One of the biggest concerns of flat owners in urban transformation practices that accelerate the construction industry, which is the locomotive of our country's economy, is whether the contractor they have agreed with for the reconstruction of their buildings has the economic power to carry out the construction they have undertaken.
Especially in districts with high comparable values, construction of renovated buildings through urban transformation practices in return for land share turns into very profitable investments for contractors. As such, many new construction and contracting companies that want to invest their cash appear as actors in the market. When evaluating the projects and offers offered by contractors, flat owners rightfully want to see and know the economic power of the companies they are dealing with. Especially in the rapidly increasing urban transformation projects in the Kadıköy region, newly established contractor companies bring with them many question marks for flat owners. For this reason, in urban transformation projects, the most concrete data showing economic power is the bank letter of guarantee.
Contractor companies provide a kind of guarantee for the completion of the construction by presenting bank letters of guarantee to the flat owners at the times and amounts agreed in the contract, as a guarantee of all their obligations arising from the contract. Although there are no legal restrictions in determining the amount of the guarantee letter, it is generally proportional to the construction cost or rental fees.
As CVG Law Firm, we think that it is best for both parties to distribute the letters of guarantee equally to the amount agreed in the Contract and give them piecemeal. For example, the contractor company with whom it agreed for the reconstruction of a building within the scope of urban transformation, committed to provide a letter of guarantee in the amount of 1,500,000 TL after the contract was signed by all flat owners. In this example, the most equitable solution is to give 3 letters of guarantee in the amount of 500,000 TL and return them to the contractor piece by piece according to the progress of the construction.
IMPORTANT DETAILS ABOUT LETTERS OF GUARANTEE:
- We recommend that the bank guarantee letter be obtained as soon as the Contract is signed by all flat owners in the presence of a Notary, or when the last floor owner delivers his flat to the contractor firm, free from all debts.
- It should be stated in the text of the bank letter of guarantee that the letter is definitely a letter of guarantee. Preferably in the text; " upon your first written request stating that the contractor company has not fulfilled its obligations arising from the contract, payment will be made in cash and in full without the need for a protest, the issuance of judgments or the permission of the said company ."
- Issuing the letter of guarantee in the name of all flat owners makes it almost impossible to convert it into cash. Because it is very difficult for all flat owners to come together at the same time and make a request. Our recommendation is that the letter be issued on behalf of a representative committee selected from among the flat owners and that this committee be given the authority to convert the letter into cash.
- The duration of the letter of guarantee is also very important. It is very rare in practice for banks to generally issue indefinite letters of guarantee, so we recommend that the maturity of the letters of guarantee be 3-6 months after the end of the construction period promised in the Contract. Because it generally takes between 3-6 months for the settlement application to be finalized after the construction is completed, and in order for the flat owners to feel safe until the settlement is received, it would be appropriate for the maturity of the letter of guarantee to include the period for settlement.
As can be seen, every detail of the contract for the reconstruction of buildings in the urban transformation process is extremely important, and the importance of receiving professional consultancy services throughout the process becomes evident every time. As CVG Law Firm, we recommend that you get professional legal support during the process of acquiring your new and solid building.
For More Detailed Information:
| Hunting. I. Can Çayırpare | email: can.cayirpare@cvghukuk.com | Tel: 0532 474 30 35 |
| Hunting. B. Güven Cem | email: guven.cem@cvghukuk.com | Tel: 0533 740 86 28 |
| Hunting. Volkan Önkibar | email: volkan.onkibar@cvghukuk.com | Tel: 0535 662 61 06 |
