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EVALUATION OF CODE OF OBLIGATIONS

The Turkish Code of Obligations No. 6098 (“TCO”) was published in the Official Gazette No. 27836 dated 04.02.2011 and it was decided that it would be effective on 01.07.2012.

However, after the publication of TCO in the Official Gazette, shopping mall and real estate investors started their intensive lobbying activities and as a result, with the Provisional Article 2 of the Law Amending Certain Laws for the Acceleration of Judicial Services numbered 6217 published in the Official Gazette dated 14.04.2011 and numbered 27905, it was decided that certain articles in the Turkish Commercial Code concerning the lease agreements of the workplace where persons considered as merchants and Private Law and Public Law legal persons are lessees shall be postponed for a period of 5 years.

When it was realized that the postponed items determined by taking into consideration the draft status of the TCO were incorrectly included in the provisional article, this time, with the 53rd article of the Law No. 6353, published on 12.7.2012, Law on amendments on certain laws and delegated legislations were corrected, Postponed period has been extended from 5 to 8 years and in cases where there is no provision in the lease agreements, it is regulated that the provisions of the Law on Obligations No. 808 shall be applied.

As a result, the provisional article 2 of the Law No. 6353 is as follows: “In the rents of the workplace, where the lessee is person who are considered as merchants in the Turkish Commercial Code and private and public law legal persons, Articles 323, 325, 331, 340, 342, 343, 344, 346 and 354 of the Turkish Code of Obligations dated 11/1/2011 and numbered 6098 are not applied for 8 years as of 01/07/2012. In this case, the provisions of the lease agreement shall be applied in accordance with the freedom of agreement regarding the issues mentioned in these articles in the lease agreements. In cases where there is no provision in the lease agreements, the abrogated provisions of the Law of Obligations shall be applied.” 

Pursuant to the relevant provision, the agreed postponement period has expired and the articles 323, 325, 331, 340, 342, 343, 344, 346 and 354 have entered into force as of 01.07.2020.

CONDITIONS OF POSTPONEMENT

Whether Lessee is a Merchant or Legal Entity

In accordance with Provisional Article 2 of Law No. 6353, postponement items are not valid for those whose lessees are merchant or legal person. The merchant is defined in Turkish Commercial Code (“TCC”)’s 12th article as, “ Person who operates a business organization, even a part of business organization, on behalf of him is deemed as merchant” Having the title of merchant by legislator is subject to three conditions; have a commercial enterprise, the operation of this commercial enterprise and operating this commercial enterprise on behalf of this person, even partially. At this point, tradesmen are not subject to postpone because they do not have EVALUATION OF CODE OF OBLIGATIONS THAT ENTERED INTO FORCE ON 07/01/2020 Atty. Soner Nabil Kılıç – Atty. Hilal Ölmez 77 the title of merchant and therefore they shall not meet the conditions of postponing. Another issue is, in the case of more than one lessee, it is important to determine the existence of conditions of the postponement. Therefore, in case only one of the lessees is a merchant or legal person, postponed provisions shall find application area.

Workplace Rent

In order to be object of TCO’s postponed provisions, the merchant or legal person must have rents that are partaking of the workplace rent. As it is seen, residential rents are excluded from the scope of postponement.

As a result, the legislator sought the cumulative realization of these two conditions listed above within the scope of the postponement.

PROVISIONS THAT ARE EFFECTIVE AS OF 07/01/2020

Assignment of The Lease Relationship (TCO article 323)

“The lessee may not, unless he obtains the written consent of the Lessor, transfer the tenancy relationship to another party. The Lessor may no, unless there is justifiable reason in a workplace leasing case, refrain from giving such consent. The party to whom the tenancy is transferred with the written consent of the Lessor replaces the lessee in the lease agreement and the lessee who transfers is released from its debts to the Lessor. In case of workplace leases, the lessee who transfers shall be jointly and severally responsible with the transferee until the expiry of the lease agreement, for maximum period of two years. ”

In accordance with the article in the general provisions of the lease agreement of the TCO, it has been decided that the transfer of the lease agreements will be valid with the approval of the lessor. Within this scope, the lessor has no right to give this approval without “justifiable reason “. The term of “Justifiable reason” has importance at this point and will have to be determined taking into account the concrete case.

