Flat-for-Land (Kat Karşılığı İnşaat) Agreements in Türkiye: How the Landowner–Developer Swap Really Works

A flat-for-land agreement (kat karşılığı inşaat sözleşmesi, also called arsa payı karşılığı inşaat sözleşmesi) is the most common way buildings get developed in Türkiye: a landowner gives a contractor the right to build, and instead of paying the contractor in cash, the landowner pays in finished units — a share of the flats or shops that result. The contractor keeps and sells the rest. This guide explains, in plain English for foreign owners and investors, how the swap works, why these contracts must be signed in a special form before a Turkish notary, where each side is exposed, and what happens to the title (tapuTapuTitle deed / land registry recordThe official title deed and the state land-registry record behind it — the only thing that proves who owns real estate in Türkiye.Glossary →) if the contractor fails to deliver.

What a Flat-for-Land Agreement Actually Is

In a flat-for-land arrangement, the owner of a plot (the arsa sahibi, or landowner) does not sell the land for money. Instead, the owner contracts with a builder (the yüklenici, or contractor/developer) who agrees to construct a building at the contractor's own cost and risk. The owner's payment is a defined share of the completed units — for example, the owner keeps a set number of apartments and the contractor takes the others to sell to third parties.

Two Turkish names describe the same deal. Kat karşılığı inşaat sözleşmesi means 'construction in return for floors (units).' Arsa payı karşılığı inşaat sözleşmesi means 'construction in return for a land share,' because the contractor is typically paid by receiving a proportionate share of the land (the arsa payı) onto which its allocated units are tied.

Legally, this is a hybrid. The construction obligation is a works contract (eser sözleşmesi) under the Turkish Code of Obligations No. 6098 — the same family of rules that governs any agreement to produce a result for a price. But because the 'price' is paid in immovable property, the deal also carries a promise to transfer real estate, which is what triggers the strict form requirement explained below.

How the Swap Works Step by Step

Although every project differs, a typical flat-for-land deal follows a recognisable path. Understanding the sequence helps you see where the risk sits at each stage.

• Allocation is agreed. The parties decide the owner's share versus the contractor's share — by specific units, by percentage, or by a 'sharing table' (paylaşım cetveli) that lists which unit goes to whom.
• The contract is signed in official form. The agreement is drawn up as a notary deed (see the next section). In practice it is usually combined with a promise to sell the contractor's land share, so that the contractor's future entitlement is secured.
• The contractor obtains permits and builds. The contractor secures the construction permit (yapı ruhsatı) under the Zoning Law No. 3194 and builds at its own expense.
• Land shares move to the contractor. Often the owner transfers part of the land share (the arsa payı) to the contractor in stages tied to construction progress, so the contractor can finance and pre-sell its units.
• Units are completed and allocated. On completion, the building is divided into independent units under condominium ownership (kat mülkiyeti) and each side receives the units it was promised, with the occupancy permit (iskân / yapı kullanma izni) obtained.

The order and timing of the land-share transfers is one of the most important commercial points to negotiate. Transferring shares too early exposes the owner; transferring them too late exposes the contractor. The contract should tie each transfer to a verifiable construction milestone.

The Form Requirement: Why It Must Be a Notary Deed

This is the single most important point for any foreign owner or investor. A flat-for-land agreement is not validly made by a private signed document, an exchange of emails, or even a contract witnessed by a lawyer. Because the deal includes a promise to transfer immovable property, Turkish law requires it to be made in official form (resmi şekil) — in practice, drawn up as a deed by a Turkish notary (a düzenleme şeklinde notary deed) or executed before the Land Registry.

In market practice these contracts are typically titled and executed as a Düzenleme Şeklinde Taşınmaz Satış Vaadi ve Arsa Payı Karşılığı İnşaat Sözleşmesi — literally a 'notary-drawn promise to sell immovable property and construction-in-return-for-land-share contract.' That long name reflects the two parts fused into one instrument: the promise to sell the land share, and the construction obligation.

The form requirement protects both sides. It creates an authentic, dated record of exactly what was promised, which unit goes to whom, and on what conditions — the very things that later disputes turn on.

Title and Tapu Mechanics: Who Owns What, and When

Foreign clients almost always ask the same question: 'When does the property actually become mine?' In Türkiye, ownership of immovable property passes by registration at the Land Registry (tapu sicili), not merely by signing a contract. So the flat-for-land contract creates obligations, but the units and land shares only become owned when the registry records the transfer.

Several title structures are used, and the contract should make the chosen one explicit:

• Staged share transfers. The owner transfers portions of the land share (arsa payı) to the contractor as construction reaches agreed stages. This balances the contractor's financing needs against the owner's security.
• Transfer on completion. The owner keeps full title and transfers the contractor's share only once the building (or a defined stage) is complete. This is safer for the owner but harder for the contractor to finance.
• Security devices. To protect the owner's promised units, the contract can be backed by an annotation of the promise to sell (satış vaadi şerhi) on the title, or a mortgage (ipotek), so the owner's rights survive against later buyers and creditors.

