1.) What Are the Conditions for the Administrative Termination of a Construction Contract?

The relevant regulation was published in the Official Gazette on 10 July 2019 and entered into force on the same date.

Pursuant to Paragraph 14 of Law No. 6306, a construction contract may be terminated upon application to the Presidency, or to the relevant administrations where such authority has been delegated. (In Istanbul, the authority to terminate such contracts has been delegated to the relevant district municipalities.)

The following conditions must be met for the administrative termination of a construction contract:

• There must be a property in respect of which unanimity among the condominium owners has been achieved regarding the construction process, either directly or through the sale of the shares of those owners who did not participate in the decision.
• The construction process must not have commenced, or must have ceased to continue, due to reasons attributable to the contractor.
• Construction must not have commenced within one year, or construction activities must have been suspended for a period exceeding six months.
• A decision in favor of termination must be adopted by a simple majority of the owners.

 

2.) Which Contracts May Be Terminated by the Administration?

Although the Law and the relevant Regulation expressly refer to construction agreements in exchange for land share (arsa payı karşılığı inşaat sözleşmesi) and preliminary real estate sale agreements (gayrimenkul satış vaadi sözleşmesi), the administrative termination procedure set forth under Law No. 6306 and Paragraph 14 may also be applied to construction/work contracts and real estate sale agreements.

 

3.) When Do the One-Year and Six-Month Periods Begin?

In cases where agreement has been reached with all owners, the commencement date of the one-year period is determined according to the date of the contract executed with the last owner who joined the agreement or, in the case of risky buildings, according to the date on which the risky building determination becomes final.

If the date of the last agreement precedes the date on which the risky building determination becomes final, the latter date is taken as the starting point of the one-year period. Conversely, if the date of the last agreement is later than the finalization of the risky building determination, the date of the last agreement shall be taken as the starting point.

In cases where a decision is adopted by at least a simple majority of the co-owners according to their ownership shares, the one-year period is calculated from the date on which the ownership transfer of the shares belonging to dissenting owners is registered in the land registry following their sale.

With respect to the six-month period concerning the suspension or discontinuation of construction works, the commencement date is determined based on the findings and records established through inspections and official reports.

 

4.) Calculation of the One-Year and Six-Month Periods for Time Elapsed Prior to the Entry into Force of the Regulation

 

Provisional Article 4 of Law No. 6306 provides as follows:

 

“For parcels located within designated risky areas, reserve building areas, and parcels containing structures identified as risky prior to the effective date of this Article, the periods of one year and six months referred to in Paragraph 14 of Article 6 of this Law shall be calculated by also taking into account the periods elapsed before the entry into force of this Article.”

 

Accordingly, periods that elapsed prior to the entry into force of the provision are also taken into consideration in calculating the one-year and six-month periods.

 

5.) How Does the Process of Adopting a Termination Decision by the Owners Operate?

 

No specific formal requirement has been prescribed for the owners’ decision to terminate a construction contract.

 

A termination decision may be evidenced by:

 

• A decision adopted by a simple majority of the owners;
• A petition submitted to the administration by owners representing at least a simple majority, requesting termination;
• A power of attorney authorizing the execution of a contract with a new contractor;
• The execution of a construction contract with another contractor by the simple majority.

 

Such acts are deemed sufficient to demonstrate the owners’ intention to terminate the existing contract.

 

6.) How Are Other Disputes Resolved Following Administrative Termination?

 

Issues relating to works completed up to the date of termination, transferred ownership shares, payments made, and other related matters are governed by the general provisions of law.

 

For example, if ownership shares have been transferred to the contractor, a separate action before the competent civil courts is required to seek the cancellation of such transfers.

 

However, rental assistance payments made by the contractor to the beneficiaries before the termination date cannot subsequently be reclaimed from the beneficiaries.

 

7.) What Are the Stages of the Administrative Termination Procedure?

 

The administrative termination procedure consists of the following stages:

 

• Submission of an application by the owners;
• If the application is found to be procedurally compliant, the administration grants the contractor a period of fifteen days to submit relevant documents and conducts its review;
• If the administration determines that the termination conditions have not been met, the process is concluded accordingly; if it determines that the conditions have been met, the contractor is granted an additional thirty-day period to remedy the deficiencies;
• If the contractor fails to comply within the prescribed period, the administration ex officio terminates the contract and notifies both the owners and the contractor;
• Upon request of the owners or the administration, any annotations registered in the land registry concerning preliminary real estate sale agreements or construction agreements in exchange for land share are cancelled.

 

8.) Is There an Objection or Appeal Procedure Against the Administration’s Decision?

 

Neither Law No. 6306 nor the relevant Regulation provides for a specific objection or appeal mechanism against an administrative decision terminating a contract.

 

Accordingly, there is a legislative gap in this regard.

 

Nevertheless, it should be accepted that the parties retain the right to challenge such administrative decisions before the administrative courts through judicial review proceedings.