The Factory Defaults in Terms of Lease Agreements are Being Restored

3/26/2021

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After having been approved on 11.01.2011, the Turkish Code of Obligations (the “TCO”) numbered 6098 was published on the Official Gazette dated 04.02.2011 and numbered 27836. In accordance with the Article 648, the TCO entered into force as of the date of 01.07.2012.
Nevertheless; in accordance with the provisional Article 2 of the Law Amending Certain Laws to Accelerate Jurisdiction Services numbered 6217 (the “Law no. 6217”) amended with the Article 53 of the Law Amending Certain Laws and Decrees numbered 6353 published on the Official Gazette dated 12.07.2012 and numbered 28351, enforcement of certain Articles of the TCO including 323, 325, 331, 340, 342, 343, 344, 346 and 354 where the leased area is a workplace and the lessee is a trader in accordance with the Turkish Commercial Code (the “TCC”) published on the Official Gazette dated 14.02.2011 and 27846 or private and public legal entity, is postponed for 8 (eight) years. The period of 8 (eight) years subject to delay will expire on the date of 01.07.2020 and the provisions having been postponed are to be entered into force as of 01.07.2020, unless another suspension decision is adopted.

Introduction
After evaluating the regulations introduced within the scope of the TCO and taking into account the advantage of lessor in terms of negotiations regarding the terms and conditions of lease agreements, it is clearly seen that the provisions are regulated in favour of lessee as either imperative or relative imperative.

On the other hand, by considering the fact that parties could prioritize their commercial interests, with contribution of the financial power held and the obligation to act as prudent merchant felt by themselves, in terms of the lease agreements concluded between merchants within the scope of the TCC and private and public entities, interest for providing legal protection on behalf of them, at least for a while, has not been observed. In this regard; the provisions of the TCO regulated under the titles of (i) transfer of tenancy relationship, (ii) Return of the leasehold before the expiry of the agreement (termination of the agreement before the term), (iii) Extraordinary termination, (iv) Prohibition of tied up agreements, (v) Provision of security by the lessee, (vi) Prohibition of arrangements against regulation, (vii) rental fee -In general and its determination-, (viii) prohibition of arrangement against the lessee and (ix) limitedness of grounds of action have been postponed for 8 (eight) years.

Due to this postponement, the provisions of the abrogated Law on Lease of Real Estate numbered 6570 , abrogated Code of Obligations numbered 818 (“Abrogated Laws”) and relevant Supreme Court decisions were applied in the interpretation of the postponed provisions. In case that the postponed provisions do not overlap within the scope of the Abrogated Laws, in accordance with the principle of freedom of contract, provisions of Lease Agreements were applied, provided that no breach exists in terms of the mandatory provisions of Laws being in force and the relevant Supreme Court decisions.

However, as it is mentioned above, unless a suspension decision is resolved, the provisions evaluated below under the relevant titles will be in force, in terms of the workplace lease agreements concluded by the lessee who are traders within the scope of the TCC and private and public entities. Accordingly; the evaluation regarding the articles that will enter into force as of 01.07.2020 are as below:

I. Transfer of Tenancy Relationship (TCO art.323)
In accordance with the Article 323 of the TCO, unless the lessee obtains the written consent of the lessor, s/he will not be able to transfer the tenancy relationship to another party. On the other hand, the lessor may not, unless there is a justifiable reason in a workplace leasing case, refrain from giving such a consent.

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 its debts to the Lessor.Moreover; in the case of workplace leases, the lessee who transfers, shall be jointly and severally responsible with the transferee until the expiry of the lease agreement, for a maximum period of 2 (two) years.

II. Return of the Leasehold Before the Expiry of the Agreement (TCO art.325)
According to the Article 325 of the TCO, in the case where the lessee hands back the leasehold in breach of the duration of the agreement or termination period:
  • the lessee’s obligations shall survive for a reasonable period within which the leasehold may be leased with similar terms and conditions.
  • In the case where the lessee finds a new lessee whom the lessor may be expected to accept that he has means to pay the rental and is ready to take over the tenancy before such period expires, the obligations of the lessee originating from the lease agreement cease to exist.
Likewise, the lessor shall be obliged to deduct from the rental the costs which the lessor is exempted and the benefits the lessor gained by using the leasehold in other manners or those which the lessor intentionally refrained from gaining.

