Delayed Provisions on Workplace Rents Came Into Force2

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Uçar Hukuk & Danışmanlık Bürosu

Uçar Hukuk & Danışmanlık Bürosu

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OVERVIEW

Although the Turkish Code of Obligations No. 6098 (TCO) entered into force on 01/07/2012; with Article 53 of the Law on Amendment of Certain Laws and Decree Laws dated 04/07/2012 and numbered 6353, enforcement of Articles 323, 325, 331, 340, 342, 343, 344, 346 and 354 of the TCO  has been delayed for 8 years as of 01/07/2012 for workplace lease agreements where the lessee is a merchant in the scope of the Turkish Commercial Code (TCC) or a private law or public law legal entity.

The 8-year deferral period has expired as of 01/07/2020 and said provisions have now entered into force in terms of workplace lease agreements, where the lessee is deemed a merchant in the scope of the TCC or a private law or public law legal entity.

 

DELAYED PROVISIONS

1- Assignment of The Lease Relationship

The Article 12 of the former Law on Real Estate Leases No. 6570 regulated that it was not possible for the tenant to assign the lease agreement to someone else unless there was a contrary provision in the contract, or it was approved by the lessor. This “non-transferability” rule has turned into “transferability” in terms of workplace rents with Article 323 of the TCO.

According to Article 323 of the TCO, The tenant of commercial premises may transfer his lease to a third party with the landlord’s written consent. The landlord may withhold consent only for just cause.

Once the landlord gives his consent, the third party is subrogated to the rights and obligations of the tenant under the lease.

The tenant is released from his obligations towards the landlord, however, he remains jointly and severally liable with the third party until such time as the lease ends or may be terminated under contract or by law, but in any event for no more than two years.

 

2- Returning the Leased Before the End of The Lease Agreement

The Article 325 of the TCO was regulated to determine the limits of the tenant’s responsibilities if the leased is returned before the end of the lease agreement. “The tenant’s responsibility in case of early evacuation of the leased property” was not regulated in Law No. 818 and Law No. 6570. The Article 325 of the TCO, which has been implemented since 01/07/2020, has been arranged parallel to the Court of Appeals case law.

According to Article 325 of the TCO, Where the tenant or lessee returns the object without observing the notice period or the deadline for termination, he is released from his obligations towards the landlord or lessor only if he proposes a new tenant or lessee who is acceptable to the landlord or lessor, solvent and willing to take on the lease or rental agreement under the same terms and conditions.

 Otherwise, the tenant or lessee must continue to pay the rent until such time as the lease ends or may be terminated under the contract or by law.

Against the rent owing to him, the landlord or lessor must permit account to be taken of:

  1. any expenses he has saved, and
  2. any earnings which he has obtained, or intentionally failed to obtain, from putting the object to some other use.

 

3- Termination of Lease Relationship Based on Important Reasons

In accordance with the Article 264 of Law No. 818, termination for an important reason was regulated only for fixed-term contracts. With the Article 331 of the TCO, which entered into force as of 01/07/2020, it has been regulated that the termination of indefinite-term workplace rents can also be made for an important reason. The judge will decide on the amount of compensation for the termination.

According to Article 331 of the TCO, Where performance of the contract becomes unconscionable for the parties for good cause, they may terminate the lease by giving the legally prescribed notice expiring at any time.

 The court determines the financial consequences of early termination, taking due account of all the circumstances.

 

4- Prohibition of Linked Contracts

According to Article 340 of the TCO, A tie-in transaction linked to a lease of residential or commercial premises is void where the conclusion or continuation of the lease is made conditional on such transaction and, under its terms, the tenant assumes an obligation towards the landlord or a third party which is not directly connected with the use of the leased premises.

There is no regulation in this direction in Law No. 818 and the Linked Contracts made were considered valid in any case. With the Article 340, it is prevented that the tenant is put into debt in cases where the tenant is not beneficial and is not directly related to the use of the leased place, and these contracts were void.

 

5- Assurance Given by the Tenant

According to Article 342 of the TCO, Where the tenant of residential or commercial premises furnishes security in the form of cash or negotiable securities, the landlord must deposit it in a bank savings or deposit account in the tenant’s name.

 In residential leases, the landlord is not entitled to ask for more than three months’ rent by way of security.

 The bank may release such security only with the consent of both parties or in compliance with a final payment order or final decision of the court. On expiry of one year following the end of the lease, the tenant or lessee may request that the security be returned to him by the bank if no claim has been brought against him by the landlord or lessor. The cantons may enact further provisions.

