The Coronavirus (Covid -19) outbreak has been declared as a pandemic by the World Health Organization and consequently similar to many countries around the world, Turkey has taken important measures to prevent the spread of the Covid -19. One of such measures was to implement restrictions on restaurants, patisseries, cafes, cafeterias to their opening days and hours for business and how they provide services to the customers for instance one of the latest measures was to provide “take away” or “come and take” service as per the circular issued by the Ministry of Interior. As a result of such measures from the beginning of the Covid-19 many businesses which suffered serious economic loss became unable to pay their rents. Although it is still debated by the academics whether the tenants can apply for adaptation of their rent agreements due to payment difficulties, the 4^th Chamber of the Bursa Regional Court of Justice (the “Court”) with its docket numbered 2020/1103 decision numbered 2020/1008 and dated 28 September 2020 has rendered a decision which may set a precedent on this issue. Hence the Court ruled that rent agreements can be adapted to new conditions because of Covid -19 circumstances and measures being taken in that respect.

The brief facts of the decision are as follows: A restaurant owner in the province of Bursa claimed that he was unable to pay the rent for the workplace which was TRY 23,000 (EUR 2,500 approximately) per month due to significant decrease in business turnover as a result of measures implemented in the scope of Covid-19. The restaurant owner requested the rent of the workplace to be adapted to the new circumstances throughout the periods of Covid-19and requested an interim measure for the rent amount of TRY 11,500 (EUR 1,350 approximately) to be paid starting from 20 May 2020 by virtue of Article 138 of the Turkish Code of Obligations (the “TCO”) which is the ground law for regulating the hardship situations.

Pursuant to the Article 138 of the TCO, in case of an extraordinary situation which is not foreseen by the parties at the time of the contract and arises from a reason not due to the debtor and changes the existing facts at the time of conclusion against the debtor in such a way that contradicts with good faith, if the debtor has not yet fulfilled his/her obligations arising from the excessive difficulty of the performance, the debtor shall have the right to request from the judge the adaptation of the contract to the new conditions.

The case was first considered by the Court of First Instance and was rejected against the claimant i.e. the restaurant owner. Due to such rejection the claimant lodged an appeal to the Court (the Bursa Regional Court of Justice). The court evaluated the hardship conditions and ruled that in order to adapt the lease agreement the following conditions stipulated in Article 138 of the TCO must be met:

• An extraordinary event in the conditions of the contract which was not foreseen and was not expected to be foreseen at the conclusion of the contract;
• The occurrence of the event must not be caused by the debtor;
• Performance must have become excessively onerous for the debtor in a way that contradicts the principle of good faith due to the extraordinary event;
• The debtor must not yet have fulfilled his/her obligations or perform his obligations by reserving its rights arising out of hardship.

The Court states that the basis of the adaptation regarding hardship is good faith under Article 2 of the Turkish Civil Code. As per the said decision of the Court, the Covid -19 pandemic could not be predicted by the parties and a pandemic disease is an extraordinary situation within the scope of the Article 138 of the TCO.

The Court also consolidated its decision with the Provisional Article of the Law numbered 7226 which sets forth that the failure to pay the rent of the workplace from 1 March 2020 to 30 June 2020 would not constitute a cause for termination and will not provide the right for evacuation of the tenant. The Court stated that this provision indicates that the law maker acts with the same concern and prevents the termination and evacuation of the tenant for workplaces within the scope of the Covid – 19 conditions and the measures implemented. Likewise, the Court ruled that the adaptation should cover only the temporary period of Covid -19 and when the Covid-19 effects on the businesses completely come to an end the rent amount must be reinstated.

As a result, the Court accepted the claim and granted an interim measure to be imposed on the rent payments that have not yet been paid starting from 1 May 2020 and the rents to be processed as at the date of the decision with a 50% deduction from the original rent. The Court also decided that the interim measure shall be reviewed by the Court every 6 months and the new circumstances will be considered as to whether set a side, increase, or decrease the measure.

This decision sets an important precedent as for the first time a higher court of appeal accepted that Covid -19 constitutes hardship by virtue of Article 138 of the TCO. The tenants of the workplaces who have lost revenue as a result of the businesses closed down due to measures implemented in the scope of Covid -19 may apply for an adaptation of lease agreements. However, each case will be considered through its own specifics and will be determined accordingly. Despite this landmark decision the threshold of bearing commercial risk especially for merchants are higher and therefore the parties first ought to reach a mutual agreement for adaptation to new situations due to Covid -19 as far as possible through negotiation and good will.