The construction contract in exchange for flats is not explicitly regulated in the law. In terms of form, it is a contract arising from a combination of a promise to sell immovable property and a work contract. While a promise to sell immovable property is established between the parties for the delivery of the land, the work contract arises when the contractor builds and delivers the house. Since the construction contract in exchange for flats contains elements of both contracts, in case of dispute, the provisions of these two contracts are applied by analogy.
The Elements of the Construction Contract in Exchange for Flats
- It is a consensual contract arising from the agreement of both parties. Therefore, there must be evidence that the parties have reached an agreement.
- The landowner must undertake the obligation to transfer their share of the land.
- The contractor must undertake the obligation to construct in exchange for the land share they will receive.
While the workmanship condition of the contracts constituting the construction agreement in return for a share in the property is not subject to any formal requirement, the promise to sell immovable property is a contract that must be made in written form before a notary public. The construction agreement in return for a share in the property is therefore subject to the formal written form requirement. In the construction agreement in return for a share, performances made without awareness of the lack of formality may be reclaimed based on the principles of unjust enrichment.
In its decision numbered 2012/2737 Main Case and 2012/4540 Decision, the 15th Civil Chamber of the Court of Cassation stated:
“Since construction contracts in exchange for a share of the land also include the transfer of land shares, they must be executed either as a notarized document or registered at the land registry, and their termination must also be done by a court decision. The exception to termination by court decision is when the parties mutually agree on the termination of the contract.”
In cases where the construction phase is largely completed or demolition would excessively harm the contractor, requesting termination of the contract by claiming a lack of formal requirements is not possible under the principle of good faith.
The Parties’ Obligations in a Construction Contract in Exchange for a Share of the Property
The landowner is required to deliver the land free of defects. Additionally, they must fulfill the transfer of the land on the committed date.
The contractor, within the scope of their duty of care and loyalty, must complete the construction by the agreed date and fulfill their performance obligation. The responsibility for zoning and permit procedures also lies with the contractor. The contractor is also liable for defects. The owner has the right to exercise their claims against defects in the construction contract, just as in a work contract.
Termination in a Construction Contract in Exchange for a Share of the Property
1- Termination is possible by mutual agreement of the parties.
2- If the conditions specified in the contract are not met, for example, if the construction is not completed by the agreed date and there are no force majeure or similar circumstances, the landowner may withdraw from the contract.
3- The contract terminates in the event of bankruptcy or death. However, heirs or representatives may decide to continue the contract.
4- Termination of the contract is possible in cases with legal grounds such as zoning changes or expropriation.
Competent Court
In disputes arising from construction contracts in return for flats (revenue-sharing construction contracts), the civil courts of first instance where the land is located have jurisdiction, and this definition of jurisdiction and competence is definitive.
However, in compensation lawsuits filed solely against the contractor by third parties, it is our opinion that consumer courts should have jurisdiction, provided that all other conditions stipulated in Law No. 6502 on the Protection of Consumers are met.
Penalty Clause Arising from a Construction Contract in Return for Flats
If included in the contract, a penalty clause is established to ensure that either the contractor or the landowner pays a specified amount in certain situations. For example, the contractor who fails to deliver the construction on time or the landowner who unjustly seeks to terminate the contract may be liable to pay the specified penalties. If such a clause is not stated in the contract, no penalty can be claimed. It is also an important rule that neither party must be at fault for the occurrence of the penalized situation.
Relevant Court of Cassation Decisions
1st Civil Chamber, 2021/787 E., 2021/3707 K.
Construction Agreement in Exchange for Land Share
The court ruled in favor of the plaintiff on the grounds that the transfer of the share in the immovable property registered as parcel no. 1, block 6576, from … to … was not in compliance with the provisions of the contract. Accordingly, it ordered the cancellation of the title registered in the name of … and its registration in the name of …. The judgment was appealed by both parties.
Indeed, it is evident from the records and documents obtained that, as a guarantee for the plaintiff’s obligations arising from the contract titled “Construction, Transfer of Responsibility, and Escrow Agreement in Notarized Form” dated 17.04.2009 between the parties, the 80/500 share of the immovable property registered as parcel no. 1, block 6576, in the name of the plaintiff, was transferred to the defendant …, who was appointed as escrow in the said contract, and subsequently transferred by … to the other defendant ….
