intense urban transformation, primarily based in Tuzla, on the Anatolian Side of Istanbul (Tuzla, Pendik, Kartal, Maltepe, Sancaktepe, Sultanbeyli, Ümraniye, Ataşehir, and Üsküdar) and in Kocaeli (Gebze, Çayırova, and Darıca). Examining the contract, power of attorney, and collateral structure before signing prevents a large portion of future disputes from the outset.

Frequently Asked Questions (FAQ)

Is it normal for the contractor to request their entire share once the foundation is laid?

It is common in practice and legally possible. However, the landowner should simultaneously register a collateral mortgage on the contractor’s apartments during the transfer and gradually lift this mortgage; otherwise, if the construction remains unfinished, they will be left without security.

What happens if the transfer is made without a mortgage?

The contractor acquires ownership and can sell the apartments; if the construction remains unfinished, the landowner can only file a compensation lawsuit and bears the risk of collection. Therefore, the provision ‘transfer is not completed without a mortgage being established’ is critical.

Does the entire mortgage get lifted upon obtaining an occupancy permit?

No. According to the Supreme Court, an occupancy permit alone does not constitute acceptance of the work; if there are incomplete or defective works and occupancy permit expenses, the final installment cannot be lifted until these are covered, in accordance with the concurrent performance rule of Article 97 of the Turkish Code of Obligations.

Can the apartments be transferred to the contractor without my consent?

If the floor easement has been established on the landowner and the transfer stage has been reached, corrective registration is possible in accordance with TKGM instructions. However, if there is a special condition in the contract such as ‘transfer is not completed without establishing a mortgage’, the administration and the land registry cannot perform this unilateral registration.

How is the sales permit ratio calculated?

According to Article 6/13 of Law No. 6306, the Administration determines the completion rate and permits sales to the extent of 10% below this rate. Since the expression is open to two interpretations, the formula ‘to the extent permitted by the municipality’s sales permit letter’ should be preferred in the contract.