III. Extraordinary Termination (TCO art 331)
According to the Article 331 of the TCO, a provision having been postponed as well, each of the parties may at any time cancel the agreement in the case of the existence of important causes that make the continuation of the tenancy unbearable for both parties;
  • by following the legal cancellation notification periods.
  • Moreover; the judge shall decide on the financial consequences of the extraordinary cancellation notification by considering the circumstances and the conditions.

IV. Prohibition of Tied Up Agreement (TCO art.340)

Pursuant to the Article 340 of the TCO, in residence and roofed workplace leases, if the conclusion or continuance of an agreement, without lessee’s benefit, is tied up to the lessee’s obligation that is not directly related to use of leasehold, the agreement shall be invalid.

In this regard; lessee's commitment to conclude an insurance agreement, or the obligation to purchase the leased at the end of the lease period may be included in the instances related to tied up agreement practices.

V. Provision of Security by the Lessee (TCO art.342)
As per the Article 342 of the TCO, in residence and roofed workplace leases, if the lessee is obliged to provide security by the agreement, the security shall be limited to maximum 3 three-month rental fee.

In this context, 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 to 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.

However; if the lessor did not notify the bank in writing within 3 (three) months following the end of lease agreement period that s/he has gone to court related to the lease agreement or has initiated execution or bankruptcy proceedings, the bank shall be obliged to release the security upon the request of lessee.

VI. Prohibition of Arrangement against the Lessee (TCO art.343)
After implementation and enforcement of the provisions stipulated under the Article 343 of the TCO, in lease agreements, making changes against the lessee shall be void, except determining the rental fee.

VII. Determination of the Rental Fee (TCO art.344)
Within the scope of the Article 344 of the TCO, agreements between parties related to the rental fee for the renewed lease period shall be valid provided that the new rental fee does not exceed the rate of increase indicated by the producer price index. Moreover, this provision shall be applicable also for lease agreements longer than one-year period.

If such an agreement has not been made by parties, the rental fee shall be determined by judge so as not to exceed the increase rate in the producer price index of previous lease period, by considering the condition of leasehold and justice.

Without considering whether an agreement by the parties exists, the applicable rental fee for the lease agreements longer than 5 (five) years or renewed after five years shall be determined by the judge with a view to the rate of increase in the producer price index, the condition of the leasehold and comparable rental fee determined by this procedure may be changed in accordance with the provisions in the previous paragraphs.

If the rental fee has been decided as foreign currency in the agreement, rental fee cannot be changed unless 5 (five) years have passed. Nonetheless the provision of the Article 138, titled “Excessive Difficulty for Performance” is reserved. After 5 (five) years passed, the rental fee, by taking into consideration the exchange rate fluctuations, shall be determined by the judge with a view to the issues mentioned above.

VIII. Payment Obligations Except Rental Fee and Additional Expenses (TCO art.346)
In accordance with the Article 346 of the TCO, the lessee shall not be obliged to pay any other obligations than the lease and subsidiary costs. In this regard, agreements that stipulate any payment of penalty in case of delay in performance of the rental fee or that the upcoming lease costs shall be due are invalid.

IX. Limitedness of Grounds of Action (TCO art.354)
In accordance with the Article 354 of TCO, the provisions included within the lease agreements regarding termination of lease agreement by the way of litigation shall not be amended against the lessee. Within this regard;
  • In terms of the workplace lease agreements, the reasons for termination of lease agreement are determined numerus clauses in TCO.
  • Except for the following conditions, (i) termination of the lease agreement on condition of expiration, (ii) termination by the lessor or successor of the lessee on condition of the death, (iii) termination with justified (substantial) reason, (iv) termination following the delay in payment or insolvency of the lessee, (v) breach of the obligations of the lessee such as non-using the leased premises in a prudent way conforming with lease agreement and not having respect for neighbours or having recurring delays in payments etc. it shall not be possible to set forth particular termination conditions.
Except for those listed above, the conditions for termination and eviction in lease agreements shall not be applicable as of 01.07.2020.

As they are explained under the relevant phases, it is envisaged that certain amendments in terms of the commercial lease agreements will be in favour of the lessee, after the provisions whose enforcements postponed until the date of 01.07.2020 of the TCO enter into force as of the mentioned that, unless another suspension decision is adopted. In this context; to interpret the provisions properly, the decisions of the Supreme Court should be taken into consideration as well.

You may access the Articles of the TCO by clicking here.

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