| Reading Time: 9 Minutes

Postponed Provisions of Turkish Code of Obligations

Postponed Provisions of Turkish Code of Obligations

Turkish Code of Obligations was accepted by The Grand National Assembly of Turkey on January 11, 2011, and entered into force as Law No. 6098 on July 1, 2012.

In our article, you can find the rental provisions of Turkish Code of Obligations No. 6098, which was postponed in 2012 and entered into force as of 01.07.2020.

Postponed Provisions of Turkish Code of Obligations

Law No: 6098 and abrogated Law on Real Estate Leases (“Law No: 6570”) do not conclude If the lessee or lessor is either a natural person or a legal person as well as not distinguishing the commercial leases and non-commercial leases. However, Provisional Art. 2 of Law No: 6217, which was enacted immediately afterwards Law No: 6098, enters into force on 04.02.2011, resulting in not all articles of the Law No: 6098 entering into force on the same date, since the effective date of nine articles pertaining to lease relationships where the lessee is a trader and the leased property is a workplace (“Commercial Lease Relationships”), has been postponed to date of 01.07.2020.

Until this date, the provisions of the Lease Agreement shall apply in accordance with the principle of freedom of contract with respect to the matters regulated in the articles that have been postponed; in case no provision was provided in the Lease Agreement, abrogated Law of Obligations (“Law No: 818”) provisions shall apply.

Since the postponement have not been extended to a new period, the nine undermentioned articles shall also be applied to Commercial Lease Relationships where the lessee is a trader, and the leased property is a workplace.

Transfer of Lease Contract (Art. 323)

According to Art. 323/1 of Law No: 6098, the lease relationship may be transferred provided that the written consent of the lessor was given. In this way, Thus “the person whose lease relationship is transferred to her/him with the written consent of the lessor” replaces the lessee (Art. 131/2). Therefore, what should be understood from the transfer of the lease relationship is the change of the lessee party; a transfer relationship in which the lessor party changes does not fall within the scope of this article.

In addition, it is decided that the lessee who transfers the lease relationship shall be severally responsible with the new lessee until the end of the Lease Agreement and for a maximum of two years without distinction between roofed and non-roofed in terms of workplace leases under the clause (Art. 131/3).

The lessor may give written consent before or after the contract to be made between the lessee and the third person who wants to take over the lease relationship, or a separate agreement may be made between the lessor and the third person regarding the transfer of the lease relationship.

Another important regulation provided by this article is that in terms of workplace leases, the lessor cannot give consent to transfer the lease relationship unless there is a justifiable reason. If the lessee believes that the lessor’s refusal to consent to the transfer of relationship is not justified, they have the right to file this request through a lawsuit. According to the concrete event, the judge will deliver a judgment whether there is a justifiable reason.

Early Termination (Art. 325)

According to Art. 334 of Law No: 6098, the lessee’s obligation to return the leased property upon the expiration of the Lease Agreement. Suppose the lessee returns the leased property before the end of the contract period or without complying with the termination notice periods. In that case, the debts arising out of the Lease Agreement shall continue for a reasonable time when the property can be leased under similar conditions, especially the debt to pay the lease (Art. 325/1).

However, before the end of this reasonable period, in case that former lessee provides a new lessee with solvency who is ready to take over the lease relationship, which the lessor may be expected to accept, the former lessee’s debts arising out of the Lease Agreement shall cease (Art. 335/1). Per the case-law of the Supreme Court, a “reasonable period” shall be determined by assessments through experts within the framework of the type, characteristics, position of the leased property, the degree of need for such a property in that area and other characteristics specific to the concrete event.

Termination For Significant Reasons (Art. 331)

Under the general provisions governing Lease Agreements, the Art. 331 of Law No: 6098 regulating the cause of extraordinary termination provides both parties with the possibility to terminate the contract in the event of significant reasons which make the performance of the lease relationship insufferable for them. This provision may also be applied in Residential and Roofed Workplaces Lease Agreements, and the parties may terminate the contract in the event of significant reasons.

The substantial reason that makes the performance of the Agreement insufferable is not solely due to the lessor’s subjective reasons, but maybe objective reasons such as unforeseen external events such as a state of war or severe economic crisis; however, the lessor who wants to terminate the contract should not be found to be defective in the birth of the major reason.

