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NEW PERIOD AND NEW REGULATION FOR WORKPLACE LEASE AGREEMENTS

With the Article 53 of the Law No. 6353 on the Amendments on Some Laws and Decree Laws, the provisional Article 2 is added to the Turkish Code of Obligations (TCO) numbered 6098, which entered into force on 01.07.2012, and enforcement of some of the articles of Turkish Code of Obligations which are related to the lease agreements are postponed for workplace lease agreements which have tradespersons or private and public legal entities as their lessees for eight years – since it is thought that these might cause negativities in the business life – and these postponed provisions which are mentioned above have entered into force on 01.07.2020 which is the end date of this eight-year-long period.

The postponement, as mentioned above, was on the table for the lease agreements where tradespersons which are listed under Turkish Commercial Code or private and public legal entities are lessees. Since the concept of “roofed workplace” which is created within the new Code of Obligations is not mentioned in the Law No. 6217, the postponement was also possible for other places (parking lot, tea garden, etc.) that can be classified as open area rental,  besides the apartments and shops.

NEW REGULATIONS THAT WILL ENTER INTO FORCE FOR WORKPLACE LEASE AGREEMENTS

As of July 1, 2020, the lease agreements where tradespersons which are listed under Turkish Commercial Code or private and public legal entities are lessees are subjected to the regulations of new Code of Obligations, just like other lease agreements.

What are the regulations that apply to the workplace lease agreements as of July 1 2020 and what changes await us in practice?

1. Conditions for the Lessee to Deposit (Security Deposit)

Article 342 of Turkish Code of Obligations – “In residence and roofed workplace leases, if the lessee is obliged to provide security by the contract, the security is limited to maximum three-month rent.

If cash or negotiable papers are decided to be provided as security, the lessee shall pay the money into a forward savings account so as not be withdrawn without approval of the lessor, or deposit negotiable papers in the bank. The bank may release such security only by the consent of both parties, upon finalization of execution proceedings or decision of the court.

If the lessor did not notify the bank about he has filed a lawsuit or has initiated execution or bankruptcy proceedings against the lessee regarding the lease contract in written within three months following the end of the lease agreement period, the bank is obliged to release the security upon the request of lessee.”

Deposit (Security Deposit), as is known, is a guarantee fort he possible damages that lessee may cause on the lessor or his debts that he may not fulfill during the lease agreement. The aim here is not to provide the lessor an economic benefit.

The system which is foreseen by the New Code of Obligations in this regard, now applies for workplace leases, too. Until today, the fair balance between these parties has been tried to be achieved by depositing the security in foreign currency. In the case of providing security is requested by the contract for the roofed workplace leases to be made after July 1 2020, as it has been applied for ten years in housing leases,  the security is limited to maximum three-month rent. If cash or negotiable papers are decided to be provided as security, the lessee shall pay the money into a forward savings account so as not be withdrawn without approval of the lessor, or deposit negotiable papers in the bank. The bank may release such security only by the consent of both parties, upon finalization of execution proceedings or decision of the court. If the lessor does not notify the bank about he filed a lawsuit or initiated execution or bankruptcy proceedings against the lessee regarding the lease contract in written within three months following the end of the lease agreement period, the bank is obliged to release the security upon the request of lessee.

2. Transfer of the Tenancy

Article 323 of Turkish Code of Obligations – “The lessee may not transfer the tenancy to another party unless he obtains the written consent of the lessor. In the workplace leases, the lessor cannot refrain from giving such consent unless there is a justified reason.

The party to whom the tenancy is transferred with the written consent of the Lessor, replaces the lessee in the lease agreement and the lessee who transfers is released from his debts against the Lessor.

The lessee who transfers the tenancy within a workplace lease shall be jointly and severally responsible with the transferee until the expiry of the lease agreement, for a maximum period of two years. ”

In the workplace tenancies, the lease agreement can only be transferred with the written consent of the lessor. It is a new condition to have the consent of the lessor in written while this transfer could be made previously. This written consent can be expressed in a separate protocol, or by a new contract or by a note on the current contract and  by being signed by the lessor.

The lessor cannot refrain from giving such consent unless there is a justified reason.If the lessor does not give such consent without a justifiable reason to the lessee who wishes to transfer the tenancy, the lessee can obtain this consent from the judge. Upon the consent is obtained, the new (transferee) lessee will replace the old (transferror) lessee, but the old (transferror) lessee will be jointly and severally responsible with the new (transferee) lessee until the expiry of the lease agreement, for a maximum period of two years.

