In mass housing projects, the failure to deliver residential units by the date specified in the contract (i.e. late delivery) is a frequently encountered problem today. Especially in consumer law, the delays in delivery give rise to significant losses for buyers and implicate important legal rights. This article examines the legal consequences of late delivery, the rights of the consumer, in light of Turkish Court of Cassation (Yargıtay) case law. Additionally, key issues such as contract termination, penalty clauses, and the statute of limitations are discussed in this context.
Contractual Delivery Period and the Concept of Late Delivery
In real estate sale contracts signed between a consumer (buyer) and a seller (contractor), it is agreed that the residential unit will be delivered within a certain period. According to the Turkish Consumer Protection Law (Law No. 6502), in prepaid housing sales the delivery period can be at most 48 months from the contract date (prior to a 2022 amendment, this period was 36 months). The parties may agree to a shorter period, in which case the seller is bound by that agreed timeframe. If the specified delivery period expires without the home being delivered, the seller falls into default. Under the Turkish Code of Obligations, if a firm deadline (fixed date) for performance is stipulated in the contract, then upon the expiration of that period the obligor (contractor) is deemed to be in default without the need for any notice.
According to the settled case law of the Court of Cassation’s General Assembly of Civil Chambers (Yargıtay Hukuk Genel Kurulu), failure to deliver a residence on time is not considered a defective performance (ayıplı ifa) but rather a failure to perform the obligation at all (non-performance due to delay, i.e. debtor’s default). For this reason, once the delivery period has passed, the obligor who has not delivered the property is deemed to be resisting performance (in default), and the buyer gains certain elective rights. The Court of Cassation emphasizes that the loss arising from late delivery of a home is essentially the loss of rental income. In other words, because the buyer did not receive the property on time, they may claim as damages either the rent they had to continue paying for other accommodation, or the rental income they could have earned had the property been delivered on time.
On the other hand, in some contracts sellers attempt to include provisions stating that the buyer cannot claim any rent in case of delayed delivery. For example, some contracts include clauses like “the buyer cannot rent out the unit before installment payments are completed” or “no rent can be claimed in case of delay.” However, such one-sided provisions against the consumer are not legally valid. Indeed, the Court of Cassation has explicitly underlined that the presence of a clause in the contract such as “the property cannot be rented out before installments are finished” does not eliminate the buyer’s statutory right to compensation for delay under the Code of Obligations. Therefore, even if the contract contains a contrary provision, in the event of late delivery the consumer may still exercise the rights granted by law.
Consumer’s Alternative Rights in Case of Late Delivery
If the property is not delivered by the agreed deadline, the consumer (buyer) has three fundamental alternative remedies under the Turkish Code of Obligations and relevant Court of Cassation precedents:
- Demand specific performance and compensation for delay: The buyer may choose to continue with the contract, insist on receiving the property, and also demand compensation for the losses suffered due to the delay. In this case, although the property is delivered late, the buyer can claim from the seller the damages incurred during the period of delay – most notably delay compensation for lost use, typically measured by rental value (explained in detail below).
- Rescind the contract (terminate) and claim negative damages: The buyer may unilaterally terminate the contract (exercise the right of “rescission” or contractual cancellation), thereby foregoing the property altogether. In this scenario, the buyer can request a refund of the price paid and compensation for expenses and interest, i.e. their reliance losses (menfi zarar, negative damages). Upon rescission, the contract is treated as if it never existed, and both parties must return what they have received: the consumer gets back any down payments and installments paid, while the seller may have to compensate the buyer for delay-related losses as well (this is discussed further below).
- Forgo performance and claim positive damages: This third option is rarer in practice. Here, the buyer gives up on delivery of the property but seeks expectation damages (müsbet zarar, positive damages) arising from non-performance of the contract. Positive damages represent compensation for all expectancy interests of the buyer – essentially the gains the buyer would have obtained if the contract had been duly performed. For example, if the market price of the property has risen and the buyer had to purchase a different property at a higher price due to the breach, the difference could be claimed as part of positive damages. However, in consumer transactions, buyers typically resort to either enforcing the contract (with delay compensation) or exercising the right to terminate, rather than pursuing positive damages.
These alternative remedies are rooted in Article 106/II of the former Code of Obligations (Law No. 818, now repealed) and Article 125 of the current Turkish Code of Obligations (Law No. 6098). The Court of Cassation’s General Assembly has affirmed that when an obligation is not performed, the creditor (here, the consumer) has these three optional rights, and the buyer may choose whichever option is most appropriate for their situation. In practice, consumers most often opt to both take delivery of the home and simultaneously seek compensation for the delay. This approach is natural since the need for housing continues, yet the buyer also wishes to remedy the losses incurred during the period of delay. However, if the delay has been extremely prolonged and the consumer has lost faith in the seller, then rescinding the contract and demanding a refund can be a compelling choice.
