Expenses that are wasted because a construction permit issued by a municipality is later annulled or withdrawn may, if the conditions are met, be claimed through a full remedy action (tam yargı davası). However, the annulment of the permit alone does not secure payment of the entire investment, the expected sales revenue or the value of the land. The administrative error in the original issuance of the permit, the investor’s knowledge and conduct, the genuineness of the expenses, the values that remain usable and the link between the loss and the administrative act are examined together.
What does the annulment of a permit refer to?
In everyday use, “permit annulment” describes different situations. The municipality may have withdrawn the permit; a court may have annulled the permit, or a decision may have been rendered on the zoning plan on which the permit was based. Moreover, the expiry of the permit period, the need for renewal and a stop-work order due to construction contrary to the permit are not the same legal matter.
In preparing a compensation file, the date the permit was first issued, the plan on which it was based, permit amendments, the level at which construction had begun and been completed, the annulment act and the court decisions are examined together. Which administrative conduct the loss stems from is determined by this timeline.
Annulment of the plan and the status of the construction permit
A judicial decision on a zoning plan may affect the legal status of the permit. However, the plan decision, the permit act, the construction level and subsequent administrative acts are assessed separately. It cannot be said that, upon every plan annulment, all existing buildings are subject to the same outcome or that all permit holders will receive the same compensation.
The obligation to comply with a judicial decision is distinguished from the financial liability that may arise from the administration’s earlier erroneous act. The fact that the administration must withdraw the permit does not mean that no liability arising from the issuance of the permit in the first place can arise.
How does the principle of reliance affect the municipality’s liability?
A person’s acting in reliance on a permit issued by the administration is important for legal certainty. However, the principle of reliance does not mean that an unlawful permit will be protected forever under all conditions. In the compensation review, it is investigated whether the investor knew of the defect in the permit, whether the investor gave information contrary to the facts and whether the investor continued construction after warnings.
Good faith, state of knowledge and investment timeline
The date at which construction had reached a given level may be critical. A mandatory project cost incurred after the permit was issued and a new cost undertaken after learning of a stay of execution decision are not assessed in the same way. The dates of expenditure should be matched with the dates of legal developments in the file.
A claim of good faith should not rest on oral statements alone. Correspondence with the municipality, permit annexes, technical opinions, inspection records and investment decisions may show the basis for reliance. If the investor’s own fault or contribution to the increase of the loss exists, its effect on liability is discussed separately.
Which construction costs may be the subject of compensation?
Project, permit and infrastructure costs
Architectural and engineering project fees, soil surveys, payments made for permit procedures and infrastructure-related costs may be taken into consideration. However, it is investigated what service or right the payment was made for and whether it retained its value after the annulment. A service that can be used in another project or a payment that has been refunded is not treated as wholly lost.
A claim for the refund of a fee or charge alleged to have been unlawfully collected and a claim for compensation for the loss arising from the annulment of the permit are not the same subject of litigation. Depending on the legal nature of the amount, the competent judicial authority, the method of application and the time limit may differ. All municipal payments should not be accepted as subject to the same rule within a single full remedy claim.
Construction completed and unused materials
The current level of construction, its compliance with the permit and its reusability must be determined technically. The obligation to demolish, the possibility of continuing the project with changes, or the prospect of a new permit affect the calculation of loss. Whether materials left in storage can be sold or used in other work is also assessed.
A payment made to the contractor does not by itself show that a final loss of the same amount has arisen. It is investigated whether there is an existing structure or economic value in return for the payment. The expense that has really been wasted because of the annulment must be separated from the residual value of the investment.
Can financing costs, rent and loss of sales be claimed?
It must be explained from which loan or debt relationship the financing costs arise, whether they were necessary for the investment and what additional burden arose because of the permit annulment. The mere fact that the permit was annulled is not sufficient to charge the entire general commercial financing cost to the municipality.
Expected sales revenue is not the same as an actual loss. A compensation calculation cannot be built on the total of advertised prices without assessing binding contracts, the likelihood of completing the project, the expenses required for sale and market conditions. Loss of profit and wasted expenses must not include the same economic value twice.
For loss of rent, the date on which the building would be legally and in fact rentable is important. The assumption that a building that is not yet completed and lacks the necessary permits would generate uninterrupted high rent for many years requires concrete evidence. Existing and enforceable lease agreements are separated from calculations based merely on expectation.
| Expense or loss | Core review | Risk of double counting |
|---|---|---|
| Project and survey | Actual payment, project specificity, reuse | Writing the same service again under another item |
| Construction cost | Level of works, compliance, remaining economic value | Adding the building’s value and the cost together in full |
| Municipal payment | Nature of the amount, refund or payment for a service | Claiming again an amount already refunded |
| Financing | Direct link to the investment and the annulment | Adding the whole of the general operating cost |
| Loss of profit | Realistic net income and reasonable period | Writing sales revenue and the full value of the building together |
A real Council of State decision: expenses are examined even if the permit is withdrawn
The decision of the 6th Chamber of the Council of State (Danıştay 6. Dairesi) of 23.02.2022, E. 2020/9891, K. 2022/2101, concerns the assessment of expenses arising from the withdrawal of a permit. The Chamber upheld the part of the first-instance decision concerning the compensation awarded, and quashed the rejected part because the nature of the payments connected with infrastructure and land allocation had not been adequately assessed.
