Sale of Land Shares in Urban Transformation

A comprehensive legal guide on land share sales in urban transformation projects, including simple majority decisions, dissenting owners, the 15-day bidding period, market value, auction, title registration, and legal avenues.

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What is the Sale of Land Shares in Urban Transformation?

In urban transformation projects, the sale of land shares, under Law No. 6306 on the Transformation of Areas Under Disaster Risk, is the sale of land shares belonging to owners who do not agree with the majority decision in risky building, risky area, or reserve building area applications, through a special procedure. This sale is not a classic free market sale. Even if the owner does not wish to sell their property voluntarily, the land share can be sold through auction if the conditions stipulated in the law are met.

The primary aim of this institution is to prevent urban transformation projects from being indefinitely blocked by a single owner or a minority group of owners. However, this does not mean that the property rights of owners who do not agree with the decision are left completely unprotected. On the contrary, for the sale of land shares to take place, a simple majority decision must be legally obtained, the dissenting owner must be duly notified of the offer, a 15-day period must be granted, the market value must be determined, and the sale must be conducted through an auction.

Under the current system of Law No. 6306, in parcels containing risky buildings or in risky and reserve building areas, some transformation decisions can be made by a simple majority of the owners in proportion to their shares. The land shares of owners who do not participate in the decision may be subject to sale through an auction process at a price not less than the market value.

Under what circumstances does the sale of land shares come into play?

In urban transformation projects, the sale of land shares is not an automatically applied method in every dispute. First, the property must fall under the scope of Law No. 6306. This scope may include applications related to risky buildings, risky areas, or reserve building areas. In terms of risky buildings, the transformation of buildings that are mostly old or technically deemed risky is involved. In risky areas and reserve building areas, larger-scale, area-based transformation applications may come into play.

The second condition for the sale of land shares to be considered is that a transformation decision be taken by a simple majority of the owners in proportion to their shares. This decision may relate to matters such as rebuilding, entering into a construction contract in exchange for a share of the completed building, choosing a revenue-sharing model, selling the shares, consolidating or subdividing the parcel, or developing the property in another way.

The third condition is that some of the owners do not agree with the decision. That is, if one or more of the owners do not sign the contract, do not accept the majority decision, or do not respond positively to the proposed terms of the agreement within the specified time, the land share sale process may begin.

The fourth condition is that procedural notifications must be made. Owners who do not agree with the decision must be notified of the offer containing the terms of the decision and agreement; they must be given 15 days to review and accept the offer. The Urban Transformation Directorate's statement also indicates that the shares of owners who do not agree with the decision despite notification will be put up for sale.

What does a simple majority mean in land share sales?

The sale of land shares is based on a "simple majority" decision. A simple majority is calculated not by the number of owners, but usually by the land share or ownership ratio. Therefore, in an apartment building, the approval of the majority of owners for the transformation may not be sufficient on its own. If the total land share of the approving owners does not exceed half, a simple majority may not be achieved.

For example, in a building consisting of 10 independent units, 6 owners may have approved the agreement. However, if the total land share of these 6 owners is 48%, a simple majority has not been achieved. On the other hand, if 4 owners own 55% of the total land share, a simple majority in terms of land share can be formed even if the number of individuals is small.

Therefore, before proceeding with the sale of land shares, current land registry records should be examined, the land share of each independent unit should be determined, the proportions of shareholders in jointly owned independent units should be calculated separately, and the representation authority of heirs and legal entity owners should be checked. The sales process guide also explains that, within the scope of Law No. 6306, shares requested for sale by those who did not participate in the decision taken by a simple majority in proportion to their shares will be processed by associating them with current land registry records through the ARAAD Information System.

Notification to the owner who does not agree with the decision before the sale of the land share

Since the sale of a land share directly affects the property rights of the owner who does not agree with the decision, it is mandatory to notify the dissenting owner before the sale. This notification is not merely a formal warning; it ensures that the owner understands which decision they are invited to participate in, which contractual terms they are required to accept, and that their land share may be sold if they do not accept them.

The notification should generally include the following: the decision reached by a simple majority, the proposed agreement terms, contractor or project information, the land-for-construction or revenue-sharing model, the new distribution of independent units, delivery time, rental assistance, guarantees, technical specifications, provisions for title transfer, and the provision that the land share will be sold if the offer is not accepted.

According to the Urban Transformation Directorate's statement regarding the simple majority process, property owners who do not agree with the decision may be notified of the decision and agreement terms, or the location where the offer can be viewed, through a notary public or by posting it at the local headman's office for 15 days. The location and date of the sale may also be announced via the e-Government Portal and at the relevant local headman's office.

Proceeding directly to the sale of land shares without this notification may render the sale transaction illegal. This is because the owner cannot be put at risk of losing their share without knowing and evaluating the content of the offer presented to them.

