The Court Of Cassation Abandoned Its Long-Standing Precedent Regarding Construction Conracts In Return For Land Shares, Known As "Advance Deed" 15 June 2025

Construction contracts in return for land shares are a common practice in the construction sector in Turkey. In this type of contract, it is frequently encountered in practice that the contractor, in order to finance the construction, acquires land shares from the landowner before the construction is completed, sometimes even before the actual construction is started. Pursuant to this contract, the landowner undertakes to transfer the ownership of the designated shares of the land to the contractor in return for the delivery of certain independent sections of the building to be constructed by the contractor on this land. In return, the contractor undertakes to complete and deliver the building to the landowner under the conditions agreed upon in the contract, and is entitled to receive the title deed of the independent sections left to him as compensation. This "upfront" performance undertaken by the landowner in order to support the financing of the construction allows the contractor to provide cash flow by transferring the land share to third parties, and the contractor thus obtains the financial strength it needs to complete the construction.
 

However, this practice leads to serious legal conflicts in cases of default of the contractor, such as the failure of the contractor to complete the construction in due time or the failure of the contractor to fulfill its obligation at all, after the contractor, who has taken over the land share in advance, has obtained the desired financing by selling and transferring the land share to a third party. In such cases, the landowner's exercise of the right to rescind the contract presents a complicated and unfair picture in terms of the legal status of third parties who have taken over the land share from the contractor, often in good faith.
 

Previously, in accordance with the established case law of the Court of Cassation, which was also adopted by the decision rendered as a result of the individual application to the Constitutional Court, the title deeds transferred to the contractor in advance at the beginning of the construction in return for the independent sections to be constructed were deemed to be in the nature of "advance". According to these established precedents of the Court of Cassation, if this transfer to the contractor was in the nature of an advance and the contractor transferred this title deed to a third party, the landowners could request the cancellation and registration of these title deeds given by the contractor to third parties without any right. Since it was accepted that third parties who transferred title deeds from the immovable under construction could not claim good faith, it was accepted that even if it was claimed that third parties were in good faith, they could not benefit from the protection of bona fide acquisition arising from Article 1023 of the Turkish Civil Code, since they had transferred the title deed of the immovable under construction.
 

As can be seen, according to the established jurisprudence adopted by the Court of Cassation for a long time, the good faith of the third parties who purchased land shares from the contractor was not even a matter of discussion, and a "presumption of bad faith" was envisaged for these persons. According to this understanding, it was not deemed legally possible for third parties who acquired land shares from the contractor to be deemed to be in good faith.
 

On the other hand, there is no conditional transfer of ownership in the title deed. Therefore, it is not possible to transfer a land share to the contractor as an "advance" and to agree that the ownership will be acquired only if the contractor fulfills its obligation. This is because, according to the Turkish Civil Code, the right of ownership is acquired automatically upon the registration in the title deed. In this case, the transfer between the land owner and the contractor is based on a valid registration and the contractor becomes the legal owner of the land share. In other words, this transfer of ownership cannot be considered as an "advance payment" conditional upon the performance of any debt.
 

In this framework, it can be said that the third party who acquires immovable property from the contractor is not acquiring immovable property on the basis of a fraudulent registration, but is acquiring immovable property in a real manner and from the legal owner, through a registered property right.  Therefore, in such transactions, it will become unnecessary to investigate the good faith of the third party. On the other hand, in the previous established practices of the Court of Cassation, it was accepted that the registration related to such transactions subsequently became corrupt by itself, and therefore, the third party acquired rights based on an incorrect registration.
 

In this context, the understanding of "advance title deed" applied for many years, the above-mentioned issues and the decisions rendered in connection therewith were in clear contradiction with the basic principles of Turkish Civil Law, especially the principle of publicity and trust in the land registry and the principle of acquisition of ownership based on registration. This approach, which caused serious grievances and uncertainties in practice, was also subject to intense criticism in the doctrine.
 

Along with the Information Note published by the First Presidency of the Court of Cassation on May 16, 2025, the Sixth Civil Chamber of the Court of Cassation, in its meeting held on the same date by the Grand Plenary Assembly of the Unification of Jurisprudence, has issued a decision, known as "advance deed", on the issue of whether the third parties who acquired real rights by relying on these transactions will be protected in the event that the contract is subsequently deemed invalid or terminated with retroactive effect, after the transfer of the immovable subject to the construction contract in return for land share to the contractor; in the event that the contract is subsequently deemed invalid or terminated with retroactive effect, whether the gains of third parties who acquired real rights by relying on these transactions will be protected or not, known as "advance title deed", should be reversed.
 

It is considered that the Court of Cassation has adopted a new approach in the established jurisprudence in land share construction contracts, which prioritizes the principle of trust in the land registry and the protection of bona fide third parties, and that this approach has been taken by taking into consideration the grievances that the previous established jurisprudence may cause in practice and the criticisms in the doctrine. In this context, by putting an end to the legal uncertainties regarding the advance title deed, the Court of Cassation has taken an important step towards eliminating the uncertainties caused by the practice known as advance title deed and ensuring title deed security and legal stability by creating a predictable and stable implementation ground.
 

Since the Court of Cassation has published the case law change in the form of an informational note, there is not yet sufficient information regarding its details. In the following days, more detailed evaluations will be made when the full text of the Unification Decision is published in the Official Gazette.
 

Sources :

• Arsa Payı Karşılığı İnşaat Sözleşmelerinde Anayasa Mahkemesi ve Yargıtay Kararlarıyla Yaratılan "Avans Tapu" Kavramının Değerlendirilmesi, Doç. Dr. Zafer Kahraman
• Arsa Payı Karşılığı İnşaat Sözleşmelerinde Yargıtay Kararları İle Yaratılan "Avans Tapu" Kavramına Yönelik Eleştiriler, Prof. Dr. E. Saba Özmen - Arş. Gör. Müge Ürem