in Legal Success
| Reading Time: 5 Minutes
The Status of Tenants Given Cap in 2016 For Shopping Centres Partner Expenses
Some changes have just been made to the Shopping Centres Regulation (“Regulation”), which had entered force upon publication of Official Gazette on February 26, 2016, with a text of amendment published on the Official Gazette dated December 30, 2016. The 11th article of this Regulation, which related to the common expenses, has made the shopping centre’s common expenses problem more complicated.
These recent changes in the regulation seem problematic in many aspects. At first, Article 11 of the Law Numbered 6585, which gives authority to the Ministry to issue regulations regarding the matter, gave authority to the “expenditures on common areas”. However, the Ministry has regulated “common expenses”, including a broader category. Accordingly to this broad, this regulation has exceeded its authority on the first day. The amendment text published on December 30 has the opposite content to the law-making technique.
Since the case, that regulation, which brought a definition and a distribution rule on February 26 of the same year, revoked the last distribution rule of the same year and gave the practitioners a “new year gift”, which had commanded them to ignore last distribution rule. Just as economic and legal grounds made such an arrangement is unknown, this amendment would penalize those who rely on public authority and practice in that way.
It seems that this amendment causes many more problems and the handicaps mentioned above. One of the most prominent of these is the CAP implementation, which results from some tenants’ commercial agreements limiting the participation to common expenses on a square meter basis in total. As it is known, the Regulation, in its first form, regulated what were the common expenses in the first paragraphs (1) and (2) and predicts that the common expenses entering this definition should be distributed according to the ‘coefficient table’ published as Annex 1.
While regulating that, the Regulation also indicated with sub-article (9) that for those who were given the CAP by themselves, the amounts that the tenants would not payout would be covered by the shopping centre owner. In a way, tenants whose joint expense contributions have been capped were reserved and wished that the newly introduced distribution chart would be counted as a base.
With the Regulation entered into force on December 30, 2016, brought that common expense distribution will be made in terms of the ratio of the sales area of each retailer to the total sales area, in the event, there is an unaccepted common expense sharing procedure that all tenants agree unanimously with CAP or without CAP.
Although this new state of the matter is not openly stated, it seems like a new condition arises that whatever the distribution procedure specified in the lease contracts, this distribution procedure would be ignored, and the parties must agree on a consensus basis. Since it’s a known case that determining a distribution procedure made by shopping mall owners and tenants unanimously, consensus would be impossible neither in Turkey nor in any country in the world, the unanimous decision of the tenants may only be a result of a new meeting, negotiation and decision.
Although the regulation remains silent on this issue, it would be needed to organize a meeting with the tenants and form a new distribution procedure in the context of the new regulation. This distribution procedure must also have been adopted unanimously because the provision of the article is a “unanimity”, and this unanimity shall involve “all tenants”. Because it has not specified that a unanimity with an exemption of the tenants who are subject to the CAP application referred to in Article (11.9) or such a meeting was referred to in the “unanimity of the participants”. When we read the article in this way – it does not seem possible to read otherwise – here what it is like:
- All previously determined provisions relating to the common expense allocation procedure by the parties in the shopping centre lease contracts are invalid.
- Whatever the parties have previously agreed on, the parties shall enter into a new agreement, and the tenants must unanimously adopt this agreement.
- In cases of unable to reach unanimity, there will be a requirement to make a distribution on a square meter basis.
The first version of the regulation intervened in the parties’ contracts. However, this second intervention, made on December 30, 2016, differs from the first version. If a rule was applied to make the merger feasible and the condition of tenants with CAP (11.9) was held reserved. At the first form of regulation, it had been ruled that all agreements between the parties shall be voided and replaced by another agreement in accordance with Annex 1 Distribution Table.
A new agreement is foreseen with this second intervention rather than between the parties. If there is no such agreement, distribution on a square meter basis is foreseen. Although the provision of Article (11.9) is repeated, the business’s nature must be deemed practicable only if it is expressly forbidden and the owner has a new CAP agreement. Since the case that there is no exception for any group of tenants and contrary, it has been envisaged for an agreement with unanimity of all tenants.
Under these circumstances, there is a necessity for inviting all tenants by shopping centre owners to make a new agreement with them for the new agreement foreseen by the regulation. Since any tenant group has not been exempted from the necessity of making a new agreement, it shall be negotiated that give CAP again to tenants who has the CAP cause of their agreements. CAP implementation has also been removed as of 2016 since it is stated that the amounts collected in 2016 according to paragraph (5) of ‘Provisional Article, 1st’ will be regarded as advance, and the distribution will be done according to its principles and principles stated in Article 11.
For these retroactive decisions, the lawyers will discuss this change for sure, both in terms of the interests of the shopping centre owners and, in the interests of the retail businesses given the CAP, the law-making technique and the legal security principle, and perhaps the case will be opened for the cancellation of the relevant provisions of the regulations. However, since this situation does not require ignoring legislation already enacted, shopping centre owners will look back to the data from 2016 and after that without CAPs issued in the past. If they intend to give a new CAP, they may negotiate again with those tenants.
Unfortunately, there is a very limited time to do above mentioned process. Even though the Regulation does not contain any provision in this respect, according to the financial legislation, the shopping mall owners must declare the VAT of December and close the year 2016 on the declaration by January 24.
The provisions of the shopping centre regulation for this article are given below for the convenience of the reader:
ARTICLE 11 – (1) Common expenses which are repeated periodically, such as; electricity, water, heating, repair-maintenance except for the renewal, security and cleaning regarding common areas and which are not related to the title, shall be calculated and distributed if the retail business has not determined a sharing procedure in the shopping centre and the shopping centre management, the sale areas of the retail businesses are allocated to the sales area of the shopping centre to the extent of the sales area. The jointly determined expense sharing procedure is applied for a maximum of five years.
(9) In the event a common cost participation share shall be collected from retail enterprises less than it should be according to this Article, the remaining part shall be covered by the owner of the relevant workplace.
PROVISIONAL ARTICLE 1 – (5) The deduction of the fees taken by the shopping mall management as an advance for the common expenses for the year 2016 shall be made under the principles and procedures stated in Article 11.
The same regulation has been abolished from Annex-1.
Amendments made in the related Regulation are shown in “bold”.
- Long-Awaited Articles of Turkish Code of Obligations on Renting Business Premises With Roof Finally Entered Into Force on July 1, 2020,
- Information Note on Dividend Distribution in The Era of Covid-19 Pandemic,
- Amendment of Shopping Centre Regulation.