How does ownership and the process work in urban transformation?

For those living in buildings at risk of earthquakes or that have reached the end of their structural lifespan, urban transformation is a way to move to a safer and more valuable living space. However, the process can seem complex and unclear to many. In this article, we discuss how urban transformation works and how entitlement is determined.

What is urban transformation?

Urban transformation is the process of demolishing risky or disaster-prone structures and constructing safe buildings that meet current building standards in their place. It is carried out under the Law No. 6306 on the Transformation of Areas Under Disaster Risk.

In urban transformation processes, it is essential to properly plan the process from the outset. Otherwise, a process that begins with a flawed plan can bring together many negative consequences, leading to both delays and significant hardship for rights holders and investors. Therefore, it is necessary to complete all necessary planning before starting the process and only then initiate it.

How is ownership determined?

The ownership calculation begins with the current zoning regulations: the buildable area of the plot according to current zoning conditions is determined. This buildable area is distributed among the rights holders in relation to the land share ratio of each independent unit within the building. Furthermore, the share/ratio to be left to the contractor undertaking the project is another important item that needs to be clarified at this stage.

These calculations are based on the following factors:

• The current value of the existing structure as determined by the valuation report.

• The buildable area of the plot according to the current zoning regulations.

• Land share ratio of each independent unit

• Share/percentage to be allocated to the contractor

• The profit-sharing ratios in the new project will vary depending on the model (such as land-for-construction, revenue-sharing, etc.).

At this point, an independent and impartial valuation report is critical to ensuring a fair distribution among the rights holders.

How does the process work?

1. Risk Assessment of Buildings: The building is inspected by authorized institutions/organizations (or licensed laboratories) and a risk assessment report is prepared.

2. Annotation on Title Deed: The decision regarding the building being at risk is recorded in the title deed.

3. Eviction Process: Current owners are given a total of 90 days (60 days + 30 additional days) to vacate the building. Vacation is mandatory at the end of this period; subsequently, subscriptions for water, electricity, and natural gas are cancelled (this has now become mandatory with a recent legislative change).

4. Demolition: The building is demolished after obtaining a demolition permit from the relevant municipality. During this process, relocation assistance and rental assistance may be provided to the property owners.

5. Ownership and Agreement Model: Shares are netted according to the valuation report; one of the models such as land-for-construction, revenue sharing, or cash agreement is determined.

6. New Project and Construction: A new building is constructed after reaching an agreement with a contractor.

7. Delivery: The new individual units are delivered to the rightful owners.

Why Should You Seek Consulting?

In urban transformation, fair distribution depends not only on the accurate calculation of ownership percentages but also on the correct determination of value appreciation – differences arising from factors such as location, facade, and floor level. If these value differences are not accurately determined, an unequal distribution among rights holders may occur. Furthermore, the technical (structural, zoning) and legal (ownership, contractual) aspects of the process are intertwined; obtaining independent valuation and consultancy support at the beginning of the process will both save time and ensure the protection of your rights.

At DDD Real Estate, we evaluate urban transformation processes holistically, considering property value, ownership rights, goodwill, and implementation alternatives.

If you would like to receive consultancy regarding your urban transformation process, you can contact us.