What happens if my Turkey property developer goes bust?
What happens if my Turkey property developer goes bust? Here is how Turkish law treats your money, your unit and your options. For advice on your own case, speak to a property lawyer in Turkey at Canko Law Firm.
What happens if your Turkey property developer goes bust: the short answer
What happens if your Turkey property developer goes bust depends mainly on whether the title deed is in your name. If the title deed is already in your name, your unit is generally yours and stays out of the developer's estate. If it is not, your position depends on the land registry record. A completion insurance policy, if one exists, may give you a separate route.
Many British buyers paid for a flat or villa in Turkey before it was built. Then the work stopped. The sales office closed and the calls went unanswered. So what happens if your Turkey property developer goes bust before the title deed is in your name? Where you stand turns on paperwork. Above all, it turns on what is recorded at the land registry.
This guide is for buyers who paid for an off plan or unfinished property. The title deed is not yet in their name. It explains where that leaves your money and your unit. It also sets out the steps you can take now. It does not cover the buying process itself. For that, see our guide to conveyance in Turkey.
Insolvency is not the end of the road. A developer who fails to finish does not wipe out your rights. But your position as a creditor is often weaker than it feels. Acting early, in the right forum, makes a real difference.
Why the title deed decides almost everything
Under Turkish law, ownership of immovable property passes on registration. It does not pass when you sign a contract or pay. The title deed (Tapu) is the proof. If your unit is registered in your name, it is generally yours. It should not form part of the developer's estate when the developer goes bankrupt.
Many off plan buyers hold something less. These are the common positions, from strongest to weakest.
Your unit is registered to you under construction servitude (kat irtifaki). This is a registered right to a specific unit in an unfinished building.
You hold a notarised promise to sell contract (Gayrimenkul Satis Vaadi Sozlesmesi). An annotation (serh) on the land registry record can strengthen your position against later owners and creditors.
You hold only a private sales contract signed in a sales office.
A contract to sell real estate in Turkey must follow a formal route to be valid. A private contract may give you no right to the unit itself. It may still support a claim to get your money back. A lawyer should read it before you rely on it.
If the building stands on the landowner's land
Many projects are built on someone else's land under a flat for land agreement (kat karsiligi insaat sozlesmesi). The landowner keeps some units and the developer sells the rest. When the developer becomes insolvent, the landowner's position matters. It can affect whether the project is finished and who you can claim against.
Start by checking who holds title to the plot. The land registry record shows the registered owner of each share. Often the landowner still holds most of the title. Shares may pass to the developer in stages as the work progresses. Ask for a copy of the flat for land agreement and any later changes to it.
Then check whose share your unit falls in. If it is in the developer's share, your right depends on the developer's own right to that share. If the work stops, that right can be lost or reduced. If your unit is in the landowner's share, ask why the developer sold it to you. Unless the landowner agreed to the sale, you may have no claim to the unit against the landowner.
A landowner faced with an insolvent developer has choices. The landowner may end the agreement because of delay or failure to build. The landowner may also bring in a new contractor to finish the work. Both steps can hurt buyers who paid the developer. If the developer's share falls away, your right to a unit may fall away with it. You may then be left with a money claim against an insolvent company.
Much depends on how the agreement ends. Turkish courts distinguish between ending it with effect from the start and ending it only for the future. Where most of the work was done, courts have sometimes protected people who bought units from the developer. Registered rights and annotations in your favour can also help. The rules are detailed and turn on the facts, so get advice early.
A new contractor is not automatically bound by your contract with the old developer. It may ask earlier buyers to pay more before handing over a unit. It may also try to sell the same units to new buyers. Some landowners and new contractors agree to honour earlier sales in return for a contribution. Any such deal should be in writing and checked before you pay anything.
Mortgages and other charges on the plot
Check the land registry record for charges as well as ownership. Developers often borrow against the land to fund the build. A bank may hold a mortgage (ipotek) over the plot or over individual units. If the developer defaults, the bank may enforce against the land.
A mortgage registered before your unit was transferred to you may still burden it. A bank mortgage can matter as much as the bankruptcy itself. Some buyers agree terms with the bank to release their unit. Any release should be registered, not simply promised in a letter.
Look too for attachments (haciz) and notes of lawsuits on the record. These show which other creditors are already chasing the developer. They can also show whether your unit has been sold or charged to someone else.
Bankruptcy and concordat: what they mean for buyers
There are two main routes when a Turkish company cannot pay its debts. The first is bankruptcy (iflas). The second is a court supervised restructuring called concordat (konkordato). Buyers often hear one word and assume the other. They work very differently.
