1. The Systematic Structure and Representation Strategies of Urban Transformation Law
Urban transformation processes in Turkey are established upon a highly complex legal foundation situated at the intersection of real estate law, the law of obligations, and administrative law, executed within the framework of the Law on Transformation of Areas Under Disaster Risk No. 6306 and its relevant implementing regulations.
The involvement of real estate owners of foreign nationality as parties to this process elevates the subject matter beyond a standard contractor-owner relationship; it necessitates the integration of international representation authority, consular legislation, cross-border payment structures, and specific administrative procedures pertaining to foreigners’ law. The Construction Agreement in Return for Land Share, which constitutes the main backbone of urban transformation, is a synallagmatic agreement of a mixed nature by virtue of its legal character, embodying elements of both the contract for work as regulated in the Turkish Code of Obligations (TCO) and the promise to sell real estate as regulated in the Turkish Civil Code (TCC).
Within the scope of our legal consultancy services to be provided for foreign investors entering the urban transformation process, this study provides an in-depth analysis of negotiations with contractors, relations with other co-owners, critical contractual clauses, administrative procedures before municipalities, and the procedural stages where the owner must be actively involved, in light of past precedents and current 2026 legislation.
A. Representation of Foreign Owners and Management of Power of Attorney Crises
The first step of legal security in urban transformation processes is the flawless establishment of powers of attorney that will represent the investor before official authorities and the contractor.
In practice, in order to expedite the construction process in their own favor, contractors demand powers of attorney from landowners equipped with highly broad authorities that directly interfere with property rights, such as property transfer, establishment of mortgages, and authority to sell to third parties. The direct transfer of these authorities, the legal consequences of which they cannot fully foresee, to the contractor by foreign investors may give rise to irreparable damages. In order to eliminate this risk, it is essential to implement a dual power of attorney strategy in light of past experiences.
The first power of attorney must be granted directly to the attorneys-at-law and contain broad authorities such as the full protection of rights over the real estate, the execution of agreements, applications for official grants, and when necessary, the restriction of the contractor’s authorities or their dismissal.
The second power of attorney, on the other hand, should be prepared to be granted to the contractor; however, this document must be strictly limited to technical authorities that solely provide for the administrative follow-up of the construction, such as obtaining construction permits, approving architectural projects, site chief appointments, and Social Security Institution (SGK) workplace declarations, and sales and transfer authorities must be meticulously excluded from the text.
Bureaucratic obstacles are encountered during the stage where foreign investors issue powers of attorney outside of Turkey. Turkish law regulates that agreements regarding real estate rights in rem and the powers of attorney constituting the basis of these agreements must be executed in the form of a deed issued ex officio (düzenleme şeklinde) in the presence of a notary public.
When owners apply to Turkish diplomatic missions in their own countries, if a sworn Turkish translator is not available within the consulate, the transactions are rejected and delays lasting for months are experienced.
Even though apostilled powers of attorney obtained from foreign notary publics for litigation processes are accepted by Turkish courts, the special system of Land Registry Directorates comes into play in real estate transactions that form the basis of urban transformation. Pursuant to this system, land registry directorates only accept powers of attorney issued before Turkish notary publics or Turkish diplomatic missions. As Nexpo Legal, we personally coordinate the entire organization so that investors do not lose time in consular bureaucracy and can seamlessly issue the correct power of attorney that will be valid in title deed transactions at once.
B. Passport Equivalency and Foreign Identity Integration
Another crisis that foreign owners may encounter with administrative authorities during the urban transformation process is the mismatch between the identity/passport information used at the time of property acquisition and the current passport information. In cases of passport renewals, surname changes due to marriage, or dual citizenship status, inconsistencies may arise between the names and document numbers in the land registry records and the current identities.
This inconsistency may pose significant complications in applications for state-subsidized urban transformation grants (such as the “Half on Us” / “Yarısı Bizden” campaign) and in licensing procedures before the municipality.
The absence of a valid residence in Turkey or a Foreign Identity Number for foreign investors may create bureaucratic hurdles that are difficult to overcome in conducting administrative procedures within the urban transformation process and in applying for advantageous state grants. However, in such specific deadlocks, by going beyond standard procedures, we step in with the alternative legal and administrative solutions that we offer to our clients in accordance with our extensive experience in this field. Thanks to these specialized integration methods of ours that expedite bureaucratic processes, we seamlessly eliminate the obstacles hindering your investments.