3. The Prohibition of Interrelating Contract

Article 340 of Turkish Code of Obligations – “In the residence and roofed workplace leases, if the establishment or continuance of the contract, without lessee’s benefit, is dependent to the fact that the lessee undertaking an obligation which is not directly related to the use of leasehold, the contractshall be invalid.”

According to the new regulations that came into force for workplace leases, in the roofed workplace leases, if the establishment or continuance of the contract, without lessee’s benefit, is dependent to the fact that the lessee undertaking an obligation which is not directly related to the use of leasehold, the interrelating contract which is related to lease agreement shall be invalid. With this new regulation which was not included in the Old Law; the lessor will not be able to force the lessee to undertake an obligation which he does not have any benefits from and which is not directly related to the use of leasehold for making or renewing the lease agreement maliciously.

The interrelating contracts signed as of the end date of the postponement (July 1, 2020) and which do not have any benefit for the lessee and which is not directly related to the use of leasehold and which obligates the lessee shall be deemed to be void.

4. Determination of the Rent

Article 344 of Turkish Code of Obligations – “Agreements between the parties related to the rent amount for the renewed lease period shall be valid provided that the new amount does not exceed the increase rate on the avarage of the twelfe months on the producer price index of the previous year. This rule also applies for lease agreements longer than one year period.

If such agreement on this matter is not made by the parties, the rent shall be determined by the judge as not to exceed the increase rate on the avarage of the twelfe months on the producer price index of the previous year, by considering the condition of leasehold and also according to the justice.

Without considering whether an agreement on this matter is made by the parties, for the lease agreements which are longer than five years or renewed after five years, the new rent to be applied for the new term shall be determined by the judge at the end of each period of five years, according to the increase rate on the avarage of the twelfe months on the producer price index, condition of the leasehold and comparable rent amounts. The rent determined with this procedure may also be changed according to the previous paragraphs at the end of five year long periods.

If the rent is decided to be paid in foreign currency in the agreement, the rent cannot be changed unless five years have passed, by reserving the provisions of the Law no. 1567 on Protection of the Value of Turkish Currency dated 20/2/1930. Nonetheless, the provisions of the Article 138, titled “Excessive Difficulty for Performance” of this law is reserved. After five years passed, for the determination of the rent, the provisions of third paragraph shall apply.”

This regulation provides a maximum limit for the increase of rent. Namely; when the agreements are renewed after the workplace lease agreements expire, the increase of rent cannot exceed the rate on the avarage of the twelfe months on the producer price index. Of course, the parties are free to agree on a less increase rate for the rent, this is only the maximum limit. This limit will also apply to workplace lease agreements longer than one year.

If there is not any agreement made between the parties, the rent will be determined by the judge in accordance with the increase rate on the avarage of the twelfe months on the producer price index of the previous year, by considering the justice and the condition of the heasehold.

Regardless of whether or not an agreement has been made between the parties, for the lease agreements that last longer than five years or renewed after five years and at the end of each five years, the parties may request from the court to determine the rent to be applied in the new lease year. The judge shall determine the new rate according to the increase rate on the avarage of the twelfe months on the producer price index, condition of the leasehold and comparable rent amounts. The rent determined with this procedure may also be increased with the condition of not exceeding increase rate on the avarage of the twelfe months on the producer price index of previous year.

If the rent is determined as foreign currency in the contract, by reserving the provisions of the Law No. 1567 on the Protection of the Value of Turkish Currency and dated 20/2/1930, the rent cannot be changed unless five years have passed.In other words; the rent which is determined as aforeign currency or its exchange cannot be increased during the lease period. However, the provisions of the Article 138 of this law titled “excessive difficulty of performance” are reserved. In addition, the parties can request from the court to determine the rent for the next five years after five years or at the end of the periods of every five years.

However, due to excessive difficulty of performance that cannot be foreseen by the parties in foreign currency or foreign currency indexed lease contracts, the adaptation of the contract can always be requested by the parties.

5. Return of the Leasehold before the Expiry of the Agreement

Article 325 of Turkish Code of Obligations – “In case the lessee returns the leasehold in breach of the duration of the agreement or termination period, the lessee’s obligations shall continue for a reasonable period within which the leasehold may be leased with similar terms and conditions. In the case the lessee finds a new lessee whoas means to pay the rent and is ready to take over the tenancy before such period expires and whom the lessor may be expected to accept, the obligations of the lessee arising from the lease agreement cease to exist.

