Construction participation contract

In the contract of participation in construction, the owners of old and shabby houses provide their property to the builders (implementers of the project) so that they can start building new apartments with their capital. Determining the legal matters that must be included in this contract, how to transfer the document and the dispute resolution method are among the things that must be specified in the construction cooperation contract between the owner and the builder.

Definition of participation in construction

Over time, especially in big cities, buildings tend to erode, which causes the owners to think about demolishing the previous building and building a new apartment. But the owners may not have the initial capital to build an apartment, in which case, the owner should refer to the builders or the project managers so that they build new apartments at their own expense and share the final apartment with the owners.

In order for the relationship between the owner and the builder to be properly regulated and placed in a legal framework, the parties must conclude a contract called the construction participation contract. The reason for the necessity of concluding such a contract is that, firstly, it prevents future disputes that may occur between them. Secondly, in the event of a dispute, the parties have the possibility to pursue a claim related to it in the judicial authorities by referring to the contract of participation in the construction.

If you are faced with the matter of participating in construction; Stay with us in this article, because we will deal with topics such as the definition of this contract, the legal issues contained in the construction participation contract, the transfer of the document, the resolution of disputes in this contract through arbitration, and the download of the construction participation contract sample.

What is a construction partnership agreement?

Rebuilding and renovating worn-out structures is one of the goals of the owners of Kalangi buildings. Among the most used and profitable contracts for owners and builders, we can refer to the construction participation contract. The contract of participation in construction is one of the private contracts that fall under Article 10 of the Civil Law; This contract is made up of several specific contracts.
In the construction partnership contract, the owner or owners provide their capital, which is the same property and can be a land or a house, to another person or persons as a builder. As a result, the builders build apartments at their own expense in accordance with the contract concluded between The parties do, and in the end, the parties become partners in the construction of the apartment.

Legal matters contained in the construction participation contract

In the construction cooperation contract concluded between the owner and the builders, the obligations of the parties and the guarantee of their non-fulfillment, the duration of the contract, the exact subject of the contract, the contributions of both parties, the ratio of the parties’ share (partnership share), all costs and… It should be mentioned precisely so that their activities have a legal path and avoid disputes that may arise between the parties.

Obligations of the owners:

Presenting the property and mentioning the details related to it is the main obligation of the owner. The reason for emphasizing on mentioning the details and features of the property is that the determination of the valuation of this property was with the owner and if it is not done correctly, it will cause disputes between the parties which will be very effective in determining the assignment and termination of the contract.

Obligations of builders (implementation of the project):

Builders are responsible for advancing the construction project, paying the costs and managing the project. Therefore, the clarity ratio of the builders’ obligations in this contract is much lower than the owner’s obligation; Therefore, the exact mention of the costs prevents future disputes that may arise.

These costs include the construction costs of the project, administrative costs, gratuitous costs that are related to the rent of the property that the owners will live in during construction (because usually the property that the owners live in is presented in this contract as be), payment of all crimes related to the property, such as Article 100 commission, the cost of municipalities, etc.

Contract period:

The duration of the contract from the time of obtaining the license for construction and operation and delivery must be mentioned in full detail, which includes the date of the day, month, and year. Also, the owners are also obliged to fully specify the time of delivery of the property to the builder in the contract.

Share ratio of the parties:

In other words, the share of each party in the contract of participation in the construction of the partnership is called share. In the contract, the owner’s share of the entire property should be specified. Usually, the method of determining profit in these contracts is 55% for the owner and 45% for the builder, but in general, the determination of the share of the parties is based on their agreement, which will also be affected by things such as custom.

Determining the valuation of the property is very effective in determining the share of the parties, so it is better to use experts to determine the value of the property in order to prevent future disputes. If one of the parties makes a mistake in the value added, in this case the injured party can terminate the contract of participation in the construction by referring to Khayar Ghaban, of course, this is in the case that the Khayarat coffee bar has not been canceled beforehand. .

How to transfer the document in the contract of participation in construction

How to transfer the document and builder’s share in construction participation contracts by the owner is one of the most important issues in these contracts. The document transfer in these contracts will happen based on three modes:

First mode:

According to the agreement between the owner and the builder, the product is first transferred to the builder and then based on the guarantee check given to the owner, at the end of the construction operation, the final property is transferred to the owner based on the share of the company, which is done according to the agreement , may be in the form of a photo.

Second mode:

In this case, the parties may make the transfer of the document subject to the completion of procedures. In this way, the parties agree that by completing the steps of each section, for example, by completing the skeletonization of the building, two dongs will be transferred to the builder during the preparation of the official document.

Third mode:

At this stage, the owner gives the builder a power of attorney. The builder, as the second party to the contract, will take steps to prepare the official document when the project reaches a certain stage using this power of attorney.

Settlement of disputes through arbitration in the contract of participation in construction

The occurrence of a dispute and its solution is a very important issue in all types of contracts that must be addressed. Therefore, the parties should consider measures in advance for such issues. One of the methods of dispute resolution that has recently become very popular is the resolution of disputes related to contracts through arbitration.

In construction partnership contracts, it is better that the parties to the contract specify under one of the clauses during the conclusion of the contract that all disputes related to this contract will be resolved through arbitration. Also, mention the name of the arbitrator explicitly in the contract, determine his powers and specify for the parties that the decision issued by this arbitrator or the arbitration court will be binding for the parties.

Read on: sample contract for participation in construction

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Frequently Asked Questions

What is the meaning of construction participation contract?

The contract of participation in construction for the purpose of building new apartments is concluded between the owner and the builder, and the conditions for concluding this contract are explained in the text of the article.

What should be mentioned in the construction participation contract?

In the contract of participation in the construction between the owner and the builder, the obligations of the parties and the guarantee of their non-fulfillment must be mentioned in the contract.

How are disputes in the contract of participation in construction resolved?

Dispute resolution through arbitration in the contract of participation in construction is one of the dispute resolution methods in this series of contracts; In the text of the article, we have fully explained how to include the arbitration clause in the contract.