2. Relations with Other Co-owners and the Absolute Majority Rule
One of the greatest obstacles hindering the agreement process with the contractor in urban transformation projects is the disputes among the other co-owners in the building. As of the year 2026, the radical amendments enacted in the Implementing Regulation of the Law No. 6306 have significantly diminished the power of minority owners to deadlock the process.
Decision-making quorums, which required unanimity or a two-thirds majority in previous years, can now be adopted with an absolute majority regarding matters such as the demolition of risky structures, the unification (tevhid) of parcels, subdivision (ifraz), selection of the contractor, and approval of the construction agreement in return for land share. Pursuant to the new legal regulations, the decision adopted by the absolute majority of the owned land shares is served upon the other stakeholders who did not participate in or opposed the decision through a notary public, and a statutory period is granted to them to execute the agreement.
In the urban transformation legislation in Turkey, the absolute majority rule is applied in order to ensure that projects progress rapidly without facing deadlocks. According to this current legal regulation, the consent of all co-owners is no longer sought for fundamental decisions such as the demolition, reconstruction, or design of the building; the decision of those holding more than half of the land shares is deemed sufficient.
However, this practical system bears a critical risk for investors who are not integrated into the process: the land shares of minority owners who do not comply with the majority decision may be put up for auction under the coordination of the administration and sold to other stakeholders or public institutions. At this juncture, it is of paramount importance to proactively prevent such risks of loss of property that may develop outside the will of foreign investors; we recommend that your investments be secured by a professional team by being legally represented in decision-making processes (general assemblies of co-owners).
The land shares of owners who fail to comply with the majority decision within the statutory period without a justified excuse may be sold through an Auction Method under the coordination of the administration or the Ministry of Environment, Urbanization and Climate Change, primarily to other agreeing stakeholders, and if an agreement cannot be reached, to third parties or the Housing Development Administration of Turkey (TOKİ). To ensure that foreign owners are not exposed to this auction risk or exploited by the majority, participating in the building’s general assemblies of co-owners directly through their legal representatives and intervening in the adopted absolute majority decisions in a timely manner will provide a strategic advantage.
As a matter of fact, when construction actively commences, the formation of a “Board of Representatives” (Construction Committee) by the co-owners and their authorization in matters such as architectural choices and the supervision of construction is the most practical method that resolves communication chaos in multi-ownership structures. Integrating the investor into such boards upon their request or representing them within these boards are among the legal steps that must be taken to ensure the transparent and seamless execution of the construction.
3. Preliminary Negotiations with the Contractor, Management of Technical Crises, and Municipal Procedures
The period prior to the execution of the Construction Agreement in Return for Land Share constitutes a stage wherein technical obstacles and uncertainties generated by municipal administrative procedures are negotiated, and where contractors act with haste due to inflationary pressures.
A. Zoning Status, Height-Cross Section (Kot Kesit), TEİAŞ, and Project (DWG) Crises
In order for the agreement with the contractor to reach its final form in urban transformation, the architectural Preliminary Project (Avan Proje) or the Final Project must be drafted in accordance with the zoning status of the land. However, applications before municipalities regarding “Zoning Status” (İmar Durumu), “Construction Alignment Survey” (İnşaat İstikamet Rölövesi) (the coordinate document demonstrating how the structure will be positioned on the land), and other relevant submissions may be hindered by encumbrances of institutions and organizations upon the land or by technical transit lines.
For instance, in the event that a TEİAŞ (Turkish Electricity Transmission Corporation) high-voltage line passes under or over the land, the municipal zoning department cannot determine the setback distances and boundaries of the area without obtaining a favorable opinion from TEİAŞ. Unless the boundaries are determined, the statutory square meters cannot become definitive; unless the square meters become definitive, Autocad (DWG)-based floor plans cannot be drafted, and consequently, it remains ambiguous as to which independent section the investor owner will receive.
