Individualization in Housing Cooperatives
INDIVIDUALIZATION IN HOUSING COOPERATIVES
Introduction
The individualization process in housing cooperatives refers to the acquisition of individual ownership rights by cooperative members over the independent units allocated to them, and the receipt of title deeds in their own names, following the completion of construction and infrastructure works carried out on the basis of collective ownership.
Under Turkish law, this process is regulated within the framework of the Cooperatives Law No. 1163, the Condominium Law No. 634, and related legislation, and includes legal, administrative, and technical stages. The legal infrastructure of the individualization process, implementation steps, problems encountered and solution methods, as well as the rights granted to members upon completion of the process, are comprehensively addressed in this article.
Definition and Legal Basis of Individualization
Individualization constitutes the most critical stage in a housing cooperative’s achievement of its establishment purpose. Individualization means that the completed housing units are removed from the ownership registered in the name of the cooperative’s legal entity and are registered in the land registry in the name of each member individually. Article 81/2 of the Cooperatives Law No. 1163 accepts this process as one of the reasons for the dissolution of the cooperative. Accordingly, upon the registration of the dwellings in the names of the members, the cooperative is deemed to have achieved its purpose and generally enters into liquidation.
The purpose of housing cooperatives was stated in the decision of the Court of Cassation Civil Chamber dated 20.06.1995 and numbered 3161/5492 as follows:
“It consists of meeting the specific economic interests of members through mutual assistance, solidarity, and good faith rules, and constructing a dwelling for members who do not own a house”
Therefore, the ultimate goal of a housing cooperative is to conclude its activities by granting individual ownership rights to its members. With this explanation, individualization can be defined as the final stage aimed at by housing cooperatives. At this stage, the completed residences or workplaces are separated from the cooperative’s legal entity and transferred into the individual ownership of each member, and this status is formalized in the land registry.
Stages of the Individualization Process
The individualization process consists of successive steps that are carried out through the fulfillment of certain legal procedures following the completion of construction. Considering the legal regulations and practices, this process is generally completed in the following five main stages:
- Determination of Housing Costs: The first stage of individualization is the calculation of the total cost of the constructed residences or workplaces. Article 61 of the Model Articles of Association for Housing Construction Cooperatives stipulates that this cost is first calculated through a provisional cost assessment, after which “benefit value” (premium) amounts are calculated in order to eliminate value differences arising from features such as location, view, and floor of the residences.
- Allocation of Residences to Members: After the costs of the residences are finalized, it is determined which residence will be allocated to which member. According to the Model Articles of Association, this allocation is made either by drawing lots or based on the preferences of the members. The drawing of lots, generally carried out in the presence of a notary public, finalizes which independent unit each member will own. According to the decisions of the Court of Cassation, the allocation of a residence to a member as a result of the draw gives rise to a personal right against the cooperative for that member; however, this does not yet constitute an ownership right.
- Change of the Property’s Status in the Land Registry: For individualization, the status of the immovable property registered as land must be changed to “building” or “residence” in accordance with the completed construction. This transaction is carried out by applying to the relevant Cadastre Directorate after obtaining the occupancy permit (building use permit).
- Establishment of Condominium Ownership in Buildings: Article 81 of the Cooperatives Law requires that, after obtaining the building use permit, transition to individual ownership in accordance with the Condominium Law must be completed within one year. Condominium ownership refers to the ownership right over independent units (apartment, shop, etc.) located within a main immovable property. This process is completed through an application to the Land Registry Directorate by the authorized representatives of the cooperative.
- Transfer of Independent Units to Members: At this final stage, the title deeds of the independent units over which condominium ownership has been established are transferred by the cooperative’s legal entity to each member. With this transfer, each member legally acquires ownership of the residence allocated to them and ensures its registration in their own name in the land registry.
Status of the Cooperative Following the Establishment of Individual Ownership
With the establishment of individual ownership, the fundamental activity undertaken by the housing cooperative in line with its establishment purpose is completed. Accordingly, the realization of individualization indicates that the cooperative has achieved its establishment purpose; however, it does not result in the automatic termination of the cooperative. After this stage, the decision regarding the future of the cooperative is determined by the will of the members. At this point, the most commonly preferred method is liquidation, whereby, upon a general assembly resolution, all debt and receivable relationships, assets, and transactions with third parties are concluded through liquidators; accounts are closed, and the cooperative is removed from the trade registry.
Nevertheless, it is also possible for the cooperative to continue its existence without liquidation. In this context, through an amendment to the articles of association by a general assembly resolution, the cooperative may be directed to a new field of activity after completing its establishment purpose. This amendment is subject to the approval of the relevant Ministry and registration in the trade registry; moreover, the new purpose of the cooperative must be compatible with cooperative principles and structure. Another alternative, more rarely applied, is conversion of type. Within the framework of the Turkish Commercial Code No. 6102, the cooperative may be converted into a capital company, provided that strict quorum requirements are met and conversion conditions are fulfilled. In the case of conversion, the legal entity does not terminate; debts, receivables, and partnership relationships continue uninterrupted. However, due to the variable capital structure of cooperatives, their large membership base, and intensive public supervision, conversion of type is considered a difficult and costly process in practice.
Conclusion and Evaluation
Individualization represents the final legal turning point where the opportunity for members to acquire housing at lower costs through solidarity becomes concrete, particularly in today’s economic conditions where housing prices have reached high levels and individual home ownership has become increasingly difficult. Acting transparently and in compliance with the legislation during this process secures both the ownership rights of members and the opportunity to acquire housing at lower costs through solidarity, thereby positioning housing cooperatives as a still strong and up-to-date alternative for access to housing under current economic conditions.
Sincerely,
Atabay Law Office