Unexpected Construction Costs in Urban Transformation Projects: Rights of Property Owners (2026 Updated Guide)

Unexpected construction costs can create major disputes during urban transformation in Turkey. Learn when property owners may have to pay, when contractors may bear the cost, how to challenge additional demands, and how foreign owners can protect their property.

Unexpected construction costs are among the most difficult financial risks in an urban transformation project.

A building may already have been evacuated and demolished when the contractor announces that the original construction budget is insufficient. Owners may then be asked to contribute additional money for foundation work, structural changes, increased material costs, project revisions, additional safety measures or other allegedly unforeseen expenses.

For property owners, the crucial question is not simply whether the additional expense actually exists.

The more important question is: Who is legally responsible for paying it?

There is no general rule under which every unexpected construction expense automatically becomes the property owners’ responsibility. The answer depends primarily on the redevelopment agreement, technical specifications, agreed financial model, cause of the additional expense and contractual allocation of construction risks.

Similarly, a contractor does not necessarily have to absorb every conceivable additional expense.

Each demand should therefore be examined individually before owners agree to make further payments.

Lawyer Fırat Fesih Kaya assists foreign property owners with unexpected construction costs, additional-payment demands, contractor disputes, redevelopment agreements and unfinished urban transformation projects.

The Redevelopment Agreement Determines the Starting Position

The first document to examine is the agreement between the owners and contractor.

It should establish how the redevelopment project is financed.

In some projects, the contractor receives independent units or development rights instead of direct payments from the existing owners.

In other projects, owners agree to make specific construction contributions.

A third model may combine owner payments, contractor development rights and available public financial support.

Before discussing an unexpected cost, owners must therefore understand the original financial structure.

Does the Contract Use a Fixed Construction Price?

A fixed-price arrangement can be extremely important.

If the contractor agreed to complete specified construction works for a defined consideration, ordinary increases in the cost of performing those works do not automatically create a new debt for the owners.

Material prices may increase.

Labor costs may rise.

Financing may become more expensive.

The contractor’s profit margin may fall.

Those developments do not by themselves rewrite the agreement.

The contractor must establish a contractual or legally sustainable basis for requiring owners to contribute additional money.

What If the Contract Contains a Price-Adjustment Formula?

The situation can be different where the parties expressly agreed that the construction price may change.

A price-adjustment provision should be examined carefully.

It may refer to an objective index or another agreed calculation method.

The clause may identify particular categories of expenses that can be passed to owners.

Where such a mechanism exists, the contractor should calculate the additional amount according to that mechanism.

A price-adjustment clause should not automatically be interpreted as unlimited authority for the contractor to determine any new price.

What Counts as an Unexpected Construction Cost?

The expression can cover very different situations.

Unexpected ground conditions may require additional foundation work.

A structural examination may reveal the need for a different engineering solution.

Project approval may require modifications.

Utility infrastructure may need additional work.

The contractor may encounter unforeseen technical conditions.

Alternatively, what the contractor describes as an “unexpected cost” may simply be ordinary inflation, an inaccurate initial budget or work that was already included in the technical specification.

These situations should not be treated identically.

Unexpected Ground Conditions Can Create Major Disputes

Ground improvement can represent a substantial part of construction expenditure.

After demolition or excavation, additional engineering measures may sometimes become necessary.

The contractor may then request a substantial payment from the owners.

Before accepting the demand, owners should determine whether adequate ground investigations were carried out before the agreement, whether the additional condition was reasonably foreseeable and how the contract allocated ground-related risks.

A technical necessity does not automatically determine who bears its financial consequences.

Mandatory Project Changes May Increase the Budget

During the permitting and construction process, changes may become necessary to comply with applicable technical or administrative requirements.

The contractor may argue that these requirements were not known when the original agreement was signed.

The owners should request documentation showing the reason for the change.

They should also determine whether the work falls within the contractor’s original obligation to construct a legally compliant building.

Not every regulatory requirement should automatically be classified as an owner-funded extra.

Contractor Design Errors Should Be Distinguished From Genuine Unexpected Costs

Suppose additional construction becomes necessary because the contractor’s project was incorrectly prepared.