It should be stated at the outset that, in resolving the dispute, it is essential to first clarify whether the plaintiff, …, fulfilled their obligations under the construction contracts in exchange for land share referred to in the agreement dated 17.04.2009.
However, it cannot be said that the court conducted sufficient research and examination on this matter to support its ruling.
In this context, it is necessary to investigate whether the plaintiff fulfilled the aforementioned obligations—both through any ongoing or concluded lawsuits arising from the agreement dated 17.04.2009 between the parties and through on-site inspections and expert reports. Only after evaluating all the evidence collectively and taking Article 26 of the Code of Civil Procedure No. 6100 into account should a decision be rendered. Issuing a judgment in its current form based on incomplete research is incorrect.
Since the parties’ appeals are found to be justified for the reasons explained, it was unanimously decided on 05/07/2021 to REVERSE the judgment pursuant to Article 428 of the former Code of Civil Procedure No. 1086 (applied via the provisional Article 3 of the Code of Civil Procedure No. 6100), and to refund the advance appeal fee to the appellant.
15th Civil Chamber, 2020/1504 Case Number, 2021/3156 Decision Number.
Construction Contract in Return for Flat Ownership
In the principal lawsuit petition, the plaintiff’s attorney briefly stated the following:
The defendants …, …, …, …, …, …, …, and … were members of the board of directors of the plaintiff cooperative, and the defendant company was the contractor of the construction. …, …, …, and A… were acting as control engineers. Although the cooperative’s construction work could have been contracted at 20% below the public construction unit prices, it was unlawfully awarded to the defendant Miran İnşaat San. Tic. Ltd. Şti. at the public unit prices plus a 5% profit margin. The board members did not submit this decision to the general assembly.
Therefore, the plaintiff requested the collection of the following amounts from the defendants, reserving the right to claim any excess:
- TRY 25,000.00 for the damage suffered,
- TRY 20,000.00 for defective construction, as the concrete used was of BS 14 grade instead of BS 18 as stated in the approved architectural project, the reinforcement iron required in the construction was missing, columns were not placed, additional reinforcements were not added to the beams,
- TRY 20,000.00 for the damage caused to the cooperative by the defendant company subcontracting its contractually assumed obligations to third parties through additional agreements,
- TRY 10,000.00 for breach of contract due to price applications contrary to contract terms,
- TRY 10,000.00 as delay compensation because the construction was not delivered within the contractual period of 48 months.
In total, the plaintiff demanded TRY 100,000.00 from the defendants.
In the consolidated case, the plaintiff cooperative’s attorney briefly stated that the defendant contractor company was in a conflict of interest with the previous managers, and had received 21 checks totaling 1,050,000 TRY, which were the basis for the enforcement files numbered 2006/5100 and 2006/6265 at Bursa 2nd Enforcement Office, bearing the signatures of the previous managers Sinan Kalıpçıoğlu and Kenan Oluklu. However, these checks were not signed by the current managers representing the cooperative. At the dates the checks were issued, the managers of the plaintiff cooperative were …, …, and …. There was no board of directors or general assembly resolution authorizing the issuance of these checks to the defendant company. The defendant, by cooperating with the previous managers, caused harm to the client. The checks were not given in exchange for any due payments. Therefore, the plaintiff cooperative requested a judicial determination that it is not indebted to the defendant company for the amount of 1,050,000 TRY corresponding to the 21 checks subject to enforcement.
In their response briefs, the defendants’ attorneys briefly argued for the dismissal of both the main and the consolidated cases.
Based on the claims, defenses, the adopted expert report, and the entire case file, the court ruled to partially accept the main case, to consider the case filed against the defendants … and … in the main case as not filed pursuant to Article 150/5 of the Code of Civil Procedure (HMK), and to accept the consolidated case. It is understood that the decision was appealed by the plaintiff cooperative in both the main and consolidated cases, the defendant contractor company, Sinan Kalıpçıoğlu, …, and the heirs …, …, …, and …, and that the decision was upheld by our Chamber with its decision numbered 2019/735 Main – 2019/4837 Decision dated November 26, 2019.