Why is the 15-day period important?

In land share sales, the 15-day period is critically important for the owner who does not agree with the decision. After the decision and offer are communicated to the dissenting owner, they are given 15 days to review and accept the offer. Within this period, the owner can agree to the majority decision, sign the contract, submit their objections in writing, or pursue legal action.

Failure to take any action during this period may trigger the land share sale process. Therefore, the dissenting owner should absolutely not ignore notifications such as notary notices, e-Government notifications, electronic notices, or announcements from the local administrative office.

The important point here is that the 15-day period is not a time limit that forces the owner to sign without thinking. If the owner believes that the offer is vague, that the contract was not presented to them, that the valuation report is incomplete, that the division of the independent unit is unfair, or that the majority calculation is incorrect, they must raise these issues in writing. This creates a strong documented basis for any future lawsuits or objections.

Application to the Administration for Sale of Land Share

If a co-owner who does not agree with the decision does not accept the offer within 15 days, the co-owners who have agreed by a simple majority may apply to the relevant directorate or authorized administration for the sale of their land shares. This application must be made not with a simple petition, but with the submission of specific documents.

The sales process guide explains that during the sales process, information regarding the shares subject to auction will be recorded in the ARAAD Information System, and that notifications on the day of the auction and post-auction sales information will also be recorded in the system. This system aims to monitor the land share sales process electronically and to ensure it is carried out in conjunction with up-to-date land registry records.

The application file is generally expected to include the following documents: minutes of the majority vote, signed contract or power of attorney copies, documents showing that the offer was communicated to the owners who did not participate in the decision, documents indicating that a 15-day period was granted, a report from a real estate valuation firm authorized by the Capital Markets Board (SPK), title deeds, a list of owners, and information regarding the land shares requested for sale.

Submitting a sales application with incomplete documents may cause delays in the process or lead to legal action. Therefore, majority owners must ensure that all procedural requirements are fully met before submitting their sales application.

How is market value determined?

In urban transformation projects, one of the most sensitive stages of land share sales is determining the market value. This is because an opposing owner may lose their share in the property as a result of the sale. Therefore, the sale price must reflect the true market value.

The law and practice stipulate that the sale must be made at a price no less than the market value. The Urban Transformation Directorate's statement also indicates that the land shares of owners who do not agree with the simple majority decision will be sold through an open auction, with the market value determined by the Directorate and the price no less than that value.

When determining the market value, it is not sufficient to look solely at the municipal market value. The district, neighborhood, street, zoning status, building rights, land share ratio, equivalent value in a new project, comparable sales, commercial value, floor and facade advantages, transportation accessibility, view, size of the land, and market conditions should all be evaluated together.

Especially in high-value areas like Istanbul, even a small share of a plot of land can carry significant economic value. Therefore, a low market value assessment can lead to an undue infringement of the property rights of the dissenting owner. If the owner believes the market value is too low, they should support their objection with an independent appraisal report, comparable sales documents, regional market data, and zoning documents.

How does the auction process work?

The sale of land shares is conducted through an auction. This auction is a special sales process specific to Law No. 6306. The aim is to sell the share of the owner who did not participate in the decision, primarily to the other shareholders who have reached an agreement, at a price not less than the market value.

The General Directorate of Land Registry and Cadastre's circular regarding the implementation of Law No. 6306 states that the land shares of owners who do not agree with the decision taken by a simple majority of the shareholders in proportion to their shares 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 the case of risky buildings, the sale process can be repeated until a sale is made to the shareholders who have reached an agreement or to third parties who agree to abide by the agreement.

The criteria for determining who is eligible for the initial sale, at what stage third parties can become involved, how offers will be received, how the sale price will be paid, and how the title deed registration will be carried out after the sale must be carefully examined according to the nature of the case. Deficiencies in the sales procedure may lead to the cancellation of the land share sale.

Who can participate in the initial sale?

In land share sales, the initial sale is, as a rule, directed to the shareholders who have reached an agreement. This arrangement aims to ensure that the share of the dissenting owner primarily passes to the owners participating in the project. If no buyer emerges from the shareholders in the initial sale, it may be possible for third parties to become involved in the process under certain conditions.

The Urban Transformation Directorate's statement also indicated that the land shares of owners who did not agree with the simple majority decision would be sold to other stakeholders who reached an agreement through an auction; if no buyer emerges at the auction, the shares could be purchased by the relevant administration.

The position of third parties is important at this stage. Not every third party can participate in the sale whenever they want. Factors such as the stage of the sale, whether the property is a risky building or a risky area/reserve building area, and whether the transformation is being carried out by the owners or by the administration/TOKİ/Presidency can affect the participation conditions.

To whom is the sale price paid?