That situation is materially different from a genuinely unforeseeable external condition.

Owners should investigate why the additional work became necessary.

If the expense results from contractor error, inadequate planning or failure to comply with technical requirements, transferring the entire financial burden to owners may be disputed.

Technical evidence can be essential.

Poor Budgeting Is Not Necessarily an Unexpected Event

A contractor may simply have underestimated the true cost of construction.

The original offer may have been too low.

Material quantities may have been calculated incorrectly.

Expected sales revenue from contractor units may not have materialized.

These are commercial problems, but they do not automatically become owner debts.

The legal issue remains whether the contract permits the contractor to transfer those risks.

Inflation Should Be Analyzed Separately

Inflation can substantially affect long-term construction projects.

However, an increase in construction costs does not automatically entitle the contractor to issue a new price.

Owners should examine whether the contract is fixed-price or adjustable and whether it contains a mechanism addressing extraordinary cost changes.

Any broader claim for contractual adaptation requires a separate legal analysis based on the circumstances.

Owners Should Request the Exact Contractual Basis

When an additional payment is demanded, the contractor should be asked a simple question:

Which provision of the redevelopment agreement makes the owner responsible for this expense?

The answer can immediately clarify the dispute.

If the contractor relies on a particular clause, that provision should be examined together with the rest of the agreement.

If no contractual basis can be identified, owners should be cautious about recognizing the amount as a debt.

Owners Should Request an Itemized Cost Calculation

A substantial unexpected expense should not be presented merely as a lump sum.

The contractor should explain what work has become necessary, the quantities involved, the unit costs and how the total amount was calculated.

Owners should also understand how the expense is allocated among individual properties.

An unexplained demand that every owner pay the same large amount should be independently reviewed.

Technical Evidence Is Often More Important Than the Contractor’s Explanation

The contractor has an obvious financial interest in obtaining additional funding.

An independent engineer or other appropriate technical expert can determine whether the alleged additional work is genuinely necessary.

The expert can also examine whether the work was already included in the original project or technical specification.

For large claims, combining technical and legal review can significantly reduce owner risk.

The Technical Specification Should Be Compared With the New Demand

The redevelopment agreement should normally be accompanied by detailed technical specifications.

Those specifications can become decisive when unexpected costs are claimed.

Suppose the contractor requests additional money for insulation, fire-safety systems, mechanical installations or façade work.

If those items were already included in the agreed specifications, the contractor may be attempting to charge owners again for existing obligations.

Owners should preserve the original signed technical documents.

Owner-Requested Changes Are Different

Not all additional expenses should be challenged.

If an owner requests something beyond the agreed project, the owner may reasonably be required to pay the difference.

Examples can include higher-quality flooring, premium kitchen materials, different bathroom fixtures or individualized interior modifications.

The additional price should preferably be agreed in writing before the work is performed.

Additional Floor Area Can Also Create a Valid Additional Cost

An owner may agree to receive a larger replacement unit.

The redevelopment agreement may provide a price per additional square meter.

In that case, an additional payment may arise because the owner is receiving additional property value.

This should be distinguished from an unexpected general construction-cost demand imposed after demolition.

Common Costs and Individual Extras Should Not Be Mixed

A project may contain both common construction expenses and owner-specific modifications.

The cost of structural reinforcement affecting the entire building should not automatically be calculated in the same manner as an upgraded kitchen requested by one owner.

The nature of each expense should be identified before allocation.

Transparent categorization helps prevent disputes among owners as well as disputes with the contractor.

Must Every Owner Pay the Same Amount?

Not necessarily.

The correct allocation method depends on the agreement and the type of expense.

Owners may have different independent-unit sizes, ownership shares or agreed construction contributions.

Some expenses may relate only to particular units.

Others may affect the entire building.

The contractor should therefore explain why the proposed allocation method is contractually appropriate.

Ownership-Share Voting and Cost Liability Are Not the Same Thing

This distinction is especially important under the current urban transformation framework.