Return of The Leased Property Before The Term of The Contract (TCO article 325)

“In the case where the lessee hands back the leasehold in breach of the duration of the agreement or termination period, the lessee’s obligations shall survive for a reasonable period within which the leasehold may be leased with similar terms and conditions. In the case where the lessee finds a new lessee whom the Lessor may be expected to accept that he has means to pay the rental and is ready to take over the tenancy before such period expires, the obligations of the lessee originating from the lease agreement cease to exist. The lessor is obliged to deduct from the rental the costs from which the Lessor is made exempt from incurring and the benefits the Lessor gained by using the leasehold in other manners or those which the Lessor intentionally refrained from gaining.”

In order to be covered by this article and for the lessee’s early return, While there is a legally valid lease agreement between the parties, the lessee must return the leased one without justifiable reason. In other words, in order for the lessor to be able to claim the rental price, the lessee shall not require to be flawed. There was a regulation in the abrogated Code of Obligations numbered 818 (“aCO”) regarding the return of the rented place before the period agreed with the Lease Agreement. In the disputes regarding the early release of the contract, the Supreme Court made decisions, that the compensation to be paid by the lessee was limited by the reasonable period at which the leased could be rented again under the same conditions. The principles found in the application area with the mentioned case law were norms under the title of “General Provisions” and it was decided to apply in terms of all lease agreements.

When the former lessee finds a new lessee, the lessee’s obligation to pay compensation shall cease. Again, the reasonable period in which the lessor may be granted a lease under similar conditions and the duration should be evaluated according to the conditions of each concrete case.

Extraordinary Termination Based on Substantial Grounds (TCO article 331) 

“Each of the parties may at any time cancel the contract by following the legal cancelation notification periods in the case of the existence of important causes that make the continuation of the tenancy unbearable for both parties. The judge shall decide on the financial consequences of the extraordinary cancellation notification by considering the circumstances and the conditions.”

Since the relevant provision is essentially included in the abrogated Code of Obligations numbered 818, in accordance with provisional article 2, during the period of postponement, abrogated Code of Obligations numbered 818 article 264 has found application area instead of TCO article 331. The difference between Article 331 of the TCO and Article 264 of the abrogated Code of Obligations numbered 818 is in particular, that includes the difference in respect of the compensation to be paid by the party, which has terminated the contract. Abrogated Code of Obligations numbered 818 article 264, it is stated that necessary to prove the existence of important reasons that make the continuation of the lease relationship unbearable for the lessee, and in any case, it is arranged that at least 6 months of rent should be paid to the lessor as compensation. However, within the scope of postponement, under the article 331 of the TCO, the compensation is left to the discretion of the judge and less than 6 months can be awarded. 

We would like to point out that the article 331 of the TCO, which regulates the termination of the lease for extraordinary reasons, is included in the general provisions of the law and should be applied in terms of all lease agreements.

Prohibition of Linked Agreement (TCO Article 340)

“In residence and roofed workplace leases, if the conclusion or continuance of a contract, without lessee’s benefit, is tied up to the lessee’s obligation that is not directly related to use of leasehold, the contract is invalid.” 

The relevant article is a new regulation, which is not included in the abrogated Code of Obligations numbered 818. In order to implement the regulation in favor of the lessee and the prohibition on the linked agreement, some conditions are required to be fulfilled. The first of the conditions is that the lessee must come under a debt that is not related to the direct use of the leased with the linked agreement. Again, another condition is execution of the lease agreement or its renewal, and agreement want to be signed and linked between the lessee and the lessor or between the lessee and the third party. Lastly, the linked agreement must be on behalf of the lessee. Linked agreements containing the mentioned terms shall be void, and only the lease agreement shall be valid. This article is included in the section of the law “residential and roofed workplace” and since there is no application area for roofless workplaces, there 79 shall be no difference in terms of workplaces without roofs with the end of the postponed period.