In this environment of uncertainty, contractors may impose the execution of the agreement without appending the project to it in order to prevent loss of time. Against the pressure of contractors, it is of vital importance to incorporate specific protective provisions into the agreement that guarantee property rights and the value of the independent section. By eliminating such risks that may be caused by technical uncertainties during the agreement negotiations stage, the investment can be secured by ensuring that not even a single signature is affixed before the details of the project become clear.
Another cost regarding municipal procedures relates to parking space regulations. If parking allocation cannot be established on the ground floors due to the mandatory shelter regulation in new buildings, a Parking Fee (Otopark Bedeli) is calculated based on the gross square meters of the independent sections pursuant to the Zoning Regulation of the municipality, and it is stipulated that this fee must be deposited with the municipality prior to the issuance of the construction permit. Such mandatory costs encountered in municipal processes are elements that directly affect the total investment budget of the project. Contractor firms are generally inclined to leave such uncertain costs upon the owner at the agreement stage.
As Nexpo Legal, we audit all cost items of the construction, payment responsibilities, and obligations before the municipality down to the finest detail during our agreement negotiations. We establish all necessary legal barriers to prevent payment obligations from turning into a debt burden against the investor, and we ensure that the financial processes are conducted with a transparent planning that is in your favor.
B. Eviction and the Timing of Key Delivery
Another matter upon which contractors exert pressure is the evacuation of existing structures as soon as possible to make them ready for demolition in order to stabilize construction costs.
The evacuation of the real estate before the signatures are finalized leaves the investor in an uncontracted and unsecured position. Once the contractual security is established, coordination is provided through real estate management firms for the eviction of the personal belongings of foreign investors, and the keys are delivered to the contractor against a written minutes-record (tutanak) for administrative procedures (disconnection of electricity/water/natural gas, verification that the building is vacant, and other relevant procedures). Subsequent to this, demolition and other relevant procedures may commence.
Accordingly, the delivery of the keys to the contractor against a written minutes-record is executed for administrative procedures (disconnection of electricity/water/natural gas, verification that the building is vacant, and other relevant procedures). Particularly for investors who reside abroad and face difficulties in the physical follow-up of the process, we personally manage the entirety of the eviction of the real estate and administrative coordination processes together with our internal operational support team.
By ensuring the security of the real estate and the complete execution of all legal preparations prior to demolition even while the investor is away, we guarantee a seamless transition to the next phase of the project without causing any stress.
4. Legal Architecture of the Construction Agreement in Return for Land Share: Critical Clauses and Liquidation of Risks
It is an imperative rule that the agreement to be prepared must be executed in the form of a deed issued ex officio (düzenleme şeklinde) in the presence of a notary public in order to be valid. Ordinary written agreements or texts executed solely with signature certification are absolutely null and void, and do not grant the parties the right to demand performance. The boilerplate agreement drafts presented by contractors are generally filled with asymmetrical provisions that leave landowners in a vulnerable position. In negotiations to be conducted in favor of the investor owner, we pay utmost attention to the following critical clauses.
A. Unilateral Penal Clauses and Termination Without Notice Provisions
Contractor agreements frequently contain unfair terms granting the contractor the right to terminate without notice and the authority to sell the investor’s share to third parties in the event that the landowner delays the performance of their obligation (such as eviction, granting a power of attorney, or the determined payment plan).
It is of vital importance that such asymmetrical and unfair termination clauses are identified by an experienced attorney during the signature stage and replaced with equitable provisions in favor of the investor. As Nexpo Legal, we meticulously integrate phased and protective legal mechanisms into the agreement.
B. Delay Compensation and Inflation Adjustment
The failure to complete the construction on time ranks among the most frequent grievances encountered in urban transformation processes. Especially under inflationary market conditions, fixed and symbolic penal clauses added to the agreement years prior lose their deterrence in a short span of time; this, in turn, incentives the contractor to delay the project.
Accordingly, during agreement negotiations, specific protection mechanisms can be implemented that automatically update the damages to which investors may be exposed in the event of a delay according to current market realities, thereby directly motivating the contractor regarding timely delivery.