For new applications concerning risky-building parcels, decisions can generally proceed with the applicable simple majority calculated according to ownership shares where unanimity cannot be achieved.

However, majority decision-making rules should not automatically be interpreted as a general power to create any financial obligation against every owner.

Whether an owner must bear a particular unexpected construction cost also requires examination of the redevelopment decision, contractual terms and applicable legal framework.

Can the Majority Approve an Increased Construction Price?

Owners may collectively decide that additional funding is commercially necessary to save a project.

That decision can be important.

However, the legal consequences for each owner depend on the existing contractual structure and the urban transformation procedure being used.

A foreign owner who disagrees should not simply ignore the decision.

The formal notification and agreement process can have serious consequences for owners who do not participate in the applicable majority decision.

Current Notification Procedures Matter

Under the current framework, where unanimity cannot be obtained, the majority decision and agreement conditions must be communicated to non-participating owners through the prescribed procedure.

The 2026 regulatory changes also introduced standardized documents relating to owner meetings and notifications.

Owners should therefore distinguish informal messages from legally significant notifications.

Ignoring a formal notice because of a cost dispute can create additional risks.

Can the Contractor Stop Construction Until Additional Money Is Paid?

This depends heavily on whether the additional payment is actually due.

If the owners failed to pay an agreed construction installment, the contractor may have contractual remedies.

If the contractor has no established contractual basis for the new amount, stopping construction can instead raise questions concerning contractor default.

Owners should preserve written demands and any statement that construction will remain suspended until additional money is transferred.

A Stopped Project Requires a Wider Investigation

When construction stops, the problem should no longer be viewed only as a cost dispute.

Owners should determine the actual percentage of construction completed.

They should investigate whether workers and subcontractors remain on site.

They should determine what property rights have already been transferred to the contractor.

Mortgages, attachments and sales to third parties should also be checked where relevant.

The contractor’s financial condition may become as important as the disputed payment itself.

Unexpected Costs Can Be a Sign of Contractor Financial Distress

Repeated requests for additional money can indicate that the project has a deeper funding problem.

Warning signs may include unpaid contractor rent, slow construction, unpaid subcontractors, repeated requests for early property transfers and long periods with little activity at the site.

Owners should not continue injecting money into a project without understanding the contractor’s ability to complete it.

An Independent Completion-Cost Analysis Can Protect Owners

Where the project is already partially constructed, owners may need to determine how much money is genuinely required to finish it.

An independent technical assessment can estimate remaining work and completion costs.

This can help owners compare the contractor’s request with the actual financial requirements of the project.

It can also become important if the owners later consider replacing the contractor.

Do Not Automatically Transfer More Property to the Contractor

The contractor may request an additional independent unit or ownership interest instead of cash.

Owners should evaluate the market value of the requested property.

They should also consider how much work remains.

Giving valuable property rights to a financially distressed contractor without adequate safeguards can significantly increase the owners’ exposure.

Additional Funding Can Be Negotiated With Better Security

Sometimes additional funding is commercially necessary even though responsibility is disputed.

Owners may decide that completing the building is more important than immediately litigating every cost issue.

If so, additional payments should be structured carefully.

Payments can potentially be linked to measurable construction milestones rather than transferred entirely upfront.

Owners can also consider appropriate security mechanisms depending on the project.

Do Not Sign a New Protocol Without Legal Review

An “additional construction cost protocol” can change much more than the price.

It may extend the contractor’s delivery deadline.

It may eliminate previously accrued delay compensation.

It may modify contractor-paid rent.

It may change apartment allocations.

It may contain a broad release of claims.

Owners should therefore evaluate the entire document rather than focusing only on the payment amount.

The Contractor May Ask Owners to Waive Previous Delay Claims

This is particularly important where the project is already late.

Suppose owners have claims for ten months of delayed delivery.

The contractor offers to restart work if they contribute additional money but requires a new agreement replacing the original delivery date.

Signing without reservation could materially affect existing claims.

The economic value of those claims should be calculated before owners agree to new terms.

Public Financial Support Should Be Considered

Urban transformation projects can potentially benefit from public financial-support mechanisms where the applicable conditions are satisfied.

