ENTRY INTO FORCE OF THE POSTPONED LEASE PROVISIONS WITH RESPECT TO THE WORKPLACES AS OF 1 JULY 2020
As you may know, the Turkish Code of Obligations No. 6098 had entered into force on 1 July 2012 by virtue of article 648 of the Code. However, the enforcement of the provisions of the Turkish Code of Obligations (the “TCO”) that govern certain rules and procedures between the lessee and the lessor, specifically those to the benefit of the lessee, had been postponed for a duration of 8 years, as per the temporary article 2 of the Code no. 6217.
Hence, when a dispute arose concerning the subjects covered by the postponed articles, the provisions of the lease agreement between the parties were to apply pursuant to the principle of contractual liberty. If the contract did not provide for the necessary provisions, the former Turkish Code of Obligations would be taken as legal basis for the relevant disputes.
We would like to inform you that unless a further postponement is made, the aforementioned provisions shall enter into force on 1 July 2020, which will foresee significant changes in the lease contracts of workplaces. Thus, it will be prudent for lessees who are considered traders or private/ public law entities, to re-evaluate their lease agreements in this light. Please kindly note that joint stock companies, limited liability companies, limited partnerships and general partnerships are considered private law entities.
We bring forth to your attention the essential amendments to enter into force on 1 July 2020:
- provided that the lessee is a trader (pursuant to article 12 of Turkish Commercial Code) and
- the subject of the lease is a workplace.
As per Article 323, the lessee may now assign the lease to another if written consent is given by the lessor. Unless there is just cause for denial with respect to the lease of the workplace, the lessor may not deny such request for assignment. With respect to workplace leases, the assignor shall be jointly liable with the assignee of the lease until the end of the agreement, for a maximum duration of 2 (two) years.
Article 325 applies to early termination of workplace lease contracts. In the event of early termination, the lessee shall continue to be the subject of the lease, but a reasonable time will be granted in which the lessor may find a new lessee who is willing and capable of performing the debts and obligations of the contract. In any case, where a new lessee is found in this regard, the contractual obligations of the former lessee shall cease to exist.
Article 331 governs terminations with substantial cause. Thus, either party to the contract may terminate the lease agreement if there are circumstances that make the fulfilment of their contractual obligation and the perseverance of the contract impossible; under the condition that the requirement to provide legal notice is fulfilled. The important distinction here would be the amount of indemnity to be paid by the terminating party. When determining the damages that will be incurred by the terminating party, the cause of the termination will be taken into consideration by courts.
Pursuant to Article 340, the formation or continuation of the lease contract with respect to residential and roofed workplaces shall not be conditioned to any obligation that is unfavourable to the lessee, with no relation to the lease contract itself, otherwise, such contract shall be deemed void.
Article 342 concerns security deposits made for leases. In case the lessee is under the contractual obligation to provide security deposits for residential and roofed workplace leases, the amount thereof shall not exceed three-months of rent. In addition, such security deposit will have to be stored/deposited in a bank in a manner requiring the lessor’s approval for their withdrawal by the lessee. The bank shall return the securities solely upon both parties’ approval or upon finalization of execution proceedings or of a court decision. Besides, the bank shall return the securities upon request of the lessee unless it receives a written notice by the lessor notifying it of a lawsuit or execution proceedings initiated against the lessee within three months following the termination of the lease.
Pursuant to Article 343, no amendment may be made to the lease agreement to the detriment of the lessee, except the determination of the lease price.
As per Article 344, the rent amount applicable to the new lease year is valid provided not to exceed the monthly average of 12 months’ consumer price index. In case the increase rate is not fixed contractually by the parties, the court shall determine the same taking into account the said principle, the state of the leased property and the principle of bona fide. That being the case, regardless of any eventual contractual determination by the parties, the rent amount of leases exceeding five years or of those which shall be renewed after five years shall be determined by the court taking into account the said principle, the state of the leased property and market rental value, respecting the principle of bona fide. In case the rent amount is fixed in foreign currency, it shall not be subject to any change for a term of 5 (five) years. The provisions of article 138 of the TCO regarding the hardship to pay (in Turkish, “aşırı ifa güçlüğü”) shall be reserved. After the elapse of the 5 years-term, the rent increase may be determined according to the aforesaid principles, as well as the changes in foreign currency.
As per Article 346, no other payment obligation can be brought to the lessee except the rental fee and its related expenses. Thus, penalty conditions or clauses of maturity regarding subsequent months’ leases which would arise due to failure in making timely lease payments, shall be void.
Finally, Article 354 governs limitations on cause to bring lawsuits, stating that provisions within the contract regarding terminations by lawsuit may not be revised during the term of the lease in a manner that would be unfavourable to the lessee.
Our Law Firm remains at your disposal for any further clarifications or assistance you may need about the subject matter.