When a land share is sold, the sale price is deposited into a bank account opened in the name of the owner of the land share. The Urban Transformation Directorate's statement indicates that the sale price of the property will be deposited into a bank account opened in the owner's name; and that any rights such as mortgages, precautionary attachments, liens, and usufruct rights registered on the property will continue to apply to the sale price after the sale.

This regulation shows that the sale does not only result in consequences between the owner and the buyer; it also affects limited real rights, liens, and creditors on the property. For example, if there is a bank mortgage on a share of the land, the mortgage is not completely extinguished as a result of the sale; the mortgage right may continue on the sale price.

Therefore, if there is a lien, mortgage, precautionary measure, usufruct right, or other encumbrance on the land share, the owner may not be able to freely use the sale proceeds. In such a case, the position of the relevant creditors, enforcement offices, or rights holders should be evaluated separately.

How is title deed registration done after a sale?

Upon completion of the land share sale, the ownership of the sold share is registered in the name of the buyer. The Urban Transformation Directorate's statement indicates that the ownership of the sold property will be automatically registered in the buyer's name.

The General Directorate of Land Registry and Cadastre's circular numbered 2024/1 also contains detailed explanations regarding the procedures to be carried out in the land registry after a sale transaction. The circular also includes the possibility of automatic registration in the name of the former owner under certain conditions if the sale of land or land shares is annulled by a court decision. Accordingly, if the immovable property has not been transferred to a third party after the sale transaction, or has not been subjected to any practice that makes registration in the name of the former owner legally or practically impossible, registration in the name of the former owner may be considered upon notification from the Presidency.

This regulation demonstrates the practical importance of lawsuits challenging the sale of land shares. Even if the sale is annulled, restoring the original state can become complicated if the share has been transferred to a third party or if irreversible transactions have been made on it. Therefore, if a dissenting owner believes the sale transaction is unlawful, they should pursue legal avenues as early as possible.

Is the sale of land shares dependent on the demolition of the building?

One of the most frequently asked questions regarding the sale of land shares in urban transformation projects is whether the demolition of the building is a prerequisite. In current practice, the demolition of the building is not always a requirement for the sale of land shares belonging to owners who did not agree with the decision. The sales process can proceed based on the duly established decision by a simple majority and the notification of offers to the dissenting owners.

This is important to prevent the transformation process from being confined to the post-demolition period. In some projects, the contractor's contract, sharing model, and financing plan are sought to be finalized before demolition. However, this does not mean weakening the rights of dissenting property owners. On the contrary, if the sales process is to be initiated even before demolition, procedural requirements must be fulfilled much more carefully.

Can a lawsuit be filed against the sale of a share of the land?

Yes. A lawsuit can be filed against the sale of land shares. However, which lawsuit should be filed depends on which action is deemed illegal. Since administrative actions and private law relationships are intertwined in urban transformation processes, determining the correct legal course of action is crucial.

Land share sales transactions, sales commission procedures, market value determination, notification irregularities, and the auction process often involve administrative court proceedings. Conversely, claims arising from contractor contracts regarding delay compensation, incomplete and defective workmanship, cancellation and registration of title deeds, termination of contracts, or penalty clauses may fall under the jurisdiction of the judicial system.

An opposing landowner may file a lawsuit against the sale of their land share on the following grounds: failure to achieve a simple majority, erroneous calculation of the land share, ambiguity in the minutes of the decision, failure to properly notify them of the offer, improper application of the 15-day period, undervaluation, irregularity of the sales announcement, incorrect application of the auction participation conditions, illegality of the land registration process, or the contractor's contract containing unfair and harsh terms.

Deadlines are crucial when filing a lawsuit. Notary notifications, electronic notifications, local administrative announcements, e-Government notifications, sales date notifications, auction minutes, and land registry registration dates should all be examined separately. Failure to file a lawsuit within the prescribed time limit can weaken the owner's ability to seek redress.

Does Filing a Lawsuit Automatically Stop the Sale?

In urban transformation projects, simply filing a lawsuit may not automatically halt sales or title deed transactions in every case. Therefore, when filing a lawsuit against the sale of land shares, requests for suspension of execution or precautionary measures should be evaluated according to the specific circumstances of the case.

If the sale has not yet been completed, a request to halt the sales process may be made due to irregular bid submissions or erroneous valuations. If the sale has been completed but the title registration is not finalized, legal claims to halt the registration may arise. If the sale and registration are complete, the conditions for canceling the sale and registering the property in the name of the previous owner should be evaluated separately.

The General Directorate of Land Registry and Cadastre's circular states that if a sale transaction is annulled by a court decision, the possibility of automatic registration in the name of the former owner is subject to certain conditions; therefore, establishing a legal strategy early is of great importance.