Available mechanisms can include rental assistance, credit support, grants or project-specific construction assistance.

The exact current support program and eligibility conditions should be verified for the particular property.

Public assistance can affect the project’s financing requirement but should not automatically be treated as changing the private contractual allocation of costs.

Public-Led Transformation Uses a Different Financial Model

Private contractor disputes should also be distinguished from certain public-led redevelopment projects.

Under the regulatory framework for public applications, the value attributed to an owner’s existing property can be compared with the construction cost of the replacement property.

If the relevant calculation results in the owner owing an amount to the competent public institution, the owner can become indebted under the applicable project structure.

That legally structured calculation is different from a private contractor unilaterally announcing an unexpected new construction price.

Can Owners Refuse to Pay an Unsupported Additional Cost?

Potentially, yes.

An owner is not automatically required to recognize every contractor demand.

However, refusal should follow legal review.

If the payment is actually required under the agreement, non-payment can place the owner in contractual default.

If the payment has no contractual basis, paying it without reservation can create unnecessary financial loss.

The correct approach is therefore to determine liability before acting.

What If the Owner Has Already Paid?

Payment does not necessarily answer every legal question.

If an owner later discovers that the amount had no valid contractual basis, potential recovery should be assessed according to the agreement, payment circumstances and applicable legal rules.

Evidence is essential.

Bank records, contractor demands, payment protocols and communications explaining why the payment was made should all be preserved.

What If the Contractor Cannot Complete the Project Without More Money?

Owners then face both a legal question and a commercial decision.

The contractor may have no clear contractual entitlement to additional money but may genuinely lack the resources to finish construction.

Owners must determine whether providing additional funding, restructuring the project, replacing the contractor or pursuing legal remedies offers the best protection.

Simply identifying who was originally responsible for the cost may not solve an unfinished-building problem.

Can the Contractor Be Replaced?

Potentially, depending on the circumstances and applicable legal framework.

The existing contractor agreement must first be addressed properly.

Work already completed, payments made, ownership rights transferred and third-party interests must all be considered.

A replacement contractor will also need to evaluate the cost of finishing the project.

Owners should therefore develop a completion strategy before ending the existing contractor relationship.

Serious Construction Stoppage May Trigger Additional Remedies

Where contractor failure becomes sufficiently serious, the urban transformation framework contains mechanisms that may become relevant in addition to ordinary contractual remedies.

The applicable statutory conditions must be established carefully.

Owners should not assume that every disagreement over additional costs automatically permits immediate termination.

However, where the contractor has effectively abandoned construction, waiting indefinitely while repeated payment demands continue may place the project at greater risk.

Can Owners Claim Damages for the Additional Cost of Completion?

Potentially.

If contractor breach causes owners to incur additional expenditure to complete the building, that expenditure may become relevant to a damages claim.

For example, a replacement contractor may charge significantly more to finish an abandoned project.

The owners would need to establish the original contractor’s breach, causation and amount of recoverable loss.

Technical and financial documentation should therefore be preserved from the moment problems arise.

Foreign Property Owners Should Independently Verify Unexpected Costs

Foreign owners managing their property from abroad can be particularly vulnerable.

They may receive an urgent message stating that every owner must immediately transfer additional money or construction will stop.

Before paying, the foreign owner should request the signed redevelopment agreement, technical specification, owner decision, detailed cost calculation and supporting technical documentation.

Independent review is especially important where the owner cannot personally inspect construction progress.

Foreign Owners Should Not Pay More Merely Because They Live Abroad

Nationality or residence abroad should not itself justify a higher construction contribution.

Different payments may be justified by different apartment sizes, additional floor area, upgrades or other objective contractual factors.

If a foreign owner is asked to pay substantially more than comparable owners, the calculation should be examined carefully.

Evidence Property Owners Should Preserve

Owners should retain the original redevelopment agreement, technical specification, architectural documents and allocation schedules.

All subsequent protocols and amendments should be preserved.

Written additional-cost demands should be saved.

Bank records and receipts should be organized.

Owner-meeting documents and formal notifications can be important.

