Frequently asked questions about residential and work leases

Introduction:

This FAQ aims to provide clear answers to the main questions we have encountered lately regarding residential and covered workshop leases, with the delayed entry into force of the provisions of the Turkish Code of Obligations for Offices of July 20201. We aim to update this FAQ with new questions and create an alert that could be the starting point for much-needed legal discourse within the practice.

1 What is the main legal framework for residential and work leases in Turkey?

Residential and work leases with roof in Turkey are subject to the Turkish Code of Obligations No. 6098 (“TCO”) and the Real Estate Lease Law No. 6570 (“Law No. 6570”). The general provisions relating to leases, article 299 to article 338 of the TCO, will apply to residential and business leases as long as they do not contradict the provisions relating to residential and workshop leases under the roof, provided for in articles 339 to 356 of the TCO.

2 What is the difference between fixed-term leases and indefinite-term leases?

In accordance with Article 300 of the TCO, rental contracts may have a firm duration or an indefinite duration. According to the definition of TCO, leases that end at the expiration of the term and without notice are defined as fixed-term leases. Other rental contracts are deemed to have been concluded for an indefinite period. Whether a term should be fixed or indefinite requires various considerations in many aspects such as the termination of the rental agreement.

3 How is the rent determined? What are the legal limits?

The lessor and the tenant can decide on the rent for a dwelling or a place of work while respecting contractual freedom. However, since the rent is an essential element of a rental contract, it must absolutely be determined or be determinable under the lease. On the other hand, in the Turkish regulatory framework, there are also limitations that consider as invalid rent amounts that are unreasonably below market value.

4 Can the rent be determined in a foreign currency?

In accordance with Decision No. 32 on the Protection of the Value of Turkish Currency, several limitations have been applied to determine the value of a contract in foreign currency. The respective provision of this decision states the prohibition of using foreign currency for the sale and rental of real estate, if both parties reside in Turkey. However, Communiqué No. 2008/32-34 relating to Decision No. 32 on the protection of the value of Turkish currency provides for an exception. Accordingly, if 50% or more of the shares of a legal entity residing in Turkey belong to persons not residing in Turkey, the agreements relating to immovable property may be determined in a foreign currency. However, it should also be noted that this regulation is regularly updated according to the different types of transactions.

5 How to determine the duration of a residential or work lease? What are the renewal processes?

The parties to a lease contract can determine the duration of the lease in accordance with the freedom of contract. If the parties have established a lease without explicitly or implicitly determining its duration, then we speak of a lease of indefinite duration, as indicated above.

The main issue to consider here is that fixed-term residential leases and covered offices are not considered to have expired at the end of the term. In accordance with Article 347 of the TCO, at the expiration of its term, a fixed-term lease is renewed by the renewal term determined by the parties. In the absence of such a renewal agreement, the lease will be renewed for one year in accordance with article 344 of the TCO.

6 How are rent increases determined?

The rent may be subject to an increase for each year of rental. However, TCO has provided a legal ceiling for the benefit of tenants. In accordance with Article 344 of the TCO, the parties may not agree to a rent increase greater than the difference of the 12-month average of the Consumer Price Index (“CPI”), published by the Institute Turkish statistics (“TUIK”). If the parties agree on a higher rent increase, this ceiling will apply.

In addition, the rent increase indicated above only applies to rental contracts in Turkish Lira. For rents determined in foreign currencies, article 344 of the TCO provides that no rent increase is authorized during the first five years of the lease.

7 Under what circumstances can the tenant terminate the lease?

In terms of leases of indefinite duration, tenants can avail themselves of Article 329 of the TCO, and they can give three months’ notice of termination for each six-month lease period and terminate the lease at the end of this period. lease period without giving any particular reason.

For fixed-term leases, if a shorter termination period is not agreed between the parties, the tenant may terminate the lease by giving notice to the landlord 15 days before the end of the lease. The tenant can terminate the lease without giving any particular reason.

8 Can the landlord terminate the lease by giving a notice of termination to the tenant?

Under TCO, the right of termination granted to the tenant under TCO is only granted to the landlord within certain limits. Accordingly, the landlord cannot terminate the lease due to the expiration of the term of the lease. The lessor may only terminate the lease without justified reason at the end of the 10-year renewal period, subject to three months’ notice.

