What is the Land Owner’s Liability to the Contractor in case the Land Owner Does Not Deliver His Land in a Condition Convenient for Construction?

Construction agreements in return for flat, which are not separately regulated in Turkish Law, are mixed contracts in which a contract of work and a real estate promise to sell agreement are intertwined. Construction agreements in return for flat incorporate the provisions of a contract for work for the contractor who will construct the building and the provisions of a real estate promise to sell agreement for the land owner who will transfer one of the detached sections in the building to be constructed.

Under construction agreements in return for flat, the obligations of the contractor and the land owner are of importance since the rights of third parties that purchase a detached section particularly when the building is just in the construction phase are affected by these agreements and since these agreements have a large field of application.

In construction agreements in return for land share, the contractor’s responsibility is to complete the construction of the building within the period of time committed and in compliance with the agreement and then, to hand over the building to the land owner. However, in order for the contractor to start the construction, the land owner should deliver his land in a condition convenient for the construction. What is meant by delivery in a condition convenient for construction can be to ensure the supply of the documents necessary for the construction to start in compliance with the legislation, and to demolish the structures, if any, existing on the land or to accomplish the procedures for amalgamation between or among the parcels if such amalgamation is necessary. The problem encountered frequently in practice is a delay on the part of the owner in obtaining the permit necessary for the construction. In such case, the period committed by the contractor for the completion of the construction shall not start to run. In case the agreement does not contain a provision clarifying the party that shall file the application for the permit, the principle is that the permit application shall be filed by the land owner.  

In the decision numbered E. 2004/7443, K. 2005/6761 and dated 12.12.2005 rendered by the 15th Civil Chamber of the Supreme Court of Appeals, the following verdict is established:

“…In principle, in the case that the agreement does not contain a provision to the contrary and that a procuration is not conferred in the name of the contractor for these works, it is the responsibility of the land owner (client) to have the plans and projects drawn and to obtain the construction permit. In case a construction, which is subject to permit, has been carried out without the permit, the contractor who has constructed the building unlawfully and without the permit is at fault and besides, the land owners who have not fulfilled their obligation to obtain the permit are also at fault. The local court has not carried out an investigation on whether or not the subject matter construction is subject to permit and on whether or not the permit has been obtained....”

Thus, the Supreme Court of Appeals specifies that the documents, e.g. plan, project, permit, necessary for the construction to start, shall be incumbent on the land owner, unless otherwise agreed.

The land owner has to make the land convenient for construction within the period determined in the agreement, or within a reasonable period depending on the concrete case if such period is not determined in the agreement. Otherwise, the land owner shall be deemed to have lapsed into default towards the contractor. Since the contract for work-related provisions of the Turkish Obligations Code do not contain a special provision in respect of the land owner’s (the client’s) default, the default-related general provisions of the Turkish Obligations Code shall apply to the default on the part of the land owner.  

As per the article 125 of the Law numbered 6098:

“If the defaulting obligor has not performed his obligation within the period granted or if there is a circumstance that does not require the grant of such period, the obligee always has the right to request for performance of the obligation and claim damages due to the delay.       

The obligee, upon forthwith notifying that he has waived of his right to request for performance of the obligation and claim damages for delay, may request for compensation of his damages arising from the non-performance of the obligation or rescind the agreement. 

In case of rescinding the contract, the parties shall mutually be relieved of their obligations to perform and may reclaim the obligations they have previously performed. In such case, if the obligor fails to prove that he is not at fault in lapsing into default, the obligee may also claim compensation for the damages suffered by the obligee due to invalidation of the contract.”

Pursuant to the article 125/3 above, the contractor may rescind the agreement and claim his negative damages against the land owner who has not initiated the permit procedures yet.  Negative damage is the actual loss suffered by reason of the fact that the trust in the fulfillment of the contract by the other party came to naught. In other words, it is the difference between the contractor’s current assets and his assets that would have existed if the contractor had not entered into the agreement at all.

In conclusion, if the land owner does not deliver his land in a condition convenient for construction, the contractor may request the land owner to make the land convenient for the construction and claim against the land owner the damages suffered by the contractor due to the delay, or desist from his request that the land be made convenient for the construction and claim against the land owner the positive damages suffered by the contractor, or rescind the agreement and claim against the land owner the decrease occurred in the contractor’s assets.