C. Defective Performance, Incomplete Works, and Inspection Periods
Pursuant to the TCO, upon the delivery of the construction, the owner is under the obligation to inspect the apartment within a reasonable period and to notify the contractor of any incomplete and defective (faulty) works. Contractor firms, due to their own self-interests, insert very short inspection periods such as 15 days into agreements. However, taking into consideration the arrival periods of owners residing abroad to Turkey and the processes of obtaining technical expert reports, this period must be equitably revised in the agreement, and it must be emphasized that statutory periods shall apply for latent defects that surface over time depending on usage. In the event that this notification is not served, the investor shall be deemed to have accepted the apartment with its defects.
D. Technical Specifications: Material and Manufacturing Standards
The technical specifications annexed to the agreement determine whether the contractor will carry out a luxury or a mediocre manufacturing. Vague expressions such as “luxury materials shall be utilized” or “first-class manufacturing shall be executed” are legally ambiguous and will pave the way for objections. All materials must be clearly listed down to every item, including their brand, model, and dimensions.
E. Legal Guarantees: Mortgages and Building Completion Insurance
It is mandatory to secure the landowner investor against the risk of the contractor leaving the construction incomplete, filing for bankruptcy, or performing a manufacturing non-compliant with the standards. The most common method for this is the establishment of a Construction Guarantee Mortgage (İnşaat Teminat İpoteği) in the land registry upon the land shares to be transferred to the contractor.
In construction agreements in return for land share, the guarantee mortgage is generally structured in two ways:
- The land share to be granted to the contractor is transferred at the very beginning of the work, and the contractor commences construction activities subsequent to the transfer of the land share allocated to its part.
- The contractor commences manufacturing without the land share being transferred to it, and gains the right to take over the land shares in proportion to the progress payments (hakediş) determined by the agreement based on the manufacturing ratio. As the construction physically progresses (e.g., sub-basement level 20%, rough construction 40%, fine workmanship 70%, occupancy permit [iskan] 100%), the mortgages corresponding to the earned stages can be released progressively.
Furthermore, within the scope of new urban transformation practices in 2024 and thereafter, in projects conducted within risky areas, reserve building areas, and parcels where risky structures are located under the framework of the Law No. 6306, it has been rendered mandatory for the contractor to take out a Building Completion Insurance compliant with the conditions of the Ministry of Treasury and Finance or to present an equivalent guarantee prior to obtaining the construction permit.
This insurance guarantees that in the event the contractor fails to fulfill its obligation, the insurance company shall complete the project, thereby saving the owners from grievance. It is essential that this provision is explicitly stated within the text of the agreement and that it is written that the premiums belong entirely to the contractor.
5. Financing, Payment Plans, and State Supports: “Half on Us” and Rental Assistance
The financial feasibility of the project in urban transformation encompasses the payment balance between the contractor and the owners, alongside the grant/loan supports provided by the state. It is possible for foreign owners to benefit from these opportunities; however, this is subject to certain bureaucratic conditions.
A. The “Half on Us” Campaign (Current 2025-2026 Legislation)
The “Half on Us” (Yarısı Bizden) Campaign, which the Ministry of Environment, Urbanization and Climate Change has rendered effective until the end of the year 2026, constitutes a historic model in urban transformation financing. The campaign provides a tremendous convenience, particularly for risky structures in Istanbul.
Co-owners of foreign nationality may also benefit from this state support in Turkey by submitting the Tax Identification Number and valid identity information, which we have previously touched upon. An important legal detail is that the state deposits these payments not into the owner’s personal account, but progressively (by virtue of the progress payment method we previously explained) into a blocked progress payment account opened at Emlak Katılım or Ziraat Bank on behalf of the contractor company (contractor) in order to guarantee the advancement of construction.
B. Urban Transformation Rental Assistance
In the event that the owners do not apply for the grant and loan or fail to satisfy the conditions, the alternative state support is the “Rental Assistance.” Pursuant to the law, both the grant/loan and the monthly rental assistance cannot be obtained simultaneously.
Foreign owners bear the burden of proof to receive this assistance. It is compulsory that the application for rental assistance be submitted within 1 year at the latest from the eviction date of the risky structure, and that the applicant proves that they factually resided at the subject address within the last 3 months prior to eviction by way of an electricity, water, or natural gas utility bill registered under their own name and an Address-Based Population Registration Extract obtained from the Civil Registry Directorate. If the investor does not reside in the real estate and merely keeps it vacant for investment purposes, they shall not be entitled to receive rental assistance by operation of law.
C. Special Payment Plans and Progress Payment Index
In financial processes that fall outside the scope of state supports or are shaped in accordance with the specific preferences of our investors, the payment balance established with the contractor holds critical importance for the security of the project. At this stage, for the purpose of minimizing financial risks and ensuring that payments progress in parallel with the actual performance of the project, the performance-based progress payment system recommended by us may be adopted as a basis.
6. Critical Phases Requiring the Physical and Legal Involvement of the Owner
Although construction agreement in return for land share processes are predominantly conducted technically and administratively through attorneys-at-law and contractors, there are specific circumstances where the direct action of foreign investors is legally or operationally mandatory.
- Granting Representation Authority (Powers of Attorney): Pursuant to land registry legislation, powers of attorney issued by foreign notary publics are not valid in urban transformation, and consular procedures may consume a significant amount of time. The most prudent method is for the investor to travel to Turkey at the very inception of the process and personally issue a power of attorney in the presence of a sworn translator. As Nexpo Legal, we coordinate the prior preparation of the legal infrastructure during investors’ visits to Turkey, ensuring that they complete power of attorney procedures in the swiftest and most seamless manner.
- Submission of Identity and Biometric Data: The provision of name equivalency documents, sworn translations of passports, and biometric photographs must be personally supplied by the investor.
- Obtaining a Tax Number: A Potential Tax Identification Number, which is necessary for the “Half on Us” campaign or other payments, must be obtained.
- Approval of Architecture: Subsequent to overcoming the zoning status and TEİAŞ obstacles obtained from the municipality, the final architectural projects prepared by the contractor are submitted for the digital or physical approval of the investor with respect to clarifications such as the apartment’s façade, floor plan, and square meters.
- Eviction and Property Organization: Following the execution of the agreement, the eviction of the personal belongings within the apartment and the delivery of the keys through real estate management companies are required.
- Performance of Financial Commitments: The accrual of municipal parking fees, down payments upon the execution of the agreement, and progress payments that fall due as construction advances are mandatory payments to be personally executed by the investor.
- Inspection and Acceptance: At the completion of the construction, on the day the independent section’s keys are taken over (or within the statutory period), the determination of patent defects and the use of materials non-compliant with standards within the apartment must be personally performed by the owner or a technical engineer/architect to be appointed by them.
7. Supervision of Construction, Dispute Resolution, and Termination of the Agreement
The management of technical and legal circumstances that may arise after the construction process has commenced constitutes the final act of the procedure. If the contractor fails to complete the work committed to under the agreement on time, the phenomenon of Default of the Contractor occurs. At this juncture, the legal steps that can be taken by landowners and their consequences are as follows:
A. Specific Performance, Delay Compensation, and Completion of Incomplete Works
If the construction is substantially completed but certain independent sections are left incomplete or have not been delivered on time; the landowner investor is entitled, pursuant to the TCO, to demand specific performance (completion of the work) from the contractor, while simultaneously collecting the delay compensations or penal clauses determined in the agreement regarding the elapsed time.
B. Termination Scenarios (TCO and Law No. 6306 Art. 6/14)
In the event that the agreement cannot be terminated by mutual consent of the parties, it is mandatory to file a lawsuit for termination by a court decree. Here, the physical completion ratio achieved by the construction constitutes a decisive criterion.
However, against the risk of judicial processes consuming years, the mechanism of Administrative Termination has been introduced pursuant to Article 6, Paragraph 14 of the Law No. 6306.
Accordingly; if the construction has not commenced despite the lapse of 1 year from the execution of the agreement with the contractor within the urban transformation area, or if the construction has been halted for a period exceeding 6 months, the agreements may be terminated ex officio (through administrative channels) upon the application of the owners to the Directorate of Urban Transformation of the Ministry of Environment, Urbanization and Climate Change by adopting an absolute majority decision.
This authority grants the owners the flexibility to transfer the project to a new contractor by liberating them from lengthy court corridors.
Best Regards,
Nexpo Legal
