TEMPORARY LIMITATION ON RENT INCREASE FOR RESIDENTIAL RENTS
We refer to our Newsletter dated 9 June 2022 whereby we informed you that a temporary regulation regarding the rent increase has been announced and the details of such an arrangement would be published soon.
The temporary provision which limits the rent increase in residential lease contracts to 25% approved by the General Assembly of the Turkish Grand National Assembly on 8 June 2022 has been added to the Code of Obligations numbered 6098 (in Turkish, “Türk Borçlar Kanunu”, “TCO”) and was published in the Official Gazette dated 11 June 2022 and numbered 31863 through the Law on Amending the Code of Attorneyship as well as Code of Obligations (in Turkish, “Avukatlık Kanunu ile Türk Borçlar Kanununda Değişiklik Yapılmasına Dair Kanun”). The relevant temporary provision is presented to your information as below:
« In terms of residential rents, agreements regarding the rent to be applied in renewed rental periods between the date of entry into force of this provision and 1 July 2023 (including this date) are valid, on the condition that it does not exceed 25% of the rent amount of the previous rental year. If change rate in the consumer price index of the previous tenancy year is less than 25% compared to the twelve-month averages, the relevant consumer price index rate will be applicable. This rule also applies to lease agreements for more than one year. Residential lease agreements which exceed such limitation are invalid in terms of the excess amount. The provision of this paragraph shall also be applied for the decisions to be made by the judge pursuant to the second paragraph of Article 344.”
It should be noted that this is a temporary provision envisaged to be valid and in effect between 11 June 2022 and 1 July 2023 as for residential rents.
By way of ana example, for a residential lease agreement which was due to be renewed on 10 June 2022, the previous rule of consumer price index of twelve-month average exchange rate would be applicable. However, as of 11 June 2022 until 1 July 2023 (this date included) the maximum rent increase that will be applied to residential lease agreement will be 25% of the rent amount of the previous rental year.
Additionally, this limitation shall not apply in cases of re-evaluation of rent upon elapse of a period of five (5) years or renewal period of five (5) years in accordance with Article 344/3 of the TCO.
Finally, adding a Temporary Provision to the TCO and stipulating a rent increase rate which may be viewed to be relatively a low rate in comparison to soaring inflation in our country has been assessed by some commentators that it may be annulled by the Constitutional Court. They have compared such provision with a similar arrangement which was brought in the past. In the past arrangement, a Provisional Article 7 stated that “The rental amounts agreed in the contracts can be increased by a maximum of 25% per annum in 2000 and by a maximum of 10% per annum in 2001. However, in 2001, the phrase of “at most 10% per annum.” was annulled by the Constitutional Court’s decision dated 19 July 2001. The reason of the annulment was the 10% increase in rents for 2001 remained far below the price increases due to the economic crisis in 2001. Therefore, the limitation on rental prices, exceeding its purpose, resulted in the deterioration of the fair balance that should be found between the lessee and the lessor in a way that cannot be considered reasonable and acceptable. Would the same happen with the current arrangement? It is yet uncertain.
Our Law Firm remains at your disposal for any further clarifications you may need