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Commercial Lease Contracts Should be Taken Separately
Contracts For Commercial Leases Should be Handled Separately
In legislative regulation about commercial lease contracts, housing and commercial rents should be taken separately.
Turkish modern retail sector is a fast-growing sector by comparison with many countries. But despite this rapid growth, it is not possible to say that the potential in this area is being fully used. One of the main reasons is that the applicable legislation contains some limitations, and regulations needed by the sector are not satisfied.
The Law on Regulation of Retail Trade numbered 6585, and by-laws connected with this Law offered an opportunity to pave the way. Still, even this opportunity is not fully evaluated. The shopping mall sector is a subdivision of the retail sector. The Turkish Code of Obligations determines the relationship between the shopping mall investors as a place provider in business and lessees in the retail trade sector.
Some provisions have been postponed for eight years (until 01.07.2020) when the new Turkish Code of Obligations went into operation on 01.07.2012 to eliminate objections created by the regulations on commercial real estate. This postponement regulation protects the shopping mall sector from some fatal effects, still, regulations about the lease agreement of the Turkish Code of Obligations, which do not take economic realities into account in the sector in force with all its faults.
Primarily, provisions related to housing and commercial rentals of the Turkish Code of Obligations contain regulations far from the reality of commercial life. Whereas “housing rent” and “commercial rent” stand for two very different forms of relation. While constitutional housing immunity and family privacy from matters related to public order are inevitable to look out for at first, the second relationship is entirely commercial and that the tenant, the protected party, is often a merchant and because of this liberty of contract principle should be current most of the time.
In one sense, housing tenants are not protected as much as they need. On the other hand, commercial tenants are using some preventive regulations that they should never take advantage of unless there is a twist of this truth. Because of this, a radical change to the Turkish Code of Obligations and a distinction between housing rents and commercial rents should be made.
Regulation of the tenant side tradespeople lease contract in a separate department and prioritising parties willpower in this arrangement is necessary in many ways.
1- No Need For Protection Utilizing Parties
Retail management in the modern (organised) retail sector is crackerjack and often on the landlords’ side and much larger than disponer by active size firms. In this case, when you give parties protective provisions that do not need to be protected, certainly, the results will not be equitable.
Again when it is about commercial reality, we know that big brands are very effective in the investment decisions of the shopping mall projects and commercial plazas of big companies. As it is known to all, the shopping mall projects that the stores do not support are weak.
On the other hand, it is a known fact that large companies are almost “ordering” commercial plazas to disponer in return from long-term lease agreements. This reveals extremely unfair consequences that judgements centred on the burning of the need for housing and providing tenant protection in Turkish Code of Obligations practice big companies who have contracted for the design and construction of the project itself.
2- Compound of Common Expenses
The common expenses of commercial real estate are very different from housing or ordinary commercial expenses due to the nature of expenses. The most accurate naming must be “common expenses” or “service charges” but which is named as “side expenses” in The Turkish Code of Obligations, “mutual expenses” in The Property Law, “expenses for common use areas” in the Law on the Regulation of Retail Trade.
For example, shopping centres have a marketing budget and an important part of the tenants benefit from this; there is no indirect relationship as you think. Again, there is no regulation about the “visitor service” to the shopping centre, and expenses arising from this are neither in The Turkish Code of Obligations nor in the Law of Property Ownership. Likewise, the fixture budget in the common areas, which is a cross to carry at the first opening, is a type that is not in the ordinary commercial and housing structures.
All this the way of featured expenses and how to apportion them to tenants have been tried to be solved by the Law on the Regulation of Retail Trade numbered 6585 and the Shopping Center Regulation. However, provisions for common expenses of the Shopping Center Regulation conflict with provisions for side expenses in the Turkish Code of Obligations. It is more suitable to organise commercial lease agreements with different dynamics and motives separately to the law technique rather than put up with this discrepancy.
3- Form of Managing
Turkish Code of Obligations and Law of Property Ownership approach to real estate property administration and administration costs are far from modern times’ economic realities. It is widely accepted that it is possible to keep the value of the property high thanks to the administration of professional and branded companies. At the same time, this status provides a sub-sector under “property management” and causes a competitive atmosphere among these companies and different immovable.
It is positive that such a competitive environment targets quality of service, but the Turkish Code of Obligations sabotage development in this area by forbidding management techniques necessary for such a competition to effort to “make a difference” at different costs because the Turkish Code of Obligations count “side expenses” as limited and kill this competitive environment with prohibiting the collection of any other amount from the tenant.
4- Turnover Rent Practice
Turkish Code of Obligations ignores the “business partnership “fact between retail businesses in the retail sector and shopping centre investors providing space to them by handling “housing and commercial rents” and ignoring turnover rent in a single scope. At the same time, many shopping malls are rented with turnover rent either entirely or partially with a certain minimum rent amount. That is to say, a certain rate of the tenant’s rent income constitutes the landlords’ rent income.
Maximising this revenue will certainly be proper in the common interest of both sides, but it is often seen that parties sometimes think differently about how to make maximisation. Fundamentally, it can not be expected that the disponer and the tenant will think differently.
It is not a secret even the tenants have very different thinking from each other. It is a case that different groups of tenants (food court, small store, middle store, big store, cinema, show centre, hypermarket) have different interest groups. The only common ground of all these different groups is to increase total turnover. But there is no the Turkish Code of Obligations to allow setting a budget for this single common interest.
5- Offer For Commercial Lease Contracts
For preventing further problems in practice, it would be useful to make a change of Law that only the general provisions on the Turkish Code of Obligations would be applied to lease contracts whose parties are “tradespeople” according to the Turkish Commercial Code.
In this way, artisans and self-employed working with labourers will leave tradespeople regulation. Their rental relationships will take place in the scope of commercial rent. Some protectionist provisions will continue for them. Thus, a temporary solution to the problem will be found, and the pressure on the parties to this commercial lease relationship will be removed.
Related Articles:
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- What Does Real Estate Bubble Mean?
- Overdue Difficulty and Adaptation Cases Under Article 138 of The Code of Obligations,
- Presidential Decree on Carrying out Certain Transactions on Turkish Currency.
