The developing economy and changing conditions make it necessary, particularly in the construction sector, to create a source of financing prior to construction activities. Prepaid housing sale contracts enable the sale of residences whose construction has commenced but has not yet been completed before completion, thereby allowing the buyer to purchase an unfinished residence at a more favorable price, while also enabling the seller to meet the cash requirements necessary to cover the financial obligations related to construction.
Obligations of the Seller
Both the Law on the Protection of Consumers and the Regulation on Prepaid Housing Sales impose certain obligations on the seller in order to conclude such contracts. These include the following:
1) Consumers must be provided with a preliminary information form at least one day prior to the establishment of the contract.
2) A prepaid housing sale contract may not be concluded with consumers before a building permit has been obtained.
3) The preliminary information form must contain the mandatory elements listed in Article 5 of the Regulation on Prepaid Housing Sales.
4) The contract must contain the mandatory elements listed in Article 7 of the Regulation on Prepaid Housing Sales.
5) Prior to signing the contract, the contract must be read carefully, and the independent section plan, site plan, floor plan, and the list of specifications (technical specifications) containing technical information regarding the products used in the residence, which are required to be delivered to the consumer as annexes to the preliminary information form, must be examined.
6) A detailed assessment must be carried out regarding the gross and net areas of the residence, its location, orientation, and the interior features undertaken under the contract, and these must be checked against their counterparts in the contract.
7) An inquiry must be conducted before the Land Registry Directorate regarding the ownership of the land on which the residence will be constructed, and it must be verified whether there are any annotations, declarations, or similar entries on the title deed record that may reduce the value of the residence to be purchased.
8) It must be ascertained which of the types of security stipulated under the legislation the seller will provide to the consumer in return for the payments made.
9) If promissory notes are to be issued in relation to the sale price of the purchased residence, they must be issued in the consumer’s name and separately for each installment payment.
10) A copy of the contract must be provided to the consumer (buyer).
Elements of the Preliminary Information Form
The preliminary information form must be provided to the consumer at the latest one day prior to the conclusion of the contract, in a clear, plain, and legible manner, in understandable language, and in a font size of at least 12 points, containing the following information:
a) The seller’s name or trade name, full address, telephone number, and, if available, MERSİS number, together with other contact details,
b) Basic descriptive information regarding the independent section subject to the contract, including block, parcel, block number, location, floor, and similar characteristics, as well as the net and gross areas of the independent section as determined pursuant to the Planned Areas Zoning Regulation published in the Official Gazette dated 2/11/1985 and numbered 18916 (Reiterated),
c) The total sale price of the residence in Turkish Lira, including all taxes, for both lump-sum and installment payments; and, if any, information regarding delivery and other expenses,
d) If applicable, the amount of interest and the annual rate at which the interest is calculated,
e) Information regarding the consumer’s right of withdrawal and right to terminate the contract,
f) The delivery date of the residence,
g) Information regarding the security to be provided,
h) The date on which the building permit was obtained,
i) Information regarding participation in common expenses in accordance with the management plan.
In addition to the preliminary information form containing the above information, the independent section plan, site plan, floor plan, and the list of specifications shall be provided to the consumer.
Form of the Contract
Prepaid housing sale contracts are subject to a formal requirement. A valid sale may be concluded in one of the following two ways:
a) By means of a written contract executed together with the registration of the transfer of construction servitude in favor of the consumer in the land registry,
b) By means of a promise of sale contract executed in the form of an official deed before a notary public.
Otherwise, the contract shall be invalid. Unless a valid contract is concluded, the seller may not request any payment from the consumer under any name or require the consumer to provide any document that places the consumer under an obligation. However, it should be noted that a promise of sale contract for immovable property to be executed before a notary public is different from the contract executed for completed and ready-to-deliver residences, and that there exists a separate type of promise of sale contract specifically for prepaid housing sales.
For Which Residences Can a Prepaid Housing Sale Contract Be Concluded?
Pursuant to both the Law on the Protection of Consumers and the Regulation on Prepaid Housing Sales, prepaid housing sale contracts may only be concluded for residences whose construction has commenced but has not yet been completed and which have not been registered in the land registry as independent sections. Such contracts cannot be concluded for residences whose construction has been completed and which are ready for delivery.
In addition, the subject matter of such contracts may only consist of immovable properties qualified as “residences.” Commercial properties such as workplaces, offices, shops, and similar units, as well as the interests of landowners arising from construction contracts in return for land share, are not within the scope.
The Consumer’s Right to Terminate the Contract
The consumer has the right to withdraw from the contract within 14 days from the date of its conclusion, without providing any justification and without paying any penalty.
In prepaid housing sales, the consumer also has the right to terminate the contract within up to 24 months from the contract date, without providing any justification, without prejudice to the right of withdrawal.
In the event of termination of the contract, the seller may request payment of compensation up to two percent of the contract price for the first three months from the contract date, four percent for the period between three and six months, six percent for the period between six and twelve months, and eight percent for the period between twelve and twenty-four months, as well as the expenses arising from taxes, duties, and similar legal obligations incurred due to the sale or the promise of sale of the residence.
In certain special circumstances, the consumer may exercise the right to terminate the contract, until transfer or delivery, without paying any amount under the names of tax, duty, expense, compensation, or similar charges.
