Decision-making process among property owners in urban transformation

How do property owners make decisions in urban transformation, what does a simple majority mean, how is land share calculated, what is the status of property owners who do not participate in the decision, and how is the sale of land share carried out? A comprehensive legal guide under Law No. 6306.

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What is the decision-making process among property owners in urban transformation?

In urban transformation, the decision-making process among property owners involves legally establishing their will regarding how their property, located within a risky building, risky area, or reserve building area, will be evaluated. This process encompasses extremely important issues such as whether the building will be demolished, how the new building will be constructed, which contractor will be contracted, whether a construction contract in exchange for land shares will be signed, how the land shares will be used, what will happen to property owners who do not participate in the decision, and how the independent units will be distributed in the new project.

The decision-making process in urban transformation differs from that of traditional apartment management. This is because Law No. 6306 on the Transformation of Areas Under Disaster Risk envisages a special decision-making system to facilitate the transformation of structures at risk of disaster. Current regulations stipulate that in parcels containing risky structures, decisions regarding the reconstruction of buildings, redevelopment through methods such as floor-for-floor exchange or revenue sharing, sale of shares, consolidation, subdivision, partition, abandonment, creation, and registration can be made by a simple majority of the owners in proportion to their shares, without requiring the demolition of the existing structures.

Therefore, the decision-making process in urban transformation cannot be reduced to simply asking, "How many people voted yes at the meeting?" What is truly important is: for which property the decision was made, whether the risky building assessment has been finalized, what the landowners' shares are, by what majority the decision was made, whether the offer was properly communicated to the owners who did not participate in the decision, and whether the decision is in accordance with the principle of good faith and property rights.

When does the decision-making process begin in urban transformation?

The decision-making process among property owners usually becomes more clearly defined legally once the building's designation as risky is finalized. The identification and confirmation of a building's risk status means the structure can no longer be used normally and that a transformation process must begin. However, in practice, property owners often start negotiating with contractors, collecting bids, and conducting preliminary assessments even before a building is officially designated as risky.

The important point to note here is that while negotiations and preliminary agreements made before the final determination of a risky building may be beneficial in terms of the transformation strategy, consequences such as special decision-making under Law No. 6306 and the sale of land shares of owners who do not participate in the decision will not occur without the fulfillment of the conditions stipulated in the law. Therefore, it is not correct for owners to act hastily, thinking "a majority has been achieved, now everyone has to comply.".

For a sound decision-making process in urban transformation, the legal status of the property must first be clarified. Title deeds, condominium ownership or easement status, land shares, independent unit list, owners' identity and contact information, shared or joint ownership, inheritance status, mortgages, liens, usufruct rights, and other encumbrances should be examined. This is because the decision-making process will often be determined not by the number of owners, but by the land share or ownership percentage.

What does a simple majority mean in urban transformation?

In urban transformation projects, a simple majority refers not to the number of owners, but to the majority calculated based on the shares or land portions in the property. In other words, if an apartment building has 20 owners, the signatures of 11 may not always be sufficient. If the total land share of these 11 owners does not constitute more than half of the shares in the property, a simple majority is not considered achieved. Conversely, if a smaller number of owners possess more than half of the total land share, they can achieve a simple majority for decision-making.

The current application of Law No. 6306 adopts the principle of "simple majority of shareholders in proportion to their shares." The regulation stipulates that decisions regarding the reconstruction of buildings on parcels containing risky structures, redevelopment through methods such as floor-for-floor exchange or revenue sharing, and the sale of shares can only be made by a simple majority of shareholders in proportion to their ownership shares.

The aim of this system is to prevent urban transformation projects from being delayed by a very small minority. However, the simple majority rule does not give the majority of property owners unlimited power. The decision taken by the majority must be in accordance with equity, the rule of honesty, the principle of equal treatment, the essence of property rights, and the economic realities of the specific case. Even if a simple majority is achieved, decisions that clearly involve unfair distribution of independent units, sale of low-value land shares, unsecured contractor contracts, or decisions aimed at harming minority property owners may be subject to legal review.

Why is land share important in the decision-making process?

In urban transformation projects, land share is one of the fundamental elements that directly affects the decision-making power of property owners and the rights they will receive from the new project. Land share indicates the share of each independent unit owner in the main property. In most cases, the quorum for decision-making is calculated based on these land shares.

