The Rent Increase Ceiling Applicable in Lease Contracts Changed
The Code numbered 7161 amending the Tax Laws and Several Laws and Decrees Having the Force of Law (“ Code numbered 7161”) (in Turkish “Vergi Kanunları ile Bazı Kanun ve Kanun Hükmünde Kararnamelerde Değişiklik Yapılmasına Dair Kanun”) was published in the Official Gazette on 18 January 2019.
According to article 56 of the Code numbered 7161 amending article 344 of the Turkish Code of Obligations numbered 6098, the rent increase ceiling applicable for residences and roofed workplaces has been amended as “the change in the twelve-month averages of the consumer price index” (in Turkish, “tüketici fiyat endeksindeki oniki aylık ortalama”) instead of producer price index. In other words, rents for such real estates may not be increased more than the twelve-month average of the consumer price index increase of the previous year.
It should be noted that the consumer price index (in Turkish, “TÜFE”) is lower than the producer price index (in Turkish, “ÜFE”) in the recent years due to the devaluation of the Turkish currency against the foreign currencies.
As per article 69 of the Code numbered 7161, this change in the rent increase ceiling has come into force as of 1 January 2019.
Besides, as per article 59 of the Code numbered 7161, the change in the twelve- month averages of the consumer price index shall also be applicable for the workplace lease agreements where the tenant is a merchant. However, the wording of this article 59 is not very clear on the effectiveness date of the rent increase ceiling for the workplace lease agreements where the tenant is a merchant. There are currently two different points of view:
- this provision should be applicable as of 1 January 2019
- this provision should be applicable as of 1 July 2020.
We will inform once such uncertainties are removed.
The Code numbered 7161 also clarifies that the provisions of the Law on the Protection of the Value of the Turkish Currency numbered 1567 and dated 20 February 1930 are reserved. Therefore, the restriction against denominating rents in foreign currency or indexed to foreign currency as per the Communiqué amending the Communiqué (Communiqué number :2008-32/34) on Decree no:32 on the Protection of the Turkish Currency will continue to be in force.
Our Law Firm remains at your disposal for any further clarifications you may need.