Technical reports, photographs and progress records should also be collected where construction is delayed or stopped.

2026 Practical Legal Strategy

The first priority is identify exactly why the unexpected cost arose. Ordinary inflation, technical necessity, contractor error and owner-requested upgrades should not be treated as the same problem.

The second priority is review the original redevelopment agreement and determine which party assumed the relevant financial risk.

The third priority is compare the additional work with the original technical specification.

The fourth priority is request an itemized calculation and supporting technical documentation before recognizing any new debt.

The fifth priority is obtain independent technical review where the amount is substantial or the necessity of the work is disputed.

The sixth priority is separate statutory majority decision-making from private contractual liability for additional construction costs.

The seventh priority is do not sign an additional-payment protocol without checking changes to delivery deadlines, rent obligations, penalties and compensation rights.

The eighth priority is investigate the contractor’s financial condition where unexpected-cost demands are accompanied by construction slowdown or stoppage.

The ninth priority is if additional owner funding is commercially necessary, consider staged payments tied to independently verified construction progress and appropriate security.

The tenth priority is develop a contractor-replacement and completion strategy if the project becomes financially unviable rather than continuing unlimited additional payments.

The central principle is clear: unexpected construction costs do not automatically become property-owner debts. The cause of the expense, redevelopment agreement, technical specification, financial model and contractual allocation of risk must be examined before determining who is responsible for payment.

Frequently Asked Questions

1. Are property owners automatically responsible for unexpected construction costs?

No. Responsibility depends on the redevelopment agreement, the reason for the additional expense and the contractual allocation of risk.

2. Can the contractor charge owners because material prices increased?

Not automatically. Increased construction costs must be considered together with the contract’s pricing and adjustment provisions.

3. What if unexpected foundation work becomes necessary?

The technical necessity should be verified, but necessity alone does not determine who must pay. The agreement and allocation of ground-related risks should also be examined.

4. Can owners be charged for contractor design mistakes?

The reason for the additional work should be investigated. Costs resulting from contractor error should be distinguished from genuinely unforeseeable project conditions.

5. Can an owner be charged for optional upgrades?

Yes, where the owner requests work or materials beyond the agreed technical specification and accepts the additional price.

6. Can the majority of owners approve additional construction costs?

A majority decision can be legally important under the urban transformation framework, but statutory voting rules do not automatically determine every owner’s private contractual liability. The existing agreement and proposed new terms must also be reviewed.

7. Can the contractor stop construction if owners refuse an unexpected cost?

That depends on whether the payment is actually due. An unsupported demand does not automatically give the contractor a right to suspend contractual performance.

8. What should foreign owners request before paying?

They should request the redevelopment agreement, technical specification, detailed cost calculation, technical justification and relevant owner decisions or protocols.

9. What if the contractor repeatedly asks for additional money?

Repeated demands combined with slow or stopped construction may indicate financial distress. Owners should investigate project finances, construction progress and the remaining completion cost.

10. Can owners claim damages if another contractor must finish the project?

Potentially. Where the original contractor’s breach causes additional completion costs, those losses may become relevant to a compensation claim, subject to proof and the applicable legal requirements.

Legal Assistance With Unexpected Construction Costs

Unexpected construction costs can place property owners in a particularly difficult position because the original building may already have been demolished when the financial dispute begins.

Owners should not assume that they must pay merely because the contractor describes an expense as necessary.

At the same time, rejecting every additional cost without examining the agreement can also create legal and practical risks.

The safest approach is to determine what caused the expense, whether it was included in the original project, who contractually assumed the risk, whether the amount is technically justified and whether the contractor remains capable of completing construction.

For foreign owners, independent legal and technical review can be especially important before additional money or property rights are transferred.

Fırat Fesih Kaya Law Office provides legal assistance to foreign property owners and investors involved in urban transformation projects.

Lawyer Fırat Fesih Kaya assists with unexpected construction costs, additional-payment demands, contractor disputes, fixed-price and adjustable-price agreements, project amendments, construction delays, contractor default and unfinished redevelopment projects.

Phone: +90 312 434 22 22
WhatsApp: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr