Article 29 of the Turkish Code of Obligations (TCO) states:
“Contracts concerning the conclusion of a contract in the future are valid.
Except for the exceptions stipulated in the laws, the validity of a preliminary contract depends on the form of the contract to be concluded in the future.”
According to our legislation, it is possible to enter into an agreement concerning a contract that will be concluded in the future, even before the actual contract date. Since a preliminary sales agreement (promise to sell) is not among the exceptions specified by law, there is no legal obstacle to its formation.
The formal requirements applicable at the time the preliminary agreement is made are subject to the formal requirements of the main (final) contract.
Preliminary Contract of Sale for Immovable Property
This contract is a consensual agreement that imposes obligations on both parties. The seller undertakes to sell the immovable property on the specified date, while the buyer undertakes to purchase the property on the same date.
According to Article 237 of the Turkish Code of Obligations, for the sale of immovable property to be valid, the contract must be executed in an official form. Contracts of promise to sell, repurchase, and purchase of immovable property are not valid unless they are executed in an official form. As explicitly stated in the law, a promise to sell immovable property is only valid if made officially before a notary.
For the contract to be valid, if the contract text does not include the address of the immovable property and the agreed price, this contract will not be legally binding.
In case the contract is invalid, the promisee (the party entitled to the promise) may claim the amount paid based on the rules of unjust enrichment.
“…As a general rule, the termination and settlement of a contract with immediate performance can be retroactive. In retroactive termination, the parties to the contract can reclaim what they have given based on the rules of unjust enrichment. In practice, after a construction contract in exchange for land share is made, before the contractor fulfills their obligations, the landowner registers the land or building easement deeds, or part of them, in the contractor’s name, and the contractor sells the transferred independent units or land shares to third parties to meet financial needs. It is a reality that the contract is retroactively terminated because the contractor did not fulfill their obligations after the sale of the land shares or independent units…” (Supreme Court 23rd Civil Chamber; Decision dated 10.12.2019, E.2017/2892, K.2019/5214)
The promise to sell immovable property contract is one of the main contracts constituting the construction contract in exchange for a share of the building. The construction contract in exchange for a share arises from the combination of the elements of the work contract and the promise to sell immovable property contract as a whole, and its litigation is conducted according to these contracts.
The Case of Multiple Promise of Sale Contracts Made for the Same Immovable Property
In practice, in this frequently encountered issue, the promise of sale contract with the earliest date will be considered valid.
Penalty Clause in the Promise of Sale Agreement for Immovable Property
First of all, in order to talk about the existence of a penalty clause, there must be a valid contract. If the contract is not valid, as stated above, the parties only have the right to reclaim what they have given based on the rules of unjust enrichment. If the contract is valid, it is possible to demand the fulfillment of the penalty clause stipulated in the contract.
Registration of the Real Estate Sales Promise Agreement as a Notice on the Title Deed
Article 1009 of the Turkish Code of Obligations (TCO) mentions that a promise of real estate sale agreement can be registered as a notice (annotation) on the title deed. Although such annotation does not convert a personal right into a real right by its legal nature, it strengthens the right by making it enforceable against third parties. Article 1009/2 of the Turkish Civil Code (TCC) states: ‘By being registered as a notice, these can be asserted against the owners of rights acquired later on the immovable.’ Accordingly, if a promise of sale agreement is registered as a notice on the title deed, in case the promisor sells the immovable to another person, the holder of the preliminary contract with the annotation can claim this immovable.
According to Article 26, paragraph 9 of the Title Deed Law No. 2644, ‘If the sale is not made or an easement right is not established and registered within five years from the annotation, this annotation shall be automatically removed ex officio by the title deed registry director or the title deed registry officers.’ If the immovable is not transferred on the title deed within 5 years from the annotation, the effect of the annotation ceases.
Termination of the Promise of Sale Agreement for Real Estate
The contract is considered terminated under the following conditions:
Termination of the contract.
Performance of the contract,
Statute of limitations on the performance specified in the contract,
If both parties fulfill their obligations and meet the requirements of the contract, the sales promise contract, like all contracts, is considered terminated. In cases where the performance becomes time-barred or the contract is mutually terminated, the contract will naturally be deemed ended as well. The mentioned statute of limitations period is 10 years. This period begins to run as soon as the performance becomes possible.
Based on the real estate sales promise contract, if the promisor fails to fulfill the obligation, the promisee may have the right to secure registration through a lawsuit for cancellation and registration of the title deed.
The Case of Entering into a Sales Promise Contract for Real Estate Owned by Another Person
The party promising the sale may also make a commitment for real estate that does not belong to them. In the contract, the person giving the sales promise undertakes to make the sale in the future, and it is not necessary for them to own the property at the time of the commitment. Since the transfer at the land registry (the actual sales contract) is promised to be made on the date specified in the sales promise contract, the contract is legally considered a commitment transaction. In other words, even if the party promising to sell the property does not own it at the time the contract is concluded, they undertake to transfer the property to the promisee in the future.
Relevant Supreme Court Decisions
3rd Civil Chamber, Case No. 2007/16943, Decision No. 2007/15498
“There is no sales promise agreement between the plaintiff and the deceased of the defendants. The deceased of the defendant, İzzet, promised the sale of the property to Muhsin, who is outside the case, and Muhsin in turn promised to sell the property to the plaintiff.
The lawsuit was filed against the heir of İzzet, the owner, due to the transfer of the property to a third party in the land registry.
The court decided to accept the case on the grounds that the sales promise agreement on which the plaintiff relied constituted an assignment of claim, and therefore the plaintiff had a right to claim the price of the property.