Security Deposit by The Lessee (TCO article 342)

“In residence and roofed workplace leases, if the lessee is obliged to provide security by the contract, the security is limited to maximum three-month lease cost. If cash or negotiable papers are decided to be provided as security, the lessee shall pay the money into a forward savings account so as not to be withdrawn without approval of the lessor, or deposit negotiable papers in the bank. The bank may release such security only by the consent of both parties, upon finalization of execution or bankruptcy proceedings, the bank is obliged to release the security upon the request of lessee.”

The relevant provision was included in abrogated Code of Obligations numbered 818. Within this framework, the lessee and the lessor freely determined the deposit value by free will of the parties. Thus, in accordance with the Supreme Court practice, deposit to an average interest-bearing bank even if it is not deposited, the application that it is responsible for the deposit with interest at the time of return continued during the postponement period. Therefore, with the end of the postponed period, there shall not be a big difference in implementation, and since the article currently includes those who have the qualification of “residential and roofed workplace”, the substance will not be applied in terms of work places without roof.

In conclusion, with the regulation that entered into force as of 01.07.2020, in workplace rents where the lessee is a merchant or legal person, the deposit shall not exceed the 3-month rental fee and in case the negotiated value is money, it shall be deposited into a time savings account, if it is a valuable paper, it shall be stored in a bank.

Prohibition of Changes to The Detriment of The Lessee (TCO article 343)

“In lease contracts, making changes against the lessee is void, except determining the lease price.”The relevant provision, residential and roofed work place is located at the separation of lease agreement and as of 01.07.2020; application area is found in the workplace rents where the lessee is a merchant or legal person.

Determination of The Rent Amount (TCO article 344)

“Agreements between parties related to the lease price for the renewed lease period shall be valid provided that the new price does not exceed the rate of increase indicated by the producer price index. This provision is applicable also for lease contracts longer than one year period. If such an agreement has not been made by parties, the lease price is determined by judge so as not to exceed the increase rate in the producer price index of previous lease period, by considering the condition of leasehold and justice. Without considering whether an agreement by the parties exists, the applicable lease price for the lease contracts longer than five years or renewed after five years shall be determined by the judge with a view to the rate of increase in the producer price index, the condition of the leasehold and comparable lease prices. In the lease year following each five years, the lease price determined by this procedure may be changed in accordance with the provision in the previous paragraphs.”

The relevant provision is one of the regulations of the TCO regarding the determination of the rental price for housing and roofed workplace lease agreements. Although the effective date of the article is determined as 01.07.2020 in the rents of the workplaces, where the lessee is a merchant or a legal person, according to the widespread opinion, with the Law on Amendment in Tax Laws and Certain Laws and Decree Laws it came into force after being published in the Official Gazette dated 18.01.2019 and numbered 30659. As this issue is still new in practice, precedent judgments are expected to guide the issue.

Civil Department No. 3 of the Supreme Court, 2017/8651 E. 2019/5865 K.

“In addition, with the article 59 of the Law No. 7161 published in the Official Gazette dated 18.01.2019, and the provisional article 2 of the Law No. 6217; “The provision regarding the rate of change based 80 on the twelve-month averages in the consumer price index in article 344 of the Law No. 6098 amended by the Law establishing this paragraph shall be applied in the renewal of the lease agreements concluded with the first paragraph. By adding the provision, it has been decided that the rental increases to be made as of 01.01.2019 in all roof real estate rents will be determined based on the rate of change in twelvemonth averages in the consumer price index.” 

The decision of the Supreme Court above stated that all rent increases to be made after 01.01.2019 should be determined on the basis of exchange rate according to Consumer Price Index (CPI) twelve month averages. In this case, renewal is determined as each lease period that the increase is made.

According to provision, regardless of the rate agreed by the parties in the lease agreement, if this rate exceeds the rate of change according to the 12-month averages in the Consumer Price Index (CPI) in the previous lease year, the rate of increase in the contract shall not be applicable. On the other hand, it is possible to determine the fair value after five years from the establishment of the agreement.