In practice, it may be observed that some owners have a lower land share despite owning larger apartments, while some smaller independent units have a higher land share. This situation can lead to serious disputes both in the decision-making process and in the allocation of new independent units. Especially in older apartment buildings, it is frequently observed that land shares are not proportionate to the actual usable area, and that there have been erroneous or unfair land share distributions in the past.

Therefore, one of the first things property owners entering the transformation process should do is examine their land shares in the land registry. If the land share distribution is clearly unfair, this issue should be evaluated separately before signing the transformation agreement. This is because the decision-making process, the sharing of independent units, and the sale of shares belonging to property owners who did not participate in the decision can be directly affected by these unfair distributions.

The issue of land share is not merely a mathematical ratio. The allocation of specific independent units in the new project to different owners, how preferential treatment differences will be calculated, how square meter differences will be compensated, and the value of commercial units are all linked to the land share discussion. Therefore, land shares and title deeds should be analyzed legally and technically before the decision-making process begins.

How should a meeting of the owners be conducted?

In urban transformation projects, property owners' meetings are critically important for ensuring the transformation process is conducted in a healthy and verifiable manner. While the law does not mandate the classic apartment general assembly format in all cases, the meeting notice, agenda, attendees, land shares, and signatures must be recorded in writing to ensure that the decisions made can be proven later.

The meeting notice should clearly state the property information, the purpose of the meeting, the topics to be discussed, contractor proposals, the stage of the risky building process, and the matters to be decided. Simply informing the owners that there is a meeting is not sufficient. In a matter with such serious consequences as urban transformation, the owners need to be informed in a way that allows them to understand and evaluate the content of the decision.

If a decision is to be made at the meeting, the decision text should be clear and concrete. For example, a general statement such as "it was decided to include the building in urban transformation" alone could create serious problems in the future. Instead, the following points should be written as clearly as possible: which contractor will be contracted and on what basis, the ratio of the building to be rescinded, the independent units to be allocated to the owners, rental assistance, delivery time, security deposit, technical specifications, title transfer, delay penalties, project changes, power of attorney, and offers to be made to owners who do not participate in the decision.

The minutes of the meeting must include the full names, Turkish Republic Identity Numbers or Tax Identification Numbers, independent unit numbers, land shares, and signatures of the participating owners. If participation is by proxy, a copy of the power of attorney must be obtained. For legal entity owners, signature circulars and authorization documents should be checked. For heir owners, the certificate of inheritance and representation status should be examined. If these documents are missing, it may become questionable whether a simple majority has actually been achieved.

In which matters can decisions be made by a simple majority?

The scope of matters subject to a simple majority in the application of Law No. 6306 is quite broad. The regulation states that in the case of risky buildings, decisions regarding parcels containing these buildings—including parcel consolidation, individual or combined development, or development block-based applications, subdivision, partition, relinquishment, creation and registration in the land registry, reconstruction, sale of shares, reassessment through floor-for-floor exchange or revenue sharing, and other methods—can be made by a simple majority of the shareholders in proportion to their shares.

This regulation shows that the decision-making process in urban transformation is not limited solely to "contractor selection." Property owners can also make decisions by simple majority on highly important transactions affecting the zoning and title deed structure of their property. For example, transactions such as consolidation with a neighboring parcel, subdivision of a parcel, relinquishment or creation of land, and choosing a revenue-sharing model instead of a land-for-construction model directly affect the economic interests of the property owners.

Therefore, when making a decision by simple majority, consideration should be given not only to whether the owners will receive new apartments in exchange for their existing ones, but also to the entire economic future of the property. An incorrect consolidation, a low-value revenue sharing agreement, an unsecured contractor contract, or an unfair distribution of independent units can cause significant harm to the owners in the future.

How are owners who disagree with the decision notified?

A simple majority decision does not mean that property owners who do not agree with the decision can be excluded from the process. Law No. 6306 stipulates that property owners who do not agree with the decision must be notified of the decision and the offer containing the terms of the agreement. The regulation states that property owners who do not agree with the decision will be notified of the decision and the offer containing the terms of the agreement via electronic notification, through a notary public, or by posting it at the relevant mukhtar's office for fifteen days, giving them fifteen days to accept it.

The sales process guide also states that decisions and offers made by simple majority will be communicated through the ARAAD Information System, along with related documents, for land share sales transactions; and that the ARAAD system will work integrated with the e-Government and land registry systems.