Delay Compensation and the Right to Claim Lost Rent
Delay compensation (gecikme tazminatı) refers to the reimbursement of the consumer’s financial losses resulting from the seller’s (contractor’s) failure to deliver the property within the agreed time. Foremost among these losses, as noted above, is the loss of rental income. If the property had been delivered on time, the buyer would not have had to incur certain costs or lose certain income. For example, a consumer whose home is delivered late can claim, as compensation, the rent payments they had to make elsewhere during the delay, or the rental income they were deprived of because they could not rent out the property during the delayed period.
It should be emphasized that even if the contract does not contain any clause stipulating a penalty or rent payment for late delivery, the consumer is still entitled to claim damages arising from the delay. This point is clear in both legal scholarship and case law. Notably, in a recent decision of the 15th Civil Chamber of the Court of Cassation (E.2019/3047, K.2020/2498), the court stated:
“Even if the contract does not include a provision for payment of delay compensation, if the contractor is late in delivery, pursuant to Article 106/II of the Code of Obligations the buyer may request delay compensation in an amount not less than the monthly prevailing rental value.”
In practice, even if the contract signed by the consumer contains no clause such as “rent shall be paid in case of late delivery,” courts will typically determine the appropriate compensation for the delay by having an expert assess the market rental rate for the property during the period of delay, and then award the buyer that amount in damages.
The main category of loss that can be claimed due to late delivery is “rent compensation,” but it may not be the only item. If the consumer has faced additional financial burdens because of the late delivery (for instance, having to pay mortgage installments and rent for alternative accommodation at the same time), they may also claim those related losses (such as interest paid on loans, etc.) as part of their damages. It is important to note, however, that this scenario assumes the consumer is upholding the contract – meaning the consumer ultimately takes delivery of the property (albeit late). If the consumer has rescinded the contract (decided not to take the property at all), then they can no longer claim delay compensation (loss of use/rent), because once the contract is terminated, there is no basis to claim for not having use of the property. In case of rescission, the consumer’s claims are instead limited to recovering the amounts paid and other negative damages such as interest (this aspect is discussed in the next section).
A penalty clause (cezai şart, essentially a delay penalty) is a contractual term wherein the parties pre-determine a sum to be paid in the event of late performance. In many mass housing contracts, one encounters provisions like: “if the unit is not delivered on time, a penalty of X TL per month of delay shall be paid.” If such a penalty clause exists in the contract, the consumer can demand the specified amount without needing to prove their actual loss. In legal doctrine, this type of clause is called “penalty attached to performance” – in other words, the contract will still be performed (the buyer will eventually get the property), but an additional penalty is imposed for the delay. According to Article 182 of the Turkish Code of Obligations, if the agreed penalty is unreasonably high, a judge may reduce it; however, a delay penalty set at a reasonable level will generally be enforced as written. One point to be aware of is that even if a penalty for delay is stipulated, if the consumer’s actual losses exceed that amount (and the contract does not clearly state that the penalty is the upper limit of compensation), the consumer can claim the excess loss under general principles of liability. In practice, though, most consumers will be content to claim the contractual penalty if one exists; if not, they claim the factual losses such as the lost rent and other expenses described above.
Termination of the Contract and Right to Refund
One of the important rights of the consumer in case of late delivery is the right to rescind the contract, i.e. terminate the contract and demand a refund of payments. If the delivery of the property is delayed beyond what is reasonable, or if the consumer no longer has confidence in the seller, this right can be exercised. The Consumer Protection Law and related regulations grant consumers the possibility to withdraw from the contract under certain conditions. Notably, in prepaid housing sales, the consumer has the right to withdraw from the contract without any reason within 24 months of the contract date (this is separate from any short-term “cooling-off” right). After this 24-month period, and up until the transfer of title or delivery date, the consumer can still rescind the contract – without any penalty – if there is a valid reason such as the seller’s failure to fulfill obligations. Failing to deliver the property within the promised time constitutes a failure to perform the seller’s primary obligation; therefore, in such a case the consumer may terminate the contract without paying any penalty. Indeed, the law provides that in termination situations caused by the seller’s fault, the seller may only charge the consumer for legally required formal expenses up to that point, and no other deductions can be made from the refund.