Terminating the Lease Agreement regarding Art. 331 of Law No: 6098 in the context of where the lessee is a trader, and the leased property is a workplace is only possible by the date of 01.07.2020. However, since Provisional Art. 2 of Law No: 6217 refers to abrogated Law No: 818 and Law No: 818 contains parallel provision of Art. 264, it is possible for parties to terminate the Agreement for significant reasons, during the postponement period, free of Art. 331 changes.

First of all, Law No: 6098, unlike Law No: 818, provides the termination of the Agreement opportunity in Residential and Roofed Workplaces Lease Agreements whether that Agreement is definite or indefinite period or the subject of the contract is movable or immovable. Art. 264 of abrogated Law No. 818 contains the clause provided for a substantial termination solely for Lease Agreements. During the term of application of abrogated Law No: 818, Law No: 6570 provided the reason for this termination solely for fixed-term contracts. On the other hand, Law No: 6098 does not seek a fixed-term contract requirement.

In case of termination of the Agreement for a significant reason, if there is no default of the lessee being subject to notice of termination, a loss of them shall arise due to the termination of the Agreement. Abrogated Law No: 818 provided that concerning the removal of such damages, the party to notify the termination shall pay the other party full compensation for the termination of the Agreement.

However, Law No. 6098 regulated that the judge will decide the monetary consequences of the notice of termination by considering the circumstances. Therefore, it provides that the judge will appreciate the compensation according to the conditions of the concrete event without determining a minimum compensation in the appropriate manner (Art. 331/2). Accordingly, it is also possible that no compensation will be paid, taking into account the concrete dispute.

Prohibition on Linked Contract (Art. 340)

According to article 340, titled “linked contract”, which is one of the new regulations of Law No. 6098, if the lessee is linked to a debt that is not directly related to the use of leased property, the linked contract that leaves the tenant under debt will be invalid, not the lease agreement.

This invalidity is a state of absolute invalidity that can always be put forward and considered ex officio by the court. There is partial invalidity since the lease agreement remains valid while the linked contract is null and void. What will be investigated in the concrete dispute is whether the contract linked with the lease agreement is imposed on the lessee or not.

Lessee’s Assurance (Art. 342)

Assurance (deposit) is usually some amount of money or valuable documents that are delivered to the lessor by the lessee at the beginning of the lease contract to cover the possible damages that the lessee may cause and do not have any function such as providing economic benefits to the lessor. According to article 342, it is up to the parties’ will whether or not to give assurances, but if assurances are to be given, the limits of this have been drawn.

According to this, first of all, the assurance fee can be up to a maximum of three months’ rent (Art. 342/1). Money or valuable documents can be given as an assurance. However, if the parties decide to give other assurances such as surety, pledge, letter of guarantee, the provision of article 342 is not applied.

If the lessee gives money as assurance, it is obligatory to deposit this money in a dated saving account that cannot be withdrawn without the lessor’s consent. If the lessee gives valuable documents as assurance, it is obligatory to deposit these valuable documents as well (TBK art. 342/2).

Except as provided in article 342, the bank is obliged to return the assurance, even if the lessor has not stated in writing that they have filed a lawsuit or initiated enforcement proceedings regarding the lease contract within three months of the expiration of the lease agreement. In this case, the lessee’s request is sufficient; the lessor’s consent is not sought.

Prohibition of Amending Against Lessee Except For Determination of Rental Price (Art. 343)

The provision of article 343 provides a general rule that no amendments can be made against the lessee after the contract is established in residential and roofed workplace lease contracts. The only exception to the general rule is determining the rental price. Thus, it is possible to change the rental price determined during the establishment of the contract according to the new economic conditions that arise, especially in case the contract period is extended due to the law.

Subsequent amendments in the lease contract against the lessee on issues other than the determination of the rental price (for example, adding a new one to the reasons stated in Article 350 and terminating the lease contracts of the residential and roofed workplace) are null and void even if lessee consented to amendments.

Determination of Rental Price (Art. 344)

With Article 344, it is stipulated that the parties’ agreements regarding the rental price to be applied in the renewed rental periods will be valid on the condition that they do not exceed the 12-month averages in the Consumer Price Index (CPI) in the previous rental year. The provision in question; The paragraphs “increase in Producer Price Index” have been changed to “changes according to the averages of twelve months in the CPI index”.

