Urban Transformation in Turkish Law: Theory, Practice and Current Legal Issues

URBAN TRANSFORMATION IN TURKISH LAW: THEORY, APPLICATION, AND CURRENT LEGAL PROBLEMS

1. INTRODUCTION

Turkey is a country situated on active fault lines by virtue of its geological structure and has historically confronted devastating earthquakes. When this geographical reality is combined with unplanned urbanization and an unsupervised building stock, the concept of "urban transformation" ceases to be a preference and becomes a vital necessity. In the legal dimension, urban transformation is the process of converting areas and structures bearing disaster risk into healthy living environments in accordance with scientific and engineering standards, with the aim of ensuring the safety of life and property.

The purpose of this study is to examine in detail the urban transformation regime shaped around Law No. 6306 on the Transformation of Areas Under Disaster Risk ("Law No. 6306"), the radical legislative amendments made in 2023, the balance between the right to property and public interest, and legal disputes encountered in practice.

2. LEGAL FRAMEWORK AND FUNDAMENTAL CONCEPTS OF URBAN TRANSFORMATION

Urban transformation law is an interdisciplinary field situated at the intersection of Administrative Law, Property Law, and Zoning Law.

2.1. Legislative Bases

The fundamental basis of the process is Law No. 6306 dated 16/05/2012. However, application is not limited to this law alone. While Article 73 of Municipal Law No. 5393 grants municipalities the authority to declare "Urban Transformation and Development Areas," Law No. 5366 on the Renewal and Protection of Deteriorated Historic and Cultural Immovable Assets regulates transformation in designated preservation areas. In this study, our focal point will be Law No. 6306, which has the widest area of application.

2.2. Fundamental Statuses

The law has structured the transformation process around three main statuses:

A. Risky Structure: This is a structure that, whether inside or outside a risky area, has completed its economic life or has been determined, based on scientific and technical data, to bear the risk of collapse or severe damage. This determination may be had performed by owners through licensed organizations, or may be made ex officio by the Administration. The risky structure determination is annotated in the land registry of the building and this annotation is notified to the owners.

B. Risky Area: This is an area bearing the risk of loss of life and property due to its ground structure or the structures built on it. The declaration of a risky area is made by Presidential Decision. According to Council of State case law, for an area to be declared a risky area, it is not sufficient that the buildings are merely old; it must be proven through technical reports (ground surveys, structural analyses) that the area as a whole bears the risk of loss of life and property.

C. Reserve Construction Area: While defined in the original version of the Law as areas "to be used as new settlement areas," the phrase "as a new settlement area" was removed from the text by the amendment made by Law No. 7471 dated 7/11/2023. This change has opened the way for residential areas (inhabited districts) to also be declared reserve construction areas. This situation is a contentious topic in doctrine from the perspective of interference with the right to property.

3. OPERATION OF THE TRANSFORMATION PROCESS

The process consists of four main stages: determination, decision-making, demolition, and reconstruction.

3.1. Determination and Objection Process

An objection may be filed against the risky structure determination report within 15 days from the date of notification. Objections are examined by the Technical Committee within the Provincial Directorate of Environment, Urbanization and Climate Change. The Committee reviews the report from a technical perspective (core samples, reinforcement determination, etc.). If the objection is rejected, the report becomes final and the demolition process begins.

3.2. Decision-Making Quorum: The "Simple Majority" Revolution

In the early years of Law No. 6306, a "two-thirds (2/3)" majority of owners was required for matters such as the new construction to be made after the building was demolished and contracts in exchange for floor rights. However, this ratio was revised to "simple majority of shareholders in proportion to their shares" (50%+1) by the amendment made on 7/11/2023, on the grounds that it caused deadlocks in practice.

This change means the following: Owners holding more than half of the total land share may decide:

• How the building will be constructed,
• Which contractor will be agreed with,
• The contract terms (distribution ratios, technical specifications, etc.).

3.3. Situation of the Minority and Sale

Minority shareholders who do not participate in the decision made by simple majority are given 15 days through notary or neighborhood announcement to participate in the decision. The land shares of those who do not participate within this period are sold, at no less than the market value determined by the Ministry (or the Administration authorized by it), through open auction to the other shareholders who have reached agreement. If the shareholders do not purchase them, these shares are expropriated by the Treasury or the Administration.

4. FUNDAMENTAL LEGAL PROBLEMS ENCOUNTERED IN PRACTICE

While the urban transformation process aims at public interest and life safety in theory, violations of the right to property, disputes arising from contract law, and defective administrative acts are encountered in practice.

4.1. Contractor-Related Problems and Termination of the Contract

The most painful aspect of urban transformation is the financial insolvency of contractor companies or their bad faith failure to complete the construction. With the provision added to paragraph 14 of Article 6 of Law No. 6306, owners have been granted the right of unilateral termination.

Accordingly:

1. If construction has not commenced within 1 year from the date it was required to commence,
2. Or if the construction work has been stopped at a certain level and construction activity sufficient to complete the project has not continued for at least 6 months,

Upon the decision of the simple majority of owners in proportion to their shares and application to the Ministry, after the Ministry's determination, the contractor is given 30 days. If work does not commence at the end of this period, the contracts are deemed terminated ex officio. This regulation is an administrative termination mechanism that departs from the general termination provisions of the Law of Obligations (which require a court decision).

