In our bulletin we will investigate conditions of validity and termination of promise to sell of real property which is often applicable in practice.
The promise to sell is a preliminary contract providing claim rights to conclude of a real property sales contract. By the preliminary contract parties express their wills to conclude the principal contract. If one of the parties refuses to execute his obligations, then the other party becomes entitle to claim the execution of obligations by the other party.
Promise to sell has a boundary power in respect to the main contract in case it should be prepared according to procedure which is provided by law. According to Articles 60/3 and 89 of Notaries’ Act, promise to sell should be prepared by notary public in order to acquire its validity. In case of conclusion of promise to sell before notary public, the parties express their wills to conclude the main contract. It is important that wills of both parties should be expressed clearly. In case only one party expressed his will the contract may not be deemed to be a promise to sell. Under doctrine and judicial practice, promise to sell may be concluded before the Land Register; Turkish law does not provide this though. As registrars of Land register are authorized to register the main contract therefore they also may register the promise to sell.
The promise to sell provides to promisee personal rights but not real rights. Each of parties may request registration of the promise to sell to the Land Register. In case of certification of contract proceeded at the Notary Public in a legal way, even the contract is not registered to the Land register, it still will be deemed valid. However, in this case the promisee may not claim against third persons by virtue of the Land register records. In case of registration of contract at the Land register, a power of the personal rights strengths and may be used against third persons. Under Article 26/6 of Land Register Act, sale, seizure, lien or similar easements may not be registered to the Land register within 5 years from registration of the promise to sell to the Land register. Promise to sell registered to the Land register impacts legal consequences for both parties within ten years.
Technically, promise to sell of a real property is not possible if a real property was not registered to the Land Register. The decision of 8th Civil Chamber of Supreme Court E.1996/9378 K.1997/4125 dated 26.06.1997 provides that: “promise to sell of a real property that is not registered to the Land Register is not a promise to sell in a real sense.” Without a title deed, the person ownership on the real property cannot be deemed beyond the right of possession. Therefore, a contract of promise to sell of a real property without a title deed cannot be assessed as a proper contract in a real sense. Even this contract is invalid it may be accepted as a sale contract which aims to transfer the right of possession.
Other condition of promise to sell of a real property contact is that the real property should be determined or determinable. 14th Civil Chamber of Supreme Court has been explained this matter in a decision dated 01.03.2004 with 2003/8604 E. and 2004/1301 K. as “it can be say that the real property subject to promise to sell contract have been deemed a determinable nature, if the real property is identifiable and assignable as a result of examination which made by the court. The principal rule is that contracts should be interpreted in the way that enables the contract to be fulfilled. Therefore, the real property subject to the contract may be accepted as determinable and identifiable if the real property subject to the contract of promise to sell was shown in general and in details in the contract and if can be understood which property meant from other evidences except the contract.” As matter of this fact, the contract of promise to sell will be valid if there are sizes, sketches or other documents which are determining the property.
On the other hand, other essential validity condition of promise to sell contract is that consideration for sale should be determined in the contract. In case of the consideration was paid, in term of contracts the promisee may claim cancellation and registration to Land register. In connection to this, 14th Civil Chambers of Supreme Court has been explicitly underlined in a decision dated 13.03.2007 and 2007/1266 E. 2007/2679 K. that in order to claim cancellation and registration to the Land register, consideration determined in the contract should be paid by the promisee. Also, the Supreme Court has been expressed in a similar case that in certain conditions the plaintiff is entitled to claim registration to the Land register by force. However, if the promisee did not pay the consideration then the promise to sell contract can be cancelled and the annotation put onto the title deed may be erased.
Besides that, the person who is not the owner of the real property can also make a contract of promise to sell. However, the fundamental point is having ownership of the real property by the promissor at the time of main sale contract. Otherwise, the real property sale contract will be invalid.
If there is common ownership and the shares were definite, promise to sell contract will be valid if it was related to certain parts or whole part of the shares.
14th Civil Chamber of Supreme Court has been decided in decisions dated 03.07.2003 2003/3550 E. 2003/5635K. and 2005/3017 E. 2005/3871 K. dated 25.04.2005, if a shareholder was made a promise to sell agreement with somebody apart from the shareholders on the property which was subject to common property regime, in which case this agreement will be valid as a commitment deal. However, the Supreme Court has been underlined that it is impossible the fulfillment of agreement until dissolution of common ownership. In the said decision the promise to sell contract became valid because the common ownership on the property becomes a joint ownership.
Not only the said decisions of Supreme Court but also according to 14th Civil Chambers of Supreme Court decision which was 2006/8419, 2006/10289 K. and dated 02.10.2006, unless the common ownership is turn into joint ownership, the promise to sell contract cannot be fulfilled.
In brief, contracts were made for selling shares of the property are valid when the property was subjected to joint ownership. Consequently, it can be claimed to sale of the said property on base of these agreements. In case of existence of common property regime, it cannot be fulfilled of the promise to sell contract unless common ownership is turn into joint ownership or dissolution of the common ownership.
