A construction contract in exchange for land share (also known as a flat-for-land or “kat karşılığı” construction contract) is a contract under which the contractor (developer) undertakes to erect a building and the landowner, in return, undertakes to pay a consideration (usually by transferring land shares). In terms of their legal nature, these contracts are as follows:
- It Is a Mixed-Type Contract: It is a “dual-type”, mixed contract made up of a contract for work under the Turkish Code of Obligations (TBK) and a promise to sell immovable property.
- It Imposes Obligations on Both Parties: It contains both the contractor’s obligation to carry out the construction and the landowner’s obligation to transfer title (tapu); in other words, it is an onerous (reciprocal) contract.
- It Is Subject to a Special Termination Procedure: Because it involves the transfer of immovable property, it cannot be terminated merely by a unilateral declaration of intent. Termination requires either the meeting of the parties’ wills or a court decision.
Case Analysis: Introduction, Development and Outcome
1. Introduction: Subject Matter and Grounds of the Case
The action was brought seeking the termination of a Construction Contract in Exchange for Land Share, together with the cancellation of the title deed (tapu) entries made on the basis of that contract and their registration in the plaintiff’s name.
- Grounds for Termination: The plaintiff landowner requested that the contract be ended, alleging that the contractor had not started the work in time and had failed to perform its obligations.
- Defence: The defendant contractor, for its part, argued that the failure to start construction was caused by reasons attributable to the plaintiff and requested that the termination claim be dismissed.
2. Development: The Legal Process and Developments
In the course of the proceedings, the following developments took place before the first-instance court and the Court of Cassation (Yargıtay):
- First-Instance Court Decision: The court initially dismissed the request for termination of the contract on the ground that the contractor was not at fault for the delay.
- New Development (Mutual Intent): During the Court of Cassation’s review, it was established that the defendant contractor had also filed an action before another court (Büyükçekmece 5th Civil Court of First Instance) seeking termination of the same contract and compensation.
- Legal Assessment: Under normal circumstances, a court decision is required to withdraw from contracts of this kind; however, where both parties seek termination through separate actions, the parties’ wills are deemed to have met on the point of “termination”.
3. Outcome: The Court of Cassation’s Decision and Its Consequences
Stating that the parties no longer intended to continue the contract and that their intentions to terminate coincided, the Court of Cassation reached the following conclusions:
- Reversal of the Judgment: The first-instance court’s decision “dismissing the termination” was found to be erroneous, and it was decided that the judgment be reversed in favour of the plaintiff.
- Financial Consequences: It was ordered that TRY 1,630.00 in attorney’s fees for the hearing be collected from the defendant and paid to the plaintiff, and that the appeal fee paid in advance be refunded to the plaintiff.
- Request for Rectification: The decision was rendered unanimously, noting that the parties could apply for rectification of the decision (karar düzeltme) within 15 days of its service.
Source: Hüseyin Kovan, Construction Contracts in Exchange for Flats in 100 Questions (100 Soruda Kat Karşılığı İnşaat Sözleşmeleri)
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