The Role of the Contractor in Land Share Sales

In urban transformation projects, the sale of land shares is often linked to construction contracts in exchange for a share of the completed building or revenue-sharing models. The shares of owners who do not participate in the contract between the majority of owners and the contractor may be subject to sale. Therefore, the content of the contractor's contract is crucial for the legitimacy of the land share sale process.

The contractor's contract should be clear, balanced, and designed to protect the interests of the property owners. If the delivery time, delay penalties, rental assistance, technical specifications, guarantees, stages of title transfer, licensing and occupancy permit obligations, liability for defective workmanship, and termination conditions are not clear, a dissenting property owner may have stronger grounds for not participating in the contract.

Therefore, instead of pressuring the dissenting owner with the threat of selling their land share, the majority of owners should first ensure that the contract is reasonable, transparent, and secure. Otherwise, the sales process could become the subject of litigation, and the project could be delayed for years.

Things Majority Owners Should Consider When Selling Land Shares

Majority owners requesting the sale of their land shares must complete the process thoroughly. First, the simple majority calculation must be done correctly. The latest land registry records must be obtained, the shares of co-owners must be separated, power of attorney documents must be examined, and inheritance and company representation authorities must be checked.

Secondly, the minutes of the meeting should be clearly prepared. The decision should explicitly state which project will be implemented, which contract was accepted, contractor information, the sharing model, delivery time, rental assistance, and the offer to be made to property owners who did not agree with the decision.

Thirdly, dissenting landowners must be duly notified of the offer. The notification should clearly state the content of the offer and that their share of the land may be sold if the offer is not accepted.

Fourthly, the valuation report and price determination process authorized by the Capital Markets Board (SPK) must be carried out carefully. Undervaluation or insufficient valuation may put the sale transaction at risk of being cancelled.

Fifthly, sales application documents must be prepared in accordance with the ARAAD system and relevant administrative procedures. The sales process guide explains that information about the shares to be sold, notifications of the sale date, and post-auction sales information must be entered into the system.

Things to Consider for an Opposing Owner in a Land Share Sale

The most important thing for the dissenting property owner is not to passively observe the process. The 15-day period may begin once the notification is received. Therefore, notary notifications, e-Government notifications, electronic notifications, and local administrative announcements should be carefully followed.

The dissenting property owner should first examine whether a simple majority has actually been achieved. Then, they should evaluate the content of the offer presented to them. Questions such as: Is the contract clear? Is the distribution fair? Is the contractor reliable? Is there a guarantee? Is the delivery time reasonable? Is the rental assistance sufficient? Is the title transfer phased? Are the technical specifications detailed?.

If the market value is low, an independent appraisal report should be obtained, comparable sales should be collected, and the objection should be supported by concrete documents. If the notification of the sale date has been received, the process has moved forward. At this stage, legal action should not be delayed.

The Most Common Mistakes in Land Share Sales

One of the most common mistakes is calculating the simple majority based on the number of owners. However, the crucial factor is the land share or ownership percentage.

The second mistake is failing to adequately communicate the offer to the opposing owner. Notifications made without clearly stating the terms of the decision and agreement can invalidate the sales process.

The third mistake is the superficial preparation of the valuation report. A price determined without considering the property's true market value may lead to the cancellation of the sale.

The fourth mistake is the failure to subject the contractor's contract to legal scrutiny. Contracts that are unsecured, vague, and unfavorable to the property owner strengthen the objections of dissenting property owners.

The fifth mistake is missing the deadline for filing a lawsuit. Seeking redress after a sale and title registration can become more difficult.

Conclusion

The sale of land shares in urban transformation projects is one of the most important and sensitive applications of Law No. 6306. This institution was introduced to prevent transformation projects from being stalled due to the continuous opposition of minority property owners. However, since the sale of land shares directly interferes with property rights, it is subject to strict procedural safeguards.

For a land share to be sold, a decision must first be made by a simple majority of the shareholders in proportion to their shares; this decision and the offer containing the terms of the agreement must be duly communicated to the shareholders who did not participate in the decision, giving them a 15-day period; the fair market value must be accurately determined; and the sale must be conducted through an auction.

The sale price cannot be less than the market value. The sale price is deposited into a bank account opened in the name of the owner; rights such as mortgage, lien, precautionary lien, and usufruct may continue on the sale price. Upon completion of the sale, the share is registered in the name of the buyer. However, if the sale is annulled by a court decision, under certain conditions, registration in the name of the former owner may also become possible.

In conclusion, the sale of land shares in urban transformation projects is a powerful tool for the majority of landowners to advance the project; however, for dissenting landowners, it represents a serious process carrying the risk of losing their property rights. Therefore, both the majority of landowners and those who do not agree with the decision must carefully follow the decision, notification, valuation, auction, title registration, and litigation processes. A properly conducted land share sale can accelerate the transformation process; however, an improperly conducted sale can lead to annulment lawsuits, compensation claims, and property disputes that can last for many years.