In addition, regardless of whether or not an agreement has been made by the parties pursuant to the regulation introduced by the third paragraph of the provision, the rental price to be applied in the new lease year according to the averages of twelve months in the CPI, in the lease contracts renewed for more than five years or after every five years thereafter, the rate of change, shall be determined by the judge due to the condition of the leased property and the equivalent rental prices can be determined following equity.

The rental price determined in this way in the rental year after every five years can be changed according to the principles in the previous paragraphs. We want to point out that, under the precedents of the Supreme Court in the period of repealed Law No. 6570; For the fair value determination, the contract had to expire in particular, and then four years of extension must pass.

Because the Supreme Court practices; In the first 3 (three) elongation years, the rental price was calculated according to PPI, and in the fourth elongation year, the determination was made according to peers. However, suppose the duration of the contract is longer than 5 (five) years after the delayed provision comes into force. In that case, the determination will be made by considering the equivalent costs.

Finally; In the fourth paragraph of the provision, it is regulated that if the rental price is determined as foreign currency, the rental price cannot be changed unless 5 (five) years have passed, provided that the provisions of the Law on the Protection of the Value of the Turkish Currency dated 20.02.1930 and numbered 1567 are reserved.

However, against this regulation, the provisions of Law No. 6098, titled “Excessive Difficulty”, have been preserved. In determining the rental price after five years, the provisions of the third paragraph, which we have explained above, will be applied by considering the changes in the value of the foreign currency during the period of abolition Law No. 6570, the parties could freely determine the increased rates in the scope of the principle of freedom of contract if the rental price was determined in foreign currency.

However, upon the entry into force of this provision, if the parties decide the rental price in foreign currency; The rental price cannot be increased, and the change cannot be made on the condition that the excessive performance difficulty in favour of the lessee is kept separate. In addition, by the law-maker, Law No. 7161 was added to this provision with the paragraph “provided that the provisions of the Law on the Protection of the Value of the Turkish Currency No. 1567 are reserved”, and compliance was achieved between the regulations.

Likewise, except for the exceptions listed in The Communique on The Amendment to The Communique No 32 on The Protection of the Value of the Turkish Currency (Communique No: 2008-32 / 34), published in the Official Gazette dated 16.11.2018 and numbered 30597, the parties cannot determine the rental price in foreign currencies.

Prohibition of Regulation Against Lessee / Invalidity of Penalty Conditions and Clause of Maturity (Art. 346)

Pursuant to Article 346 of the TBK, a mandatory regulation specific to residential and roofed workplace leases, the lessee’s obligation to pay is limited only by rental prices and ancillary expenses; An additional payment obligation cannot be imposed on the lessee. This rule meets Article 16 of abolished Law No. 6570.

With article 346 of Law No. 6098, the established precedents of the Supreme Court, which indicates that the maturity clauses included in the lease agreements are invalid as well the records regarding the penalty condition and the maturity clauses included in the agreements made before the effective date of the Law No. 6098. This important rule, which is not included in the old law, will also find application as of 1.7.2020 in terms of workplace rents with a merchant or legal person.

It should be noted that the penalty condition that is prohibited by Article 346 and is bound by the non-payment of the rent; the penalty stipulated in the contract for the violation of the lessee’s obligations other than the rent is not covered by Article 346.

Limitation of Causes of Filing a Lawsuit (Art. 354)

A lease contract can be terminated by lawsuit, but possible in the presence of the reasons shown in Articles 350, 351 and 352. Therefore, the limited number principle is valid in terms of reasons for evacuation, and the lease agreement cannot be terminated by a lawsuit, i.e. by a court decision, for any reason other than those listed in these articles.

In the aforementioned provision, the rule regarding the termination of the lease contract by a lawsuit is also enforced. For example, the parties cannot add a new one to the evacuation reasons stipulated in the law with a contract between them; they cannot aggravate the existing reasons in the law against the lessee or change the deadlines that regulate termination by the lessee. Article 354 is mandatory, and the records in the lease agreement that are contrary to the mentioned provision will be invalid.

Relevant Legislation and Precedent

Law No. 6098, Abrogated Law No. 818, Law No. 6217, Law No. 7161, The Communique on The Amendment to The Communique No. 32 on The Protection of the Value of the Turkish Currency (Communique No: 2008-32 / 34) Precedents of Supreme Court, Doctrine.

Related Article For Further Reading: Long-Awaited Articles of Turkish Code of Obligations on Renting Business Premises With Roof Finally Entered Into Force on July 1, 2020.

Related Articles