Against the decision of our Chamber to uphold the ruling, the defendant contractor company Miran İnşaat San. Tic. Ltd. Şti in the main and consolidated cases, along with the main case defendants Sinan Kalıpçıoğlu, …, and the heirs …, …, …, …, and …, have applied for a correction of the decision.
Pursuant to Article 27 of the Code of Civil Procedure No. 6100 regarding the right to be heard, the parties to the case have the right to be heard in connection with their rights, which also includes being informed about the proceedings. Within this scope, as a rule, in contested litigation where a hearing is mandatory, the judge cannot issue a judgment without hearing the parties or inviting them to present their claims and defenses in accordance with the law, except for the exceptions indicated by the law.
As a requirement of the right to be heard, a judgment cannot be rendered without summoning the parties to the hearing. This is a natural consequence of the principle allowing the exercise of the right to present claims and defenses, as regulated by Article 36 of the Constitution. It is also one of the most important elements of the right to a fair trial set forth in Article 6 of the European Convention on Human Rights. Indeed, as explicitly stated in Article 36 of the Constitution of the Republic of Turkey, which guarantees the right to defense, and Article 27 of the Code of Civil Procedure No. 6100, it is not possible for the court to issue a judgment if the defendant party has not been lawfully summoned to be heard and to present their defense.
As for the specific dispute before us; in the main case, the plaintiff’s attorney stated in the petition that the defendant …’s address was given as “İnönü Street, Kardeşler Business Center, Floor: 1 No: 1 Bursa.” After the lawsuit petition sent to this address was returned undelivered, the plaintiff’s attorney submitted a petition on 13.04.2007 indicating the defendant …’s address as “Dikkaldırım Street, Düzgün Apartment No: 92 Osmangazi.” The lawsuit petition sent to this address was duly served. However, the expert report dated 16.06.2016 was not served to this address, but rather to the address originally stated in the lawsuit petition and to which the lawsuit petition was returned undelivered. After the expert report was returned undelivered, it was then served to the said address in accordance with Article 35 of the Notification Law. It is understood that the expert report dated 25.09.2017, the reasoned decision, the appeal petition, and our Court’s approval decision were also served to the defendant at the address mistakenly given in the lawsuit petition and to which no notification could be made, pursuant to Article 35 of the Notification Law.
Similarly, in the main case, the plaintiff’s attorney stated in the petition that the defendant …’s address was “Yıldırım Neighborhood, Karadavut Street No: 46, Apt: 13 Bursa.” After the lawsuit petition sent to this address was returned undelivered, the plaintiff’s attorney submitted a petition on 13.04.2007 indicating the defendant …’s address as “Yalova Road, Buttim Business Center, Floor: 5, No: 1402 Osmangazi/Bursa.” The lawsuit petition sent to this address was duly served. However, the expert report dated 16.06.2016 was mistakenly served to the address originally stated in the lawsuit petition, which had been returned undelivered. After the expert report was returned undelivered, it was then served to the said address in accordance with Article 35 of the Notification Law. It is understood that the expert report dated 25.09.2017, the reasoned decision, the appeal petition, and our Court’s approval decision were also served by the court to the same address pursuant to Article 35.
However, notifications should have been sent to the addresses of the defendants … and … as indicated in the plaintiff’s attorney’s petition dated 13.04.2017, to which the lawsuit petition was properly served. Instead, the expert reports, reasoned decision, appeal petition, and our Court’s approval decision were served according to Article 35 of the Notification Law to the addresses shown in the lawsuit petition for the defendants, where proper notification was not made. Conducting the trial in the absence of the defendants and violating their right to be heard was incorrect. Since the court decision should have been overturned for this reason but was erroneously upheld, this has now been understood upon review. Therefore, the defendants’ requests for correction of the decision have been deemed appropriate.
RESULT: For the reasons stated above, the requests for correction of the decision by the defendants … and … are accepted, the approval decision of our Court numbered 2019/735 Main – 2019/4837 Decision and dated 26.11.2019 is annulled, and the local court decision is REVERSED in favor of the defendants … and ….
Views: 0