Prohibition of Regulation to The Detriment of The Lessee (TCO article 346) 

“The lessee is not obliged to pay any other obligations than the lease and subsidiary costs Agreements that stipulate any payment of penalty in case of delay in performance of the lease price or that the upcoming lease costs shall be due are invalid.”

With the relevant article, the lessor shall not be able to bring the obligation to pay against the lessee except for the rental price and side expenses. By way of example, in case of the lapse into default, the rental costs will be due or to be paid a penalty fee due to default it made it clear that the relevant provisions shall be invalid. Since there is no regulation in the same direction in the abrogated Code of Obligations numbered 818, the parties could comply with the restrictions in the general provisions (TCO article 27-28) and impose payment obligations such as a penalty. Again, in the principle of liberty of the contract, the lessee could pay the common expenses that exceed the tax liability or side expenses of the lessor. The provisions contained in the agreement remained valid and continued to be applied for the duration of the postponement in respect of the work place rents whose lessee is a merchant or a legal person.

In this manner, as of 01.07.2020, in lease agreements related to workplace rents whose lessee is a merchant or legal person, provision records related to the rental debt default and penal clause provisions are forward effectively invalid. In fact, the relevant article shall be forward effectively, the penalty condition that occurred until 01.07.2020, if there is an overdue rental fee, these costs shall be valid and it shall be claimed by the lessor. We would also like to state that the relevant provision shall entry into effect only in terms of residential and roofed workplace rents.

Limitedness of The Grounds of Action (TCO article 354)

“Provisions on the termination of lease agreement by bringing a lawsuit cannot be changed against the lessee.” 

The last one of the postponed provisions in terms of workplace rents whose lessee are merchant or legal person is Article 354 of the TCO, which regulates that the reasons for eviction cannot be changed against the lessee. The earlier, relevant article was regulated in article 8 of the GKHK numbered 6570 and according to that it was also the reasons for the release were arranged with limited limitations and on the contrary, the Agreements were considered invalid. Although the provision of article 354 of the TCO is included in the scope of the postponement, its effect was seen in practice. It shall not have a big impact with the expiration of the postponed period. 

Law to be Implemented When the Postponement Period Ends

In case the postponement is not extended by another legal arrangement until the end of the postponement period, the postponed articles are entered into force as of 01.07.2020.

This will be particularly important in terms of lease agreements that are prepared in contravention of the content of the postponed provisions during the postponement period, and it shall continue when the postponement period expires. When the postponement period expires, the determination of the law to be applied to the said articles shall be made according to the Law on the Enforcement and Implementation of the Turkish Code of Obligations No. 6101.

TCO article 323 provision; is mandatory provision and related to public order. Therefore, it is effective as of 01.07.2020 and thus, it shall not be able to refuse to give consent to the transfer of the rent of the workplace, unless there is a justifiable reason for the agreements concluded in the postponed period.

TCO article 325 provision; since it regulates the termination of the lease agreement, it is subject to the immediate effect principle. In other words, for workplace rents, this provision entered into force as of 01.07.2020. Likewise, the same conclusion shall have to be made for the 331st provision of the TCO.

TCO article 340 provision; it was not effective in the past and the related agreements concluded within the postponement period still be valid after 01.07.2020. Again, for TCO article 342 same conclusion shall be applied. Agreements regarding rent guarantee that made during the period of postponement shall continue to be its validity after 01.07.2020 and lessee, in terms of the amount of the guarantee (the deposit), shall not be able to suggest that it is contrary to TCO article 342 or that it should be deposited in the bank.

TCO article 346 is related to public order and the lease agreements made during the postponement period shall be applied immediately starting from 01.07.2020. After 01.07.2020, expect the rental value foreseen against the lessee and side expenses, the other payment obligations are eliminated, maturity records and penal clause also became void automatically.

Article 8 and 9 of the law No. 6570 which are the equivalent of articles 343 and 354 of TCO are in force