In bankruptcy, a court declares the company bankrupt. A bankruptcy administration (iflas idaresi) takes control of its assets. Those assets form the bankruptcy estate (iflas masasi). Creditors are invited to lodge their claims, and a time limit applies. Notices are published in Turkish, in Turkey. Foreign buyers often miss them for that reason.
An unsecured creditor ranks behind others. Secured lenders and certain preferred creditors are paid first. Whatever remains is shared among the rest. Unsecured buyers may recover only part of what they paid, or nothing. That is why registered rights matter so much.
Concordat is meant to rescue a business. The developer asks the court for protection while it prepares a plan. The court may grant a period of respite, during which most enforcement stops. A commissioner (konkordato komiseri) is appointed to oversee the company. Creditors then vote on the plan, and the court decides whether to approve it.
For buyers, concordat can be a chance or a trap. A sound plan may see the building finished. A weak plan may cut what you are owed. You need to lodge your claim, check how it is described and decide how to vote. Do not assume someone else will protect your interest.
Lodging your claim and checking where it ranks
In bankruptcy, you lodge your claim with the bankruptcy office (iflas dairesi). Send your contract, proof of each payment and a clear statement of what you are owed. Key documents may need translating into Turkish. A lawyer in Turkey can lodge the claim for you under a power of attorney.
The bankruptcy administration examines each claim. It then prepares a schedule of claims (sira cetveli). The schedule shows which claims are accepted, for how much and in what rank. If your claim is rejected or ranked wrongly, you can challenge it in court. A strict time limit applies, so watch for the schedule being announced.
Two points often surprise British buyers. A claim for money paid in a foreign currency is generally converted into Turkish lira as at the date of bankruptcy. Interest on an unsecured claim generally stops running once the bankruptcy opens. Both can reduce the real value of what you recover.
In concordat, you notify your claim to the commissioner after the notice is published. The commissioner may accept or dispute it. That can affect whether and how your claim counts in the vote. Once the court approves a plan, it generally binds the creditors it covers, including those who voted against it.
Your rights against the developer under Turkish law
Most people buying a home in Turkey count as consumers. Consumer protection rules apply to off plan housing sold to consumers. They give buyers extra rights, including on late delivery and cancellation. They may also set conditions the developer must meet before selling homes off plan. These can include completion insurance or other security, explained in the next section. Whether your developer met them is worth checking.
The delivery date in your contract matters. If the developer fails to deliver on time, you may have choices. You may insist on completion, claim compensation, or end the contract and seek a refund. The right choice depends on your contract, the stage of the build and the developer's finances. Once bankruptcy or concordat begins, some of those choices narrow.
Smaller claims may first go to the consumer arbitration committee (Tuketici Hakem Heyeti). Limits apply to each route. A claim for the unit is different from a claim for money. If you want the unit, you may ask the court to cancel and register title in your name (tapu iptal ve tescil). That needs a sound legal basis and strong evidence.
Sometimes the problem is more than failure. Money may have been moved, or one unit sold twice. A criminal complaint may then sit alongside the civil claim. It does not replace it, and it rarely returns money on its own.
Building completion insurance and other developer security
Turkish rules on prepaid housing sales (on odemeli konut satisi) aim to protect people who pay before a home exists. They can require the developer to take out building completion insurance (bina tamamlama sigortasi). Some developers offer another form of security instead, such as one issued by a bank. If you bought off plan, check whether your developer arranged this insurance or other security. Whether the rules required one for your project depends on when you bought and the kind of project. Get advice on that point before you rely on it.
A completion policy is meant to protect the buyer, not the developer. If the developer cannot finish, the insurer may arrange for the building to be completed. Depending on its terms, it may instead refund what you paid. Where a valid policy exists, it can change your position a great deal. The policy sets out what is covered and what is excluded. Limits apply, so read the terms with a lawyer.
To find out whether a policy covers your unit, work through these checks.
Read your sales contract and any information form you were given before signing (on bilgilendirme formu). It may state whether insurance or other security was arranged.
Ask the developer in writing for a copy of the policy and any certificate issued to you.
Check that the policy names your unit and names you, as buyer, as the person it protects.
Contact the insurer named on the policy. Ask it to confirm in writing that the policy is in force and covers your unit.
If the developer is bankrupt or in concordat, ask the bankruptcy administration or the commissioner what security is in place.
