TÜRKIYE Law and Practice Contributed by: Serkan Gül, Nazım O Kurt and Türkay Avanaş, Hergüner Bilgen Üçer Attorney Partnership
landlord instead of following the above proce - dure.
of Obligations, owners are responsible vis-à- vis third parties. In the event that owners are required to pay compensation to third parties, they are entitled to have recourse to their con - tractor. At the contractor level, design and con - struction work is outsourced through subcon - tractors that are hired by contractors. 7.3 Management of Construction Risk Contractors generally assume the construction risk of a project; thus, limitation of the contrac - tors’ liability is not very common. Moreover, clauses containing waivers, indemnifications and limitations of liability in favour of contrac - tors are not generally accepted by courts. 7.4 Management of Schedule-Related Risk Provisions on schedule-related risks are subject to freedom of contract; therefore, parties may agree on certain milestones and penalties. This is commonly used in practice. As per the law, an owner is entitled to compensation if the con - tractor does not comply with the milestones and deadlines specified under the agreement. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Parent guarantees, performance bonds (bank letters of guarantee) and retentions are com - mon securities given by contractors. Request - ing guarantees from contractors is common for valuable lands where the owners have negotiat - ing power. Another method that is often used in tranches but not necessarily in high-profile construction projects is the exchange of negotiable instru - ments (eg, bonds or cheques). While negotiable instruments are ordinarily used to settle out- standing debts, they are sometimes used as security in construction agreements.
7. Construction 7.1 Common Structures Used to Price Construction Projects Structures used in the global market (turnkey and cost-plus-profit) are also used in the Turkish market. Turnkey structures are commonly used in public tenders. For private deals, turnkey or cost-plus-profit structures may be used depend - ing on the commercial agreement of the parties. Moreover, a unique method that is commonly used that was created for construction to be made over private party land is known as “con- struction in return for flat” . Under this structure, the contractor constructs the building without receiving any cash payment. The owner makes the payment to the contractor in the form of a flat or flats; accordingly, the owner and contractor share the flats in the constructed building in line with a ratio determined under the agreement (eg, 55% for the owner and 45% for the contractor). The owner does not make any other payment for the construction. Revenue sharing, which is a structure that resembles ordinary partnership, has been gain - ing traction in the market recently. Revenue sharing involves the contractor taking on the construction and sale activities, and the land - owner and the contractor sharing the collected revenues in previously agreed ratios. 7.2 Assigning Responsibility for the Design and Construction of a Project Contractors assume the responsibility for con - struction of a project through construction agreements. However, as per the Turkish Code
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