Termination of the Promise to Sell
The promise to sell terminates with non-execution of obligations or annulment of the contract. According to the promise to sell, its obligations deemed to be executed if consideration of the real property paid by the promisee, and property rights for this real property are transferred by another party – promissor.
According to the decision of 15th Civil Chamber of Supreme Court E.1993/3539, K.1994/830 dated 17.02.1994, in case the promise to sell concluded at the notary public is not terminated, it is deemed valid and boundary for both parties. In this case each parties has right to claim the execution of obligations from another party. However, under Articles 20 and 117 of Turkish Code of Obligations, in case of impossibility of execution of the contract, parties are not entitled to claim the execution from another party.
Under Article 81/2 of Notaries’ Act, due to the necessity of the promise to sell to be concluded before the notary public, the contract’s termination also should be proceeded before the notary public. The parties should proceed with the termination in accordance with the relevant procedure.
According to Article 106 of Turkish Code of Obligations, another contract’s termination way is notification of termination initiated by one party in case of non-execution by another party. In case the contract is not terminated and the party incurred damages arisen from non-execution of obligations by another party, he may claim indemnification of these damages and execution of the obligations.
According to the aforementioned article, a plaintiff is entitled to choose one of the mentioned rights in case of another party’s default. The plaintiff may claim contract’s termination, indemnification of damages and execution of obligations as well.
One of the main reasons for contract’s termination is time prescription. Under Article 125 of Turkish Code of Obligations, promise to sell is subject to the time prescription of 10 years.
According to the decisions of 14th Civil Chamber of Supreme Court E.2000/2066 K.2000/2448 dated 13.04.2000 and E. 2003/3550 K.2003/5635 dated 03.07.2003, in order to calculate time prescription, first of all, it is necessary to determine whether contract execution is possible or not. In the aforementioned cases, promise to sell of share of inherited common ownership to the third person in sense of undertaking of obligation is valid. However, the execution of this contract is deemed impossible until common property is dissolved. In this case, dissolution of common property means acquisition of possibility to execute the contract and time prescription will be calculated from the dissolution’s moment.
1. Yavuz, Cevdet (Prof. Dr. Cevdet Yavuz, Yrd. Doc. Dr. Burak Ozen, Yrd. Doc. Dr. Faruk Acar) “Turk Borclar Hukuku Ozel Hukumler”, 7.Baski, Beta Basim Yayim Dagitim A.S., Istanbul, 2007, s.198
2. Decision of 14th Civil Chamber of Supreme Court E. 2005/9207, K. 2006/1921, dated 22.2.2006
3. Surlu, Mehmet Handan “Aciklamali – Ictihatli Gayrimenkul SatiS Vaadi. SatiS Vaadine Dayali Tapu Iptali – Tescil. Elatmanin Onlenmesi Davalari”, Seckin, Ankara, 2007, s. 32
4. Yavuz, Cevdet (Prof. Dr. Cevdet Yavuz, Yrd. Doc. Dr. Burak Ozen, Yrd. Doc. Dr. Faruk Acar) “Turk Borclar Hukuku Ozel Hukumler”, 7.Baski, Beta Basim Yayim Dagitim A.S., Istanbul, 2007, s.199
5. Decisions of 1st Civil Chamber of Supreme Court E. 1984/6602, K. 1984/7623, 25.02.1984 dated, E. 1993/14023, K. 1993/16189, dated 29.12.1993, decision of 13th Civil Chamber of Supreme Court E.2005/13875, K. 2006/795, dated 27.01.2006
6. Surlu, Mehmet Handan “Aciklamali – Ictihatli Gayrimenkul SatiS Vaadi. SatiS Vaadine Dayali Tapu Iptali – Tescil. Elatmanin Onlenmesi Davalari”, Seckin, Ankara, 2007, s. 68
7. Surlu, Mehmet Handan, “Aciklamali – Ictihatli Gayrimenkul SatiS Vaadi. SatiS Vaadine Dayali Tapu Iptali – Tescil. Elatmanin Onlenmesi Davalari”, Seckin, Ankara, 2007, p. 97
8. Decision of 1st Civil Chamber of Supreme Court, 1984 E. K.1984/7623, dated 25.02.1984
9. Surlu, Mehmet Handan , “Aciklamali – Ictihatli Gayrimenkul SatiS Vaadi. SatiS Vaadine Dayali Tapu Iptali – Tescil. Elatmanin Onlenmesi Davalari”, Seckin, Ankara, 2007, s. 42
10. Surlu, Mehmet Handan “Aciklamali – Ictihatli Gayrimenkul SatiS Vaadi. SatiS Vaadine Dayali Tapu Iptali – Tescil. Elatmanin Onlenmesi Davalari”, Seckin, Ankara, 2007, s. 84
11. Decision of 13th Civil Chamber of Supreme Court E. 2005/10091, K. 2005/17180, dated 21.11.2005