In the decision, it is significant that it be investigated whether there was a new allocation or a refund in return for the payment. The outcome is not the direct acceptance of all heads of claim. The decision shows that the lawfulness of the withdrawal of the permit and the financial liability that may arise from the original permit act are separate matters, and that the expenses must be examined one by one.
The database link giving access to the text of the decision is in the sources. The platform may require access or membership. The decision should be used while preserving the concrete features of the file and the outcome of partial affirmation and partial quashing.
How are the annulment action and the compensation action related?
An annulment action against the withdrawal of the permit targets the lawfulness of the act. A full remedy action, by contrast, is directed at redressing the pecuniary or non-pecuniary loss asserted. Under the conditions in Article 12 of the Administrative Procedure Law (İYUK), these claims may be raised together or at different stages.
How is the start of the filing period determined?
Unless there is a special provision, the general administrative filing period is 60 days. However, the notification of the permit annulment act, the loss caused by its implementation, the decision in an annulment action filed earlier and the notification of the appeal decision require separate assessment. The period cannot be calculated until it is clear which loss is claimed on the basis of which act.
It cannot be said that waiting until the end of the annulment action is mandatory in every case. Likewise, the idea that “compensation can be claimed years later” is not safe. The effect of Article 11, 12 or, depending on the nature of the event, Article 13 of İYUK must be examined on the concrete timeline. Repeated petitions do not by themselves restart a past filing period.
Who is the correct claimant and defendant?
The legal positions of the landowner, the contractor, the permit holder and the buyer of an independent unit may differ. Each person must demonstrate the violation of his or her own right and his or her own loss. The judicial route for contract-based contractor–owner claims and for claims arising from the municipality’s acts of public authority may not be the same.
In a full remedy action against the municipality, the relationship between the administrative conduct and the loss is shown. If the authority that made the plan, the authority that issued the permit and the authority that later took action are different, the role of each is examined. The competent court is also determined under the provisions of İYUK, taking into account the immovable-property and compensation nature of the dispute.
Which documents should be prepared for the lawsuit?
The original permit and its annexes, the zoning status, approved projects, the permit annulment letter, court decisions and notification documents form the initial file. Dated photographs showing the construction level, building inspection records and progress payments (hakediş) are important for the technical review.
In the financial file, for each expense, the contract, invoice, bank payment and what the service was should be present together. The dates of the expenses should be matched with the permit and the judicial process. Usable remaining materials, refunded payments, insurance collections and expenses used in another project must be stated without concealment.
In the expert examination, architectural, construction and calculation expertise may be needed together. The report should explain the date of the loss, the valuation method, the remaining economic value and causation. If non-pecuniary damages are claimed, their concrete effect on personality values must be separately substantiated; the existence of an investment loss alone is not regarded as sufficient.
Conclusion
In the compensation review for the annulment of a construction permit, the main question is on which administrative act the investor relied in incurring which expense and to what extent that expense was wasted. The lawfulness of the withdrawal of the permit and the financial consequences of the earlier administrative error must be addressed separately. The expenditure timeline, the technical determination of the level of works and the payment documents should be combined with the correct litigation route.
Related articles: A Municipality’s Failure to Implement a Court Decision: Enforcement of Annulment and Stay of Execution Decisions; Annulment of a Construction Permit: Acquired Rights, Annulment Action and Compensation; Cancellation of a Construction Permit: Acquired Rights, Stop-Work Orders and Legal Remedies.
Frequently Asked Questions
If my permit is annulled, can I recover the entire construction cost?
Not automatically. The legal status of the building, its current value, its usability, the loss and the administration’s liability are assessed.
If the municipality withdrew the permit by implementing a court decision, does liability disappear entirely?
Not always. The act of withdrawal and the financial liability arising from the erroneous issuance of the permit in the first place may be examined separately.
Are a permit fee refund and compensation the same lawsuit?
Not in every case. The nature of the amount collected, the ground for the refund request and the competent judicial authority must be determined separately.
If the construction has not yet been demolished, is a claim for loss possible?
Whether the loss has occurred and which item it concerns is investigated. It cannot be said that actual demolition must be awaited for every claim, or that the entire cost of the building can be claimed without demolition.
Can I claim the entire sales revenue of the apartments I was expecting?
Sales revenue is not net profit. A realistic expectation, expenses, the likelihood of completion, contracts and causation must be proven.
Sources and legal bases
- Administrative Procedure Law No. 2577 (İdari Yargılama Usulü Kanunu): Articles 7, 11, 12, 13, 34 and 36.
- Development Law No. 3194 (İmar Kanunu): provisions on permits and construction.
- Constitution of the Republic of Türkiye: Articles 2, 35 and 125.
- 6th Chamber of the Council of State (Danıştay 6. Dairesi), E. 2020/9891, K. 2022/2101, 23.02.2022 — decision text. Outcome: partially affirmed, partially quashed; database access conditions may apply.