4.2. Disputes Regarding Premium Value and Distribution of Independent Sections

The location, orientation, and floor of apartments in the old building do not always correspond to the qualities of the apartments in the new building to be constructed. These value differences, referred to as "premium value" (şerefiye), cause serious disputes among owners.

For example, giving an owner who occupied a 5th floor sea-view apartment in the old building a rear-facing 1st floor apartment in the new project generates the debate of violation of the right to property. In Court of Cassation and Council of State decisions, the principle of "equitable distribution" is emphasized. If the decision made by the simple majority excessively damages the property rights of the minority (for example, the minority being given basement floors while the majority takes the best apartments), this decision is characterized as "abuse of rights" and may be annulled.

4.3. Value Determination and Market Value Problem

The value determination (appraisal) made before the sale of shares of owners who did not participate in the decision is performed by CMB-licensed valuation organizations. However, in practice, claims that these reports do not reflect market realities and that the land share value is shown low are widespread. This is the topic most frequently requiring expert examination in cases filed in Administrative Courts. Courts do not content themselves with the licensed organization's report but have a new inspection and valuation conducted through judicial experts.

4.4. Legal Status of Tenants

Urban transformation directly affects not only property owners but also tenants. Pursuant to Law No. 6306:

• Tenants residing in risky structures are paid (a one-time moving assistance or rent assistance).
• Eviction of tenants is mandatory.
• Tenants cannot become entitled to apartments in the new building to be constructed; however, they may benefit from housing loan interest support under conditions determined by the Ministry.

In practice, it is frequently seen that demolition processes are halted because the eviction notification was not properly served to the tenant.

4.5. Notification Problems

Law No. 6306 has also introduced special regulations in the procedure of notification. In addition to the general provisions of the Notification Law, there are accelerating provisions such as notification to addresses in the address-based population registration system and notification to those who cannot be reached being deemed to have been served through announcement at the neighborhood headman's office. However, notification processes are full of legal defects for expatriate citizens living abroad or for real properties that have passed through inheritance but for which the transfer has not been registered in the land registry. The Constitutional Court requires that in transactions touching upon the essence of the right to property, notification be made in a manner that ensures the person personally learns of it.

5. JUDICIAL REVIEW AND TYPES OF ACTION

Disputes arising in the urban transformation process are resolved in Administrative Judiciary or Civil Judiciary depending on their nature.

5.1. Administrative Judiciary (Administrative Courts)

These are actions filed against transactions established by the Administration using public authority:

• Action for Annulment of Risky Structure Determination: Owners may file this action with the claim that the building is not risky.
• Action for Annulment of Demolition Decision: Filed with the claim that the eviction and demolition procedure is irregular.
• Action for Annulment of Risky Area/Reserve Area Decision: Filed before the Council of State or Administrative Court against the Presidential or Ministry transaction.
• Action for Annulment of Share Sale Transaction: The minority owner may file an action claiming that the auction of their share is irregular or that the value is low.

Important Note: Pursuant to Article 6/9 of Law No. 6306, the issuance of a "stay of execution" decision in actions filed against administrative transactions established under this Law was prohibited until it was annulled by the Constitutional Court in 2014. A stay of execution decision can be issued at present, however courts interpret the "damage difficult to remedy" condition very strictly and generally reject stay of execution requests on the grounds of public safety (earthquake risk).

5.2. Civil Judiciary (Civil Courts)

These are actions arising from private law relationships:

• Actions Arising from Construction Contracts in Exchange for Floor Rights: Termination, compensation, and incomplete work price actions between the contractor and owners.
• Land Registry Cancellation and Registration Actions: Claims that the decision made by simple majority violates the minority's rights and that fraudulent registration has been made.
• Determination Actions: Actions filed to determine that the contractor has abandoned the work.

6. EVALUATION OF THE 2023 AMENDMENTS

The amendments made by Law No. 7471 aim to accelerate the process. In particular:

• Reduction of the decision-making quorum to simple majority,
• Acceleration of notification processes through e-Government and neighborhood announcement,
• Expansion of the authority to evict and force open doors through law enforcement agencies,
• Expansion of the definition of reserve area,

have strengthened the Administration's hand. However, this acceleration sometimes conflicts with the principles of "rule of law" and "right to property." Criticisms are made that the avenues for seeking rights of minority shareholders crushed under the domination of the simple majority have effectively narrowed.

7. CONCLUSION AND RECOMMENDATIONS

Urban transformation is an unavoidable safety issue for Turkey. Law No. 6306 provides a regime equipped with extraordinary powers to address this issue. However, the success of implementation must be measured not merely by the renewal of buildings but by the provision of social justice and legal security in this process.

For overcoming problems in practice:

1. Transparency: Presentation of valuation reports and distribution tables to all owners in a transparent manner,
2. Effective Judiciary: Administrative Courts rapidly conducting technical expert examinations and distinguishing genuinely non-risky structures from risky ones,
3. Contractor Guarantee: More effective implementation of the mandatory construction completion insurance or letter of guarantee requirement,
4. Tenant Rights: Adjustment of the support provided to tenants to be appropriate to current economic conditions (rental prices).

In conclusion, urban transformation is the most typical example of the right to property being limited for the purpose of public interest. That this limitation be made in accordance with the principle of "proportionality" is a requirement of the rule of law.