This notification process is extremely important. Because serious consequences, such as the sale of the land share of a co-owner who does not agree with the decision, can only occur after a proper notification and offer process. If the co-owner who does not agree with the decision is not notified at all, if the notification is sent to the wrong address, if the content of the offer is unclear, if the terms of the contract and agreement are not presented in a way that allows for examination, or if the 15-day period is not given properly, the sales process may become unlawful.

It is not sufficient for the notification to simply state "you must agree to the majority decision." The owner must understand which contract, which project, which independent unit sharing, which contractor, and which terms and conditions of guarantee they are being invited to participate in. Otherwise, it cannot be considered a truly informed acceptance.

Will the land shares of owners who do not agree with the decision be sold?

Yes. Under Law No. 6306, it is possible to sell the land shares of owners who did not participate in the decision taken by a simple majority of shareholders in proportion to their shares. The regulation stipulates that the land shares of owners who did not participate in the decision taken by a simple majority will be sold by public auction according to the procedure specified in Article 15/A. Applications for sale require: a copy of the decision minutes or contract/power of attorney showing that an agreement was reached by a simple majority, documents proving that the offer was communicated to the owners who did not participate and that they were given 15 days to accept, and valuation documents prepared by real estate valuation firms authorized by the Capital Markets Board (SPK).

The General Directorate of Land Registry and Cadastre's circular regarding the implementation of Law No. 6306 also states that the land shares of those who do not agree with the decision will be sold to the other shareholders who have reached an agreement through an auction process, at a price not less than the market value; if the sale to the shareholders cannot be realized, in risky buildings, the sale process will be repeated until the sale is made to third parties who accept the agreement reached by the shareholders.

This sales mechanism aims to prevent the conversion process from being completely blocked by a minority owner. However, since the sale transaction directly affects property rights, it must be very strictly monitored. If a non-participating owner believes that a simple majority was not achieved, that the decision was made irregularly, that they were not informed of the offer, that the valuation report was too low, or that the sales process was conducted in bad faith, they can pursue legal action.

Why are Valuation Reports and Market Values ​​Important?

In the process of selling the land shares of owners who do not agree with the decision, one of the most critical documents is the valuation report. The regulation requires that the value of the properties belonging to the owners who do not agree with the decision be determined by real estate valuation firms authorized by the Capital Markets Board.

A valuation report is not merely a technical document determining the sale price. It also serves as a legal safeguard for the protection of property rights. If the land share is determined below its true value, an owner who does not agree with the decision may lose their economic rights to the property at a low price. Therefore, the valuation report should carefully examine comparable sales, zoning regulations, land share ratio, location of the property, potential value in a new project, current use, commercial value, and regional market conditions.

Property owners wishing to object to a valuation report should not simply state that the price is too low. They must provide concrete evidence, including comparable properties, sales advertisements in the area, municipal rates, appraisal reports, zoning rights, the advantageous location of the plot, and the equivalent value of an independent unit in a new project. Particularly in commercial units, ground-floor shops, and apartments with sea or street views, premium differences are of great importance.

How Should Contractor Selection and Contract Decisions Be Made?

In urban transformation projects, one of the most important decisions among property owners is the selection of a contractor. The choice of contractor should not be based solely on the question of "who offers the highest square footage?". The contractor's financial strength, technical experience, past projects, availability of guarantees, delivery time, rental assistance, penalty clauses, building quality, and ability to obtain permits and occupancy certificates should all be evaluated together.

Property owners often make decisions based solely on the profit-sharing ratio between contractors. However, a contractor with a higher bid but weaker financial resources may abandon the project. Conversely, a contractor offering a more reasonable profit-sharing ratio, along with strong guarantees and a short delivery time, may be more beneficial to the property owners.

If a construction contract is to be drawn up in exchange for a share of the land or a construction contract in exchange for a share of the building, the following issues must be clearly stated in the contract: sharing of independent units, net and gross square meters, goodwill calculation, delivery time, delay compensation, rent assistance, relocation costs, security deposit, technical specifications, material quality, stages of title transfer, licensing and occupancy permit obligations, liability for defective workmanship, project modification conditions, termination and dispute resolution.

Since a contract decision made by a simple majority can also have consequences for minority owners, the contract must be fair, clear, and verifiable. Otherwise, the objections of owners who did not agree with the decision may become stronger.

How is a decision made if there is more than one building on a single plot of land?