There is no regulation in this direction in Law No. 818; As of 01/07/2020, the provision regulated by Article 342 of the TCO will also apply to the assurances received under workplace lease agreements. The purpose of this regulation is to set an upper limit by preventing the high amount of assurances demanded from tenants and to prevent the lessor from refusing to refund the amount of the assurances.

 

6- Prohibition of Making Changes Against the Tenant

According to Article 343 of the TCO, No changes can be made in the lease agreements to the detriment of the lessee, except for the determination of the rental fee.

 Since there is a provision corresponding to this article in Law no. 6570, it does not differ in practice.

 

7- Determination of The Rental Fee

According to Article 344 of the TCO, The agreement of the parties regarding the rental fee to be applied in the renewed lease periods are valid provided that the increase rate does not exceed the increase rate in the consumer price index according to twelve-month averages in the previous lease year.

 The parties of the lease agreement do not determine the increase rate and states that, in this case, the rental fee will be determined by the judge on an equitable basis, taking into account the condition of the leased property, provided that the increase rate does not exceed the increase rate in the consumer price index according to twelve-month averages in the previous lease year.

There is no exact equivalent regulation in Law No. 818 and Law No. 6570, regarding the determination of the rental fee regulated in Article 344. Disputes were resolved through Supreme Court case law. This Article 344 was created by taking into account the principles developed in practice. This article aims to protect the tenant and in Article 344/1, the maximum amount of rent that may be requested is set. In addition, even if otherwise agreed in the contract, the increase rate will not exceed the Consumer Price Index (CPI) as of 01/07/2020, there will be no increase in foreign currency rents either.

 

8- Prohibition of Regulation to Against the Tenant

According to Article 346 of the TCO, No payment obligation other than the rental fee and ancillary expenses can be imposed on the lessee. In particular, agreements stating that if the rental fee is overdue, a penalty will arise or the following rental fees will become due, are deemed invalid.

The article is limited to the penalty conditions based on non-payment of rental fees. In addition, agreements on the term and penalty condition made before 01/07/2020 automatically become invalid with the entry into force of the provision from 01/07/2020.

 

9- Limitation of the Causes of Litigation

According to Article 354 of the TCO,  The provisions regarding the termination of the lease agreement through litigation cannot be changed to detriment of the lessee.

This article has been arranged in parallel with the provision of Article 8 of the Law No. 6570 to limit the reasons for evacuation and, on the contrary, to deem the contracts invalid, therefore there will be no difference in practice.

 

CONCLUSION AND EVALUATION

In terms of workplace lease agreements where the lessee is a merchant  or a private law or public law legal entity; The aforementioned articles, whose enforcement was delayed for eight years with the Article 53 of the Law No. 6353, entered into force as of 01/07/2020.

Until the entry into force of these articles, freedom of contract was taken as a basis and priority was given to the will of the parties. However, the mandatory provisions of Law No. 818 and Law No. 6570 were implemented until 01/07/2020.

Looking at the Articles 343, 354, 325 of the TCO; These are the provisions included in Law No. 818 and Law No. 6570 or, although there is no equivalent, they are the provisions put in parallel with the regulations left to the Court of Appeals case law. For this reason, it seems that postponing their enforcement does not make a difference in practice.

Looking at the Articles 323, 331, 340, 342, 344, 346 of the TCO; Although there is no equivalent in Law No. 818 and Law No. 6570, it differs in practice in terms of lease agreements, whose tenants are merchants and legal entities, as there are provisions regulated in the TCO.

Delayed provisions will be applied immediately to contracts to be made as of 01/07/2020. Regarding how these provisions will be applied to the contracts made before 01/07/2020, it is necessary to look at the “Law on the Enforcement and Application of the Turkish Code of Obligations No. 6101”. In accordance with this law;

The delayed provisions regulating the issues related to default, termination and liquidation or regarding public order and public morality are also applied to contracts established before 01/07/2020.

You can contact us for further information and to take advantage of our advocacy and consulting services. You can find detailed information about our office’s work on Real Estate LawBankruptcy and Enforcement LawProperty Ownership Law and Corporate Law on our website.

Diclaimer:

This article is prepared by Uçar Law & Consultancy Office for information purposes only, and the information and visual materials contained in it cannot be used, reproduced, published, transmitted to a third party or translated without prior written permission from us. This legal memorandum is not a comment or legal opinion and was prepared on the publication date and our attorney’s office is not responsible for its failure to
update continuously.”

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