For owners who are significantly limited by termination by notice pursuant to TCO, several grounds for termination are provided by TCO, which must be asserted through a lawsuit. For example, pursuant to Sections 350 and 351 of the TCO, the landlord may terminate the lease by legal action based on necessity, reconstruction or zoning, or the necessity of the new landlord.

9 What are the consequences of non-payment, partial payment or late payment of rent?

A tenant who pays the rent late or partially or who does not pay it at all, can provide a right of termination to the landlord. Firstly, as provided for in Article 315 of the TCO, non-payment or partial payment of the rent would result in default by the tenant. The landlord may provide for a curing period of at least 30 days and notify the tenant that if payment is not made within the curing period, the lease will be terminated.

Additionally, pursuant to TCO Section 352, if the tenant causes two legitimate notices within a lease year, the landlord may sue for eviction.

10 What are the conditions of a sublease? Can subletting be made free?

In accordance with article 322 of the TCO, the lessor’s written agreement must be obtained for the lessee to sublet. This written consent can be given by a stipulation of the main lease between the lessor and the lessee.

As indicated above, rent being an essential component of the lease, a lease stipulating that the property is rented without rent can be considered as a loan for use agreement (“kullanim dnc”) instead of a residential lease. or office.

11 What are the tenant’s rights in the event of transfer of ownership?

If the leased property is transferred to a third party by the lessor, the lease continues to produce its effects, as expressly provided for in article 310 of the TCO. Thus, in the event of a transfer of ownership, the new owner will be bound by the lease.

12 What are the lessor’s rights in the event of a transfer of ownership?

The new owner cannot set new lease terms or terminate the lease without cause. However, Section 351 of the TCO provides a ground for termination for the new owner by which he can terminate the lease if he needs to use the property. According to this provision, the lessor can bring a legal action six months after giving the notice of termination to the lessee, which must take place within one month of the date of the transfer of ownership. Annotation of the lease to the title deed would prevent the new lessor from terminating the lease by litigation in accordance with Article 351 of the TCO

13 Can the tenant or the owner return the rented property?

The lessor may make improvements and modifications to the leased property that may be suffered by the lessee, in accordance with article 320 of the TCO. The lessee may also make improvements and modifications to the leased property with the agreement of the lessor, in accordance with article 321 of the TCO.

Moreover, the general view of Turkish doctrine regarding minor repairs (such as changing light bulbs or repairing the sink) is that such works do not constitute improvements or alterations to the rented property within the meaning of Article 321 of the TCO. Thus, tenants would not be required to obtain written consent from their landlord for every minor repair.

14 How would a tenant’s bankruptcy affect the lease?

In accordance with Article 332 of the TCO, in the event of the bankruptcy of a tenant, the lessor has the right to require the provision of a written guarantee within a reasonable time. If this guarantee is not provided in due time, the landlord may terminate the lease immediately.

15 What is the related contract prohibition?

The related contractual prohibition is another provision that is intended to protect tenants of residential and working leases within TCO. This provision aims to prevent the imposition of payment obligations other than rent, ancillary charges and guarantees such as a deposit. According to Article 340 of the TCO, if the tenant assumes an obligation unrelated to the tenancy relationship, without any benefit for himself, to ensure the continuation of the residential or working lease, this agreement related to the tenancy does not would not be valid.

16 What are the main differences between a usufruct lease and an ordinary lease?

According to Article 357 of the TCO, usufruct leases are defined as leases which stipulate “the use of a product or a right and the collection of the products connected therewith”. The main difference with an ordinary lease is that the lessee has the right to benefit from the harvest of the leased property (or valuable assets that the leased property produces).

In addition, usufruct leases and ordinary leases are subject to different provisions under the TCO. Consequently, residential and covered workshop leases and usufruct leases may be subject to different provisions, in particular for the aforementioned matters such as termination, rent increases and rent renewals.

The content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may qualify as “lawyer advertising” requiring notice in some jurisdictions. Prior results do not guarantee similar results. For more information, please visit: www.bakermckenzie.com/en/disclaimers.

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