Where the project is part of urban transformation of a risky building, the title may also carry a 'risky structure' annotation (riskli yapı şerhi), and special transfer and registration rules apply. These projects sit under the urban-transformation regime (Law No. 6306) and can carry fee and tax advantages, but they also bring their own consents, deadlines, and procedures that must be checked case by case.

Risks for the Landowner

The landowner's central fear is simple: handing over land (or land shares) and ending up with an unfinished building, or no building at all. The main exposures are:

• Contractor default or abandonment. The contractor runs out of money, goes insolvent, or simply stops work — leaving the owner with a half-built structure and transferred land shares already in the contractor's name.
• Third-party sales of the contractor's units. Contractors usually pre-sell their share off-plan to fund the build. If the contractor then fails, the off-plan buyers and the owner may end up fighting over the same building.
• Defective or non-compliant construction. Work that does not match the permit, the project, or the agreed quality can expose the owner, as registered landowner, to neighbours, authorities, and buyers.
• Liens and mortgages. Creditors of the contractor may register mortgages or pursue enforcement against shares the contractor holds.

Risks for the Contractor

The contractor carries the heavy financial and construction risk, and has its own exposures:

• Investing before owning. The contractor often spends large sums building before all of its land shares are transferred. If the relationship breaks down, recovering that investment can be difficult.
• Owner-side obstacles. Missing consents, disputes among co-owners of the land, undisclosed encumbrances, or an owner who refuses to transfer shares as agreed can stall the project.
• Permit and zoning problems. If the plot turns out not to support the planned building under the Zoning Law No. 3194 (for example, lower buildable area than assumed), the contractor's expected unit count — its whole return — can shrink.
• Cost and currency swings. Construction costs in Türkiye can move sharply during a multi-year build, squeezing a contractor that priced the deal on old assumptions.

What Happens If the Contractor Defaults

When a contractor fails to perform — does not build, builds far too slowly, abandons the site, or delivers defective work — the landowner's remedies sit on top of the works-contract and general default rules of the Turkish Code of Obligations No. 6098. In broad terms, once the contractor is properly placed in default (temerrüt, usually by a formal notice, often a notarised ihtarname), the owner may, depending on the facts and the contract:

• Demand performance — insist the contractor finish, and claim damages for the delay.
• Have the work completed at the contractor's expense — in suitable cases, complete the building (for example through a substitute contractor) and recover the cost.
• Terminate the contract — end the agreement and seek to recover the transferred land shares, typically through a tapu iptali ve tescil claim (a court action to cancel the contractor's registered title and re-register it to the owner), together with damages.

Turkish courts hear a large volume of these title-cancellation disputes, and under the Court of Cassation's settled case-law the outcome often turns on the completion ratio — how far the building had progressed at the point of termination. A near-finished building is treated very differently from a project barely begun, both in whether the owner can simply reclaim everything and in how the parties' contributions are accounted for.

The third-party dimension makes default especially painful: buyers who purchased the contractor's units in good faith, and lenders holding mortgages, may all have competing claims on the same building. Untangling these is one of the most litigated areas of Turkish construction law, which is exactly why the up-front contract structure and title annotations matter so much.

Special Considerations for Foreign Owners and Investors

Foreign individuals and companies can participate in flat-for-land projects in Türkiye, both as landowners and, through a Turkish company, as developers — but several points deserve extra attention.

• Foreign property-ownership rules. Acquisition of Turkish real estate by foreign nationals and foreign-capital companies is subject to legal limits and checks (for example, restrictions in certain zones such as military or security areas, and area-based caps). Whether you can take the units you are promised should be confirmed before you sign, not after.
• Doing it through a Turkish company. Many foreign investors act as the contractor or co-developer through a Turkish company, which can simplify ownership and financing but brings its own corporate, tax, and permitting obligations.
• Taxes and fees. Flat-for-land deals have specific Turkish tax treatment — including value-added tax (KDV) on unit deliveries, title-deed fees (tapu harcı), and stamp duty considerations — and urban-transformation projects under Law No. 6306 can carry fee and tax exemptions. The exact treatment changes over time and should be confirmed for your specific deal.
• Language and authority. The notary deed will be in Turkish; foreign parties typically sign with a certified translator present, and powers of attorney for signing must be properly issued and, if executed abroad, apostilled and translated.

At Lexin Legal we advise foreign owners, investors, and developers on structuring, negotiating, and enforcing flat-for-land agreements in Türkiye — from the notary deed and title protections through to disputes if a project goes wrong. If you are considering or already in such a deal, contact our team to discuss your position and the protections available to you.

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