Introduction
The Construction Partnership Contract (qarārdād-e moshārakat dar sākht) is a contractual arrangement under which the landowner and the developer participate, in accordance with their respective contributions, in the construction project undertaken on the land and in the property arising therefrom. Despite the widespread use of this type of contract in practice, Iranian law has a normative gap, as no specific statutory provisions regulate it, and it has received relatively limited scholarly attention. The relationship between construction partnership contracts and building pre-sale contracts has become particularly significant in practice because the parties, especially the developer, may pre-sell units within the developer’s share to finance the costs of the construction project.
The Law on the Pre-Sale of Buildings (enacted in 2010) permits the pre-sale of units belonging to the developer, whom the legislator refers to as the “investor.” Subsequently, Article 15 of the Law on Mandatory Official Registration of Transactions in Immovable Property (enacted in 2024), by amending Article 1 of the Law on the Pre-Sale of Buildings, has expressly brought construction partnership contracts within the scope of building pre-sale contracts and thereby subjected them to the provisions of the latter Law. Under the amended provision, any contract, regardless of its title, under which the owner of land officially enters into a construction partnership with another person, as well as any contract under which a person undertakes to construct and transfer a specified unit, and any transfer of the rights and obligations arising from such contracts, is deemed to constitute a building pre-sale.
Before the enactment of the 2024 Registration Law, these two contractual arrangements were distinct: each had its own legal nature and scope, and neither fell within the other's legal framework. Article 15 has, however, transformed this relationship into one of absolute generality and specificity, effectively treating the construction partnership contract as a species or instance of a building pre-sale contract. This legislative approach is open to question in view of the substantive and functional differences between the two arrangements, the common intention of the parties, and the realities of customary and administrative practice. This assimilation may also create significant legal difficulties and ambiguities in applying the provisions of the Law on the Pre-Sale of Buildings to construction partnership contracts.
Method
The present study adopts a descriptive-analytical method with a critical approach. It first examines the legal nature and characteristics of construction partnership contracts independently of the legislative intervention introduced by Article 15, taking into account the parties' intention, governing customs, and practical contracting patterns. Given the flexibility and diversity of construction partnership arrangements, the study focuses on their dominant forms and customary modes of operation. It also draws on the views and experiences of practitioners and professionals concerning the relationship between the Law on the Pre-Sale of Buildings and construction partnership contracts, as well as the legal consequences of subjecting the latter to the former, an area that has received limited attention in previous research.
The study first identifies the operational characteristics of both arrangements. It examines their respective demand and supply sides, the decisive role of time in their formation and performance, and the fact that both constitute contractual arrangements or practices rather than necessarily corresponding to a single nominate contract. Regarding the legal nature of a building pre-sale, the study considers the competing views that existed under the general rules of the Civil Code before the enactment of the 2010 Law. These views include characterizing the pre-sale merely as an undertaking to sell, as a translative contract involving co-ownership shares in the land and the gradual transfer of title to the building, or as a combination of a translative act concerning the land and an obligational act concerning construction. Following the enactment of the 2010 Law, however, doctrinal authorities have generally treated building pre-sale as a nominate contract.
By contrast, construction partnership contracts lack specific statutory regulation, and the Civil Code's partnership provisions do not adequately govern them. Through comparison with suspended sale, salaf, contracts for the hire of services, juʿāla, partnership, muḍāraba, promissory agreements, istiṣnāʿ, construction contracts, and joint ventures, the study identifies the construction partnership contract as an independent contractual arrangement founded on the principle of freedom of contract under Article 10 of the Civil Code.
The two arrangements are then distinguished along seven principal axes: the type of contract, namely participatory as opposed to purely commutative; the identity and legal position of the parties; the nature of consideration and obligations; the timing of the transfer of ownership; the accessory or principal character of the contractual relationship; the scale and extent of their use; and the differing need for legislative protection. These distinctions demonstrate that construction partnership contracts and building pre-sale contracts cannot readily be treated as identical legal institutions merely because both may ultimately concern the construction and transfer of units in a building.
The study subsequently examines the rationale for assimilating construction partnership contracts to building pre-sales and considers the practical consequences of such assimilation. These include the mandatory formalization of the contracts and the criminalization of certain informal arrangements, as well as the difficulty of applying provisions specifically linked to installment payments in building pre-sales. Exercising termination or rescission rights under the Law on the Pre-Sale of Buildings may also create significant complications when those rights extend to construction partnership contracts.
Finally, the study examines the Implementing Regulation of Note 3 to Article 14 of the Registration Law, particularly its requirements concerning formalization, the assignment of a “single identifier” (shenāseh-ye yektā), and the restriction of subsequent legal dispositions to those based on such identifier. These requirements are assessed in light of the distinctive structure and practical operation of construction partnership contracts.
Conclusions
Article 15 of the Law on Mandatory Official Registration of Transactions in Immovable Property treats construction partnership contracts as building pre-sale contracts and consequently subjects them to the Law on the Pre-Sale of Buildings. Under this approach, the landowner is effectively treated as the pre-purchaser and the developer as the pre-seller. The study finds that this legislative generalization results from insufficient attention to the fundamental differences between the two arrangements, as well as to the common intention of the parties and the realities of customary and practical dealings.
Construction partnership contracts are essentially based on partnership and cooperation between the parties and therefore possess a participatory character, whereas building pre-sale contracts are fundamentally commutative. Moreover, the Law on the Pre-Sale of Buildings is essentially protective legislation intended to safeguard the interests of the pre-purchaser as the weaker party. Extending its extensive protective mechanisms to a contractual arrangement in which the parties generally occupy relatively balanced positions and negotiate their respective rights and obligations freely is therefore unnecessary. By imposing additional legal and contractual burdens on developers, such an approach may also dampen investment incentives in the construction sector.
Applying rescission rights designed for pre-purchaser-to-construction partnership contracts may create particularly significant legal difficulties. Likewise, several provisions of the Law on the Pre-Sale of Buildings are either inapplicable to construction partnership contracts or unsuitable for their particular structure. For example, the landowner, deemed the pre-purchaser under Article 15 of the Registration Law, generally does not make a monetary payment or installment payment to the developer. Consequently, many provisions designed to secure payment of the pre-purchase price are inapplicable because they lack a subject matter in construction partnership contracts.
Ultimately, although the legislator’s objective of regulating construction partnership relationships and strengthening legal certainty is understandable, assimilating these contracts to building pre-sales does not provide an appropriate legal response to their distinctive nature. The appropriate approach is therefore to develop dedicated statutory rules for construction partnership contracts, standardize contractual terms, and design model contracts that faithfully reflect the distinctive features of these arrangements.