The lessor is obliged to deduct the expenses that he got rid of covering, the benefits that the lessor gets by using the leasehold in other means or those which the lessor intentionally refrained from getting from the rent.”

If the lessee returns the leasehold without complying with the agreement period or termination period, his debts arising from the lease agreement will continue for a reasonable period within which the leasehold may be leased with similar terms and conditions. In other words, the lessee will continue to pay the rent and management expenses during this (reasonable) period. The reasonable time here was used to be determined based on the precedents at the time of the old Code of Obligations. On the other hand, The Supreme Court, used to accept this reasonable period as 6 months in its decisions.

In the case the lessee finds a new lessee whoas means to pay the rent and is ready to take over the tenancy before such period expires and whom the lessor may be expected to accept, the obligations of the lessee arising from the lease agreement cease to exist.

The lessor is obliged to deduct the expenses that he got rid of covering, the benefits that the lessor gets by using the leasehold in other means or those which the lessor intentionally refrained from getting from the rent with this regulation.

6. Extraordinary Termination with Major Causes

Article 331 of Turkish Code of Obligations – “Each of the parties may terminate the agreement at any time by complying with the legal termination nofitication period in case of the existence of major causes that make the continuation of the tenancy unbearable for both parties.

The judge shall decide on the financial consequences of the extraordinary termination notification by considering the circumstances and the conditions.”

Since the current regulation has started to be applied for the workplace lease agreements, each of the parties can now terminate the agreement by complying with the legal termination nofitication period in case of the existence of major causes that make the continuation of the tenancy unbearable for both parties. In other words; in case of a change in the terms of the agreement after the establishment of the lease agreement and in this case the lease agreement becomes unbearable for the parties, extraordinary termination rights are granted fort he both parties.

We should state that; it is not sought for the “major cause” to arise from the behaviors of the parties. As a matter of fact, the major cause may be caused by objective situations, which both parties do not have any faults for. For example, the economical damage, losing the customer market or quarantine practices, shopping malls not taking the necessary measures or being quarantined for a long time due to positive cases although they have taken the necessary measues caused by the pandemic can be listed as the objective cases.

While the Old Code of Obligations accepted the right of extraordinary termination with majure cause only for immovable properties, the new regulation accepted it for all lease agreements made for movables, immovables, roofed and without roof.

7. Prohibition on Making Changes in disfavor of the Lessee

Article 343 of Turkish Code of Obligations – “In the lease agreements, making changes in disfavor of the lessee is void, except determing the rent.”

This regulation is also one of the new applications that came into effect as of the end of the postponement date (1 July 2020) for roofed workplace lease agreements. Therefore, no changes in disfavor of the lessee cannot be made within the workplace lease agreements, after the lease agreements are made or in the process of renewal. Only the provisions of the agreement regarding the rent are exceptions of this prohibition.

 8. Prohibition on Making Regulations in disfavor of the  Lessee

Article 346 of Turkish Code of Obligations – “No other obligation to pay anyhting besides the rent and subsidiary costs can be brought for the lessee. Especially the agreements that stipulate any payment of penalty in case of delay in performance of the rent or that the upcoming rents shall be due are invalid.”

No other obligation to pay anyhting besides the rent and subsidiary costs can be brought for the lessee in the workplace lease agreements. No provisions such as any payment of penalty in case of delay in performance of the rent or that the upcoming rents cannot be involved in the agreements to be made as of the end of the postponement date (as of July 1 2020), and the similar provisions in the agreements made before this date will be also invalid.

9. The Limitedness of the Causes of Termination Cases

Article 354 of Turkish Code of Obligations – “The provisions on the termination of the lease agreement by filing a lawsuit cannot be changed against the lessee.”

The New Code of Obligations gives the right of termination without any ground at the end of the tenth year of the agreement to the lessor and besides the following grounds, no cause for termination are given; the obligation of the lessor himself (or the new owner in case of change of ownership), the spouse, the subordinate or the upper lineage, the reconstruction or substantial repair of the leasehold or in case of default for the payment of the rent. As of the end of the postponement date (as of July 1, 2020), these termination rights will be accepted as limited in workplace leases and in case other grounds for termination are or will be foreseen within the existing agreements or agreements to-be-made, these will be invalid. In addition, no additional provisions besides the termination notice or warning periods written in the law cannot be involved in the workplace lease agreements and they will be invalid, if involved.


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