The assignment under the sales promise agreement is the right to demand the transfer of ownership of the property. The sales promise agreement does not contain a provision stating that in case of breach of contract, rights related to the price of the property or compensation are also assigned; the assignment of claim involves the transfer of a specific, determined right. The assignment of claim (Articles 162-172 of the Turkish Code of Obligations) does not allow for the transfer of the debt relationship.
The plaintiff may assert their right arising from the sales promise agreement against the contract. Since there is no sales promise agreement between the plaintiff and the defendant, and since no assignment of claim for compensation of the property price has occurred, the case should have been dismissed, and therefore the acceptance of the case for the reasons stated in writing was not correct.
Accordingly, without considering the principles explained above, the judgment made in writing is incorrect; the appeals are justified for these reasons and accepted, and the judgment is overturned pursuant to Article 428 of the Code of Civil Procedure.”
14th Civil Chamber, Case No: 2012/13623, Decision No: 2012/14616
The plaintiff, based on the sales promise agreement dated 24.10.1997, stated that the defendants promised the sale of the shares inherited from their deceased … in the immovable property registered as parcel number 226, which is the subject of the case, and requested the cancellation of the … registration and its registration in their name, as well as the removal of the annotation on the registration of … regarding the sales promise agreement dated 27.04.2004 between the defendant Süleyman Sırrı Mutlu’s heirs and the other defendant ….
The defendants argued that the obligation under the sales promise agreement had been fulfilled and requested the dismissal of the case.
The court ruled to dismiss the case on the grounds that there was no possibility for performance of the sales promise agreement.
The plaintiff’s attorney appealed the decision.
According to the sales promise agreement dated 24.10.1997, which forms the basis of the plaintiff’s claim, the defendants … heirs promised to sell to the plaintiff the shares “transferred or to be transferred to them from their deceased … in the immovable property registered as parcel number 226 in … Village.”
In the sales promise agreement, the defendants … heirs only promised to sell to the plaintiff the shares inherited or to be inherited from their deceased …, and did not promise the sale of the shares inherited from the deceased … or any previous predecessors.
It is understood from the registration dated 08.05.2003 that the debtor defendants transferred their 60/720 share inherited from their deceased … in parcel number 226 to the plaintiff’s spouse ….
The 60/720 share inherited from the previous deceased … to the heirs of the defendants … is not subject to the sales promise agreement.
In this case, since the sale of the shares inherited by the defendants from the deceased … was not promised to the plaintiff under the sales promise agreement, the case should have been dismissed. Although the dismissal based on the non-performance possibility of the sales promise agreement is not correct, since the judgment ultimately ruled to dismiss the case, the reasoning of the decision should be corrected and the judgment affirmed.
RESULT: In accordance with the last article of Article 438 of the Civil Procedure Code (HUMK), the reasoning of the appealed decision is changed as explained above, all the plaintiff’s appeals are rejected, the reasoning of the judgment is MODIFIED and CORRECTED, and the judgment is AFFIRMED in this form.
14th Civil Chamber, Case No. 2015/5382, Decision No. 2017/7473
The case concerns a request for annulment and registration of title based on a promise to sell agreement.
The plaintiff’s attorney stated that according to the promise to sell agreement dated 06.06.1997 made at the notary between the defendants and the non-party …, the defendants promised to sell all their rights and shares in parcel number 386 to …; that … in turn committed to sell these shares to the plaintiff in the promise to sell agreement dated 26.09.2008 also made at the notary; that the sale price was paid in full and in cash; and that the plaintiff has taken possession and started using the portion corresponding to the disputed shares. Accordingly, the plaintiff requested the annulment of the shares registered in the defendants’ name and the registration of the shares in the plaintiff’s name.
The defendants raised a statute of limitations defense; argued that they temporarily transferred their shares in the disputed property to … in return for a loan they received from him, under a promise to sell agreement; claimed that the plaintiff was not acting in good faith; and requested the dismissal of the case.
The court ruled in favor of the plaintiff.
The defendants’ attorney appealed the judgment.
Real estate sales promise contracts, which derive their basis from Article 29 of the Turkish Code of Obligations, are a type of contract that, according to Article 237 of the Turkish Code of Obligations, Articles 706 of the Turkish Civil Code, and Article 89 of the Notary Law, must be drawn up ex officio before a notary. In other words, their validity is conditional upon official form requirements. These contracts impose obligations on both parties and grant personal rights. When the promisor, who is obligated to transfer ownership under the real estate sales promise contract, fails to fulfill the performance, the promisee may request the judicial enforcement of the obligation by filing a lawsuit for annulment and registration of title at the Land Registry, pursuant to Article 716 of the Turkish Civil Code.
Since no special statute of limitations period is prescribed for lawsuits arising from real estate sales promise contracts, the ten-year limitation period provided by Article 146 of the Code of Obligations applies, and this period begins to run from the moment the contract becomes performable. However, if the promised real estate has been delivered either contractually or actually to the promisee who accepted the promise of sale, then a statute of limitations defense raised in lawsuits filed after the ten-year limitation period will not be entertained as it would conflict with the “principle of good faith” set forth in Article 2 of the Turkish Civil Code.
In the present case, the defendants raised a statute of limitations objection in their response petitions; the defendants’ attorney also appealed the judgment by arguing that the case is time-barred since their clients did not take delivery of the real estate in question, and that the promise to sell contract was made with the plaintiff after the ten-year period had elapsed.
In this situation, the court should have examined and investigated the matter by considering the defendants’ statute of limitations objection in accordance with the principles explained above and then rendered a decision based on the outcome. However, ignoring this issue and issuing a judgment with insufficient examination and investigation was improper, and therefore, the judgment must be overturned.
RESULT: For the reasons explained above, the defendants’ attorney’s appeal objections are accepted, and the judgment is REVERSED.
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