New Developments On Shopping Mall Joint Income and Common Expense Management

A. What is the Amendment Introduced by the Amendment Regulation?
Common issues that are most frequently seen between the retail businesses and shopping mall managements regarding the sharing of common expenses and joint incomes are expected to be resolved under the Amendment Regulation.

B. What is Regulated in the Amendment Regulation?
a) New Descriptions and Calculation Methods
The descriptions of “Joint Income”, “Common Expenses” and “Management Expense” have been introduced and the calculation methods used in the determination of Common Expenses have been amended in the Regulation.

i) Common Expenses: means common area expenses that are not directly arising from leased property, such as electricity, water, heating, maintenance and repair (excluding renovations), cleaning and health safety, and the expenditures connected to the duties of management personnel.

Accordingly, it has been determined that retail businesses will only be charged with the common expenses mentioned in the foregoing. Other expenses that are not included in the said description or any expenditures that are related to the common areas but not documented will not be requested from the retail businesses. Common expenses will be charged to each of the stores in the shopping mall pro rata to the sales area used by such particular store. As such, former common expenses determination method using the unanimous vote of retail businesses and the shopping mall management will no longer be consulted. The advance payment requested as common expense remains the same, yet the shopping mall management will be required to set-off the relevant advance payment until the end of February on the following rental year, meaning that shopping mall managements are no longer be allowed to set-off such amount until the end of the relevant rental period that advance payment had been made.

ii) Joint Income: means temporary rental fees acquired from the common area, advertising, marketing, entertainment and art activities, base station, ATM, and other joint incomes, as well as advance payments provided for common expenses.

It has been regulated that such joint income can only be used for covering the common expenses. In case that joint incomes are higher than the common expenses, the excessive amount will be set-off from the common expenses in the following rental year.

iii) Management Fee: means the expenses relating to the duties of management personnel that are currently employed in the shopping mall.
Accordingly, as to the rental agreements executed prior to 18.08.2022, the publication date of the Amendment Regulation, the shopping malls will be allowed to charge the retailer businesses with management fees that are only related to the duties of the currently employed management personnel, provided that any breakdown had not been included otherwise in the rental agreement. The sales area used by any particular store shall be taken into account in the calculation of the sharing of management fees.

Shopping malls will no longer be allowed to request any expense that is not a common expense, such as advertising, marketing and consultancy or any other expenditure that is undocumented, expect for certain cases as from the publication date of the Amendment Regulation. Having said that, retail businesses can be charged for these expenses until the renewal or extension of the lease, provided that such matter is included in the agreement that had been executed prior to the publication of the Amendment Regulation (18.08.2022) in accordance with the general principle of freedom of contract.

b) Newly Introduced Reporting Requirements for the Management of Shopping Malls
In addition to formerly requested reporting on joint income and common expenses (“Shopping Mall Report”), the management of shopping malls are now required to submit an independent auditor’s report (“Independent Auditor’s Report”) to the retail businesses.

Shopping Mall Report:
The obligation for submitting the Shopping Mall Report on the joint incomes and common expenses pertaining to the previous rental year has been postponed to the end of April. Besides, the minimum content that should be included in the Shopping Mall Report has been determined in the Amendment Regulation. Additionally, if requested from any retailer, all source documents that had been used for the preparation of the Shopping Mall Report shall be provided to the retailer within fifteen days of such request.

Independent Auditor’s Report:
It has become mandatory for the management of shopping mall to submit each retailer an Independent Auditor’s Report at its own expense conducting an audit on the advance payment, joint income, common expenses, and its share among retail businesses in terms of their conformity with the Regulation.

As to the agreements executed prior to 18.08.2022, in case that any retail business in the shopping mall has been charged for any expenditures regarding advertising, marketing, consultancy, and management fee, the Independent Auditor’s Report must contain a statement that all proceedings regarding the sharing of common expenses are in conformity with the Regulation.

You may refer to the Amendment Regulation here.

MORAL | KINIKOĞLU | PAMUKKALE | KÖKENEK
Serkan Pamukkale, Senior Partner
Cerensu Çetin Yenigün, Senior Associate


¹For the rental agreements that had been entered into force prior to 18.08.2022, the publication date of the Amendment Regulation, if it has determined any expenditure, such as advertising, marketing, and consultancy will be covered by the relevant retail business, it will be possible to charge the retail businesses with the same expenditures. If the rental agreement has been renewed prior to or after the expiry date of such agreement or if it has automatically been extended, the abovementioned expenses will not be incurred by the retail businesses considering such rental agreement is subject to the Regulation.