One of the common problems in urban transformation is the presence of multiple buildings on a single plot. The regulations contain specific provisions regarding this. If a plot contains multiple buildings and all of them are identified as risky structures, decisions regarding the implementation are made by a simple majority of all shareholders, regardless of whether they are co-owners of the building, based on their respective shares. If only some of the buildings on the plot are identified as risky structures, only the addresses of the identified risky structures are registered in the land registry, and decisions regarding the implementation are made by a simple majority of the shareholders of the identified risky structures, based on their respective shares.

This regulation is of great importance, especially in sites, block buildings, multiple buildings on the same plot, structures with shared land but effectively separated, and former cooperative areas. Making a decision with the wrong group of owners can render the decision questionable. For example, if only Block A is at risk, the extent to which the owners of Block B should be included in the decision should be evaluated based on the specific plot and title deed situation.

Therefore, in plots containing multiple structures, the technical report, land registry records, the full addresses of the structures, land shares, and designations of risky structures should be carefully examined before the decision-making process begins.

Minority Property Owners' Rights in the Decision-Making Process

In urban transformation projects, a minority property owner is one who does not agree with or abstains from the simple majority decision. The simple majority system does not allow minority property owners to block the process indefinitely; however, it cannot be said that minority property owners are completely unprotected.

Minority landowners can first examine whether the decision was truly made by a simple majority. They should check whether the land shares were calculated correctly, whether the powers of attorney are valid, who signed on behalf of a deceased owner, whether legal entity owners have authorization documents, whether the meeting minutes are clear, and whether the contract terms are defined.

Secondly, minority property owners have the right to examine the content of the offer made to them. The offer should clearly state which project they are expected to participate in, which contract they will sign, which independent unit they will receive, how much rental assistance is foreseen, the delivery time, and what the guarantees are.

Thirdly, minority landowners can object to the valuation report, the sales procedure, and the notifications during the land share sale process. If they believe the sale was not made at its true market value or that proper notification was not given, they can pursue administrative and judicial remedies.

The Most Common Mistakes in the Decision-Making Process

In urban transformation projects, the most common mistake in the decision-making process among property owners is calculating the majority based on the number of property owners. However, the quorum for decision-making is most often determined in proportion to the shares or land portions of the property owners.

The second mistake is preparing the decision report vaguely. General statements like "It was decided to proceed with the transformation" may be insufficient later on. The content of the decision, including the contractor, contract, sharing, guarantee, delivery time, and offer conditions, should be clearly stated.

The third mistake is the failure to properly notify the owners who do not agree with the decision. The offer should be announced electronically, through a notary public or by the local headman, and the 15-day acceptance period should be properly implemented.

The fourth mistake is accepting the valuation report superficially. A low market value can lead to a violation of property rights.

The fifth mistake is signing the contractor's contract without conducting a legal review. Insufficient security deposit, uncertain delivery time, non-phased title transfer, and inadequate penalty clauses can lead to lawsuits that can last for years for the property owners.

Conclusion

In urban transformation projects, the decision-making process among property owners is one of the most critical stages of Law No. 6306. Decisions made during this process directly affect not only the demolition of the existing building but also the future economic value of the property, the independent units that property owners will receive in the new project, the legal relationship to be established with the contractor, and the property rights of property owners who did not participate in the decision.

In the current system, decisions on many issues can be made by a simple majority of shareholders in proportion to their shareholdings. However, a simple majority does not imply unlimited power. The decision must be clear, specific, fair, correctly calculated according to land shares, and properly documented.

For the sale to be valid, the offer must be properly notified to the owners who do not agree with the decision, the 15-day period must be correctly applied, the report prepared by the valuation firm authorized by the Capital Markets Board must be accurate, and the sales transactions must be carried out in accordance with the legislation through the ARAAD Information System. Otherwise, the decision-making process and the related land share sale may become subject to legal disputes.

In conclusion, the decision-making process in urban transformation is not simply about holding apartment meetings. It is a strategic legal process encompassing title deeds, land shares, risk assessment, owner consent, contractor contracts, valuation, notification, minority rights, and administrative sales mechanisms. To prevent owners from suffering any loss of rights, all documents must be carefully prepared during the decision-making phase, the majority ratio must be calculated correctly, contracts must undergo legal review, and the notification and sales process for owners who do not agree with the decision must be conducted in accordance with the law.