When a consumer exercises the right of rescission, they can demand a refund of all amounts paid to the seller. In addition, the consumer may request statutory interest on those payments from the date each payment was made, since the seller has unjustly benefited from the consumer’s money in the meantime. If the consumer had taken out a housing loan (mortgage) to pay for the property, upon termination of the contract the loan would need to be settled and any installments paid should be returned. In cases of a tied credit (where the loan was provided by a bank in cooperation with the seller for that specific project), if the consumer exercises the right of rescission, the credit institution (bank) becomes jointly liable with the seller for refunding the consumer, up to the amount of the loan. For example, if under an arrangement between the contractor and a bank a special loan was given for a certain housing project, and the property is never delivered or delivered extremely late, the bank and the seller are jointly responsible to the consumer for the amount of credit that was extended. This rule is intended to protect consumers and helps ensure that they are made whole in such situations.
If the contract is terminated (rescinded), the consumer’s claim for damages is, as noted above, limited to reliance losses (menfi zarar). In other words, the consumer may claim for losses they incurred that they would not have suffered had the contract never been made. Examples include: refund of the down payment and installments paid, title deed fees or taxes, the burden of any loan interest paid, and costs of formal notices or legal fees, if applicable. Expectation damages (olumlu zarar, lost expected profit) are generally not claimable upon rescission, since the contract is treated as nullified and any future profit expectation is not legally protected once the contract is dissolved. On the other hand, if the contract provides for a “penalty in favor of the consumer in case of delay” and the consumer wishes to enforce that instead of terminating the contract, this means the consumer is choosing to keep the contract in force (not to rescind) and hold the seller to perform. Typically, termination and contractual penalty remedies do not go together: if the consumer uses the right to terminate, they may not be able to claim the penalty clause (because a penalty for delay is a sanction contingent on the contract’s performance being delayed, and once the contract is ended, that clause no longer has effect). Therefore, a consumer should carefully evaluate their contractual rights before deciding on termination.
Statute of Limitations and Preserving Rights
Exercising the rights arising from late delivery in a timely manner is crucial to avoid losing those rights. Consumers often wait for years for their homes to be delivered, and during this period they postpone seeking compensation for their losses. However, due to statutes of limitation and certain legal presumptions that prolonged inaction might trigger, it is advisable not to delay in asserting one’s rights.
Under the Turkish Code of Obligations, the general statute of limitations for claims arising from a contract is 10 years. The Court of Cassation’s General Assembly has also noted that if a home is delivered late, the buyer may “at any time demand performance and delay compensation,” but this must be done within the applicable limitation period. In other words, if the consumer does not file an action for performance and delay damages within, in principle, ten years, they could face a time-bar objection. This 10-year period can vary based on the specifics of the situation; generally it starts from the date the property is actually delivered to the consumer, or if the contract was rescinded, from the date the seller received the notice of rescission. For example, if a property that was supposed to be delivered in 2015 was actually delivered in 2018, and the consumer took delivery in 2018, then the consumer should file any claim for delay compensation by 2028 at the latest. If the property still has not been delivered at all, even though losses continue to accrue each day, it is nonetheless important to initiate legal action within a reasonable time and not let the delay stretch on indefinitely before seeking relief.
Conclusion
In mass housing projects, the late delivery of a residential unit grants the consumer significant rights arising from the contract and the law. If a property is not delivered on time, consumers should either continue with the contract and seek compensation for the delay, or terminate the contract and pursue a refund of what they have paid. In both scenarios, the statutes and Court of Cassation case law have evolved in a manner protective of the consumer. Notably, the right to delay compensation (for lost rental value) is recognized even if it is not explicitly provided in the contract, and this has been supported by precedent decisions of the Court of Cassation. Additionally, if there is a contractual penalty clause, the consumer may seek to have it enforced. At the same time, circumstances beyond the seller’s control (such as force majeure) are treated as exceptions, but under normal conditions it is accepted that the seller must bear responsibility for losses caused by delay.
In conclusion, if you are a consumer faced with a late delivery in a mass housing project, you should carefully review your contract and evaluate your rights with full awareness. If necessary, with the help of a legal professional, take timely steps such as sending a formal notice (ihtarname) or filing a lawsuit in the consumer court. It should be kept in mind that the legislation and court decisions strongly protect the consumer’s rights to compensation and termination when a property is not delivered within a reasonable time. Asserting these rights decisively will not only remedy your individual grievance but also contribute to a more disciplined and responsible functioning of the sector.
Attorney and Mediator Fatih Mehmet Tercan