If a policy exists, tell the insurer as soon as the work stops or the developer fails. Notice rules and time limits apply. A claim under the policy is separate from a claim in the bankruptcy or concordat. Your lawyer can advise on how the two fit together, so that pursuing one does not harm the other.
Some buyers find that no policy was ever arranged. There is then no insurer to claim against. Your position rests on your contract and on what is registered at the land registry. The missing policy may still help you. If the rules required one, the failure may support your claim against the developer. It may also support a complaint to the Ministry of Trade (Ticaret Bakanligi). A complaint does not by itself return your money. Do not sign a release or new terms that give up these points without advice.
Practical steps once the developer has failed
Speed matters, because other creditors will act quickly. Time limits run in both bankruptcy and concordat. Run the same checks now to see where you stand today. If you have not yet bought, you can protect yourself before paying. See our guide to the risks of buying off plan.
Gather every document: the contract, receipts, bank transfers and messages with the developer and agent.
Check the land registry record for the plot and your unit. See whether construction servitude exists and whether anything is annotated in your favour.
Find out the company's status. Is it bankrupt, in concordat or simply silent?
Have someone visit the construction site and record how far the work has gone.
Lodge your claim on time if a bankruptcy or concordat is open.
Where the developer is not yet formally insolvent, a court may grant interim measures. A precautionary injunction (ihtiyati tedbir) can stop your unit being sold to someone else. A precautionary attachment (ihtiyati haciz) can secure assets, such as a bank account, for a money claim. Courts may ask you for security first. These tools work best before assets disappear.
Buyers in the same building often face the same problem. Working together can share costs and add weight at a creditors' meeting. Some owners arrange to finish the build with another contractor. That needs agreement, money and a careful legal structure. Each buyer still needs advice on their own contract.
A finished building needs an occupancy permit (yapi kullanma izni). Once the permit is issued, construction servitude normally converts to condominium ownership (kat mulkiyeti). Without the permit, connecting utilities and selling the unit can be harder. Buyers who finish a build themselves should plan for the permit from the start.
Some buyers dealt with a UK agent or a company with a presence here. A claim in England and Wales may then be possible. Read more about civil litigation in the UK courts. Whether it is worth pursuing depends on who you contracted with and where their assets are.
When to take advice
No general guide can tell you exactly what happens if your Turkey property developer goes bust in your own case. Take advice as soon as you hear that a developer is in difficulty. Do not wait for a formal announcement. Delay can cost you the chance to lodge a claim or secure an asset. Take advice before you sign anything new, too. Struggling developers sometimes ask buyers to pay more or sign revised terms.
A lawyer qualified in Turkey can read your documents, check the land registry and see what is filed in court. A lawyer who also practises in England can explain the UK side plainly. Canko Law Firm is a boutique firm of UK solicitors and Turkish lawyers. We act for clients across Turkey, including Antalya, Bodrum, Fethiye, Kalkan and Marmaris.
Meetings can be in person, by phone or by video. For the wider rules, see our guide to property law in Turkey. You can also read about our Turkish real estate lawyer service. We cannot promise an outcome. We can tell you where you stand and what your options are.
Common questions
Is my unit safe if the title deed is already in my name?
Generally, yes. A unit registered to you is your property, not the developer's. Unpaid charges or disputes over the land can still cause problems, so check the record.
Can I get my money back if the developer goes bankrupt?
You can lodge a claim in the bankruptcy. If your claim is unsecured, you may recover only part of it. Registered rights and early action improve your position.
Do I need to travel to Turkey to make a claim?
A lawyer in Turkey can act for you under a power of attorney. The power of attorney must meet formal rules, so get advice before signing one.
What if the developer has simply vanished?
Check the company's status and the land registry record. A court may still grant interim measures against its assets. A criminal complaint may also be appropriate.
Can I claim against the agent who sold me the property?
Possibly, depending on what the agent promised and who they acted for. The answer turns on your documents and where the agent is based.
Does building completion insurance cover every off plan unit?
Not necessarily. It depends on whether the developer took out a policy and what that policy covers. Ask for the policy and check that your unit is named.
What happens to my unit if the landowner ends the flat for land agreement?
It depends on whose share your unit was in and how far the work went. You may be left with a money claim against the developer, so act early.
Should I keep paying instalments to a developer in difficulty?
Take advice first. Paying more may increase what you stand to lose. Stopping without a proper legal basis may put you in breach of contract.
Can the bank take my unit if it holds a mortgage on the plot?
Possibly. Check the land registry record before you pay anything more.
Related reading
If this affects you, you can book a consultation with Canko Law Firm.
