The effective date of nine provisions of the Turkish Code of Obligations numbered 6098 which entered into force on 01 July 2012(“TCO”)related to the workplace leases, the lessees of which are merchants as per the Turkish Commercial Code and private and public law legal persons, had been postponed for 8 years. Accordingly, it has been regulated that the provisions of the lease agreements falling in the scope of the postponed provisions shall be applied according to the freedom of contract principle and in case there are no relevant provisions under the lease agreements; the provisions of the former Law of Obligations shall be applicable. In this framework, the below mentioned postponed provisions will enter into force on 01 July 2020 unless there is a new postponement.
TCO ARTICLE 323 – TRANSFER OF THE LEASE AGREEMENT
It has been set forth that as of 01 July 2020, in order for the lessee to transfer the lease agreement to a third party; it is required to obtain the written consent of the lessor. Even though the written consent of the lessor has been regulated as an obligation, it has been stated that the lessor cannot refrain from providing such written consent without a valid reason. In order for the lessor to not provide written consent to the transfer, the lessor should have a valid ground. Furthermore, the transferor shall be jointly liable with the new lessee to the lessor until the termination of the lease agreement and in any case maximum for two years.
TCO ARTICLE 325 – RETURN OF THE LEASED PROPERTY PRIOR TO THE TERMINATION OF THE LEASE AGREEMENT
As per the relevant article, it has been set forth that in case the lessee returns the leased property without complying with the termination or agreement period, the lessee’s obligations arising from the lease agreement shall continue for a reasonable period during which the property can be leased again with similar conditions. However, if the lessee is able to find a new lessee with ability to pay, ready to take over the lease agreement and the lessor is expected to approvesuch lessee before the end of the reasonable period, the lessee’s obligations arising from the lease agreement shall terminate. Accordingly, an opportunity has been provided to the lessee, who has terminated the agreementwithout complying with the termination or agreement period,to be released from liabilities, if the lessee fulfills the conditions listed in the article. Moreover, the lessor shall be liable to deduct the expenses, which the lessor has refrained from making, along with the benefits that the lessor has obtained by using the leased property for different purposes or the benefits that the lessor has deliberately refrained from obtaining,from the lease amount.
TCO ARTICLE 331 –EXTRAORDINARY TERMINATION–IMPORTANT REASONS
As per this provision, it has been foreseen that each party of the lease agreement can terminate the agreement by complying with the legal termination notice period, in case of existence of important reasons which render the continuation of such agreement unbearable for a party. Even though the parties are provided with such freedom to terminate the agreement, the judge would evaluate whether there is any financial consequence of such extraordinary termination or not. In such regard, taking into consideration the specific case and the conditions, the financial consequences of the extraordinary termination shall be determined.
TCO ARTICLE 340 –CONNECTED AGREEMENT
It has been regulated by this article that if the execution or continuation of a lease agreement is connected to an obligation for the lessee to incur a debt which is not related to the direct usage of the leased property and is not for the benefit of the lessee, such connected agreement shall be invalid. Accordingly, a connected agreement would be invalid;
- if the execution or continuation of the lease agreementis subjectto an obligation of the lessee to incur a debt which is not related to the direct usage and;
- Such connected agreement is not for the benefit of the lessee.
TCO ARTICLE 342 –SECURITY GIVEN BY THE LESSEE
According to this article, if the lessee is liable to provide a security under the lease agreement, such security shall not exceed three months’ lease and if the security is provided in cash or as a negotiable instrument, the lessee shall deposit the cash in a term saving account and the negotiable instrument shall be depositedwith a bankprovided that such security not be withdrawn without the consent of the lessor. In order for the bank to return the security, the parties should mutually agree on such return or there should be a definite court decision or execution proceeding.
If the lessor does not notify the bank in writing of any filed lawsuits or legal proceedings that were initiated against the lessee within three months following the termination of the lease agreement, the bank shall return the securityto the lessee upon lessee’s request.
TCO ARTICLE 343 – LEASE AMOUNT– GENERAL TERMS
As per this article, it has been set forth that apart from the determination of the lease amount, no other changes that are against the lessee can be made within the lease agreement. Even though this article shall be applicable after 01 July 2020, cases where provisions against the lessee are not accepted are already encountered frequently in practice and under other regulations.
TCO ARTICLE 344 –DETERMINATION OF THE LEASE AMOUNT
Pursuant to this article, it has been regulated that the agreement of the parties regarding the lease amount for the renewal period shall only be valid if such amount is not higher than the rate of change in accordance with the twelve-month average of consumer price index of the previous year and such method shall be applied to lease agreements executed for longer than one year period.
Although the effective date of this article is 01 July 2020, the provision regarding the limitation of the lease amount increase with the rate of change in accordance with the twelve-month average of the consumer price index of the previous year, has been published under the Law on Amendment to Tax Laws and Certain Other Laws and Decree Laws numbered 7161 on 18 January 2019. Thus, such article regarding the lease amount increase is currently in effect.
It has been determined in paragraph 3 of article 344 that,regardless of any agreement between the parties, for the agreements that are executed for longer than five year period or that are renewed after five years, at the end of every following five year term, the lease amount increase shall be decided by the judge fairly considering the rate of change in accordance with the twelve-month average of the consumer price index, the status of the leased property and similar leases. The lease amount, determined in line with this method for the lease period after every five-year period, can be amended in accordance with the principles listed in previous paragraphs of article 344.
If the lease amount is determined in foreign currency, without prejudice to the provisions of the Law on Protection of The Value of Turkish Currency, the lease amount shall not be amended before five years. However,taking article 138 of the TCO regarding extreme performance difficultyinto consideration, the above mentioned paragraph 3 of article 344 can be applicable to the determination of the lease amount after five years for the changes in foreign currency leases.
TCO ARTICLE 346 –PROHIBITION OF REGULATIONS AGAINST LESSEE
It has been stated under this article that no other payment obligation shall be imposed on the lessee apart from the lease amount and secondary expenses. Regarding especially the penalty clauses, which are currently included in many lease agreements and are subject to various disputes, it has been regulated that any agreement particularly regarding the payment of a penalty in case of late payment of the lease amount or the remaining lease amountsbecoming automatically due shall be invalid.
TCO ARTICLE 354 –LIMITEDCAUSES OF ACTION
In accordance with this article, it has been foreseen that provisions which regulate the termination of lease agreements by lawsuits cannot be amended against the lessee. Accordingly, although the freedom of contract principle remains valid, it will not be possible to include any additional provisions against the lessee for the termination of the lease agreement apart from the provisions regulated within the scope of legislation regarding termination by lawsuit.
As a final note, even though currently there are some practices similar to the provisions stated above, following the effectiveness of these postponed provisions, more definite and clearer consequences shall occur related to the workplace lease agreements, the lessees of which are merchants as per the Turkish Commercial Code and private and public law legal persons.
Please do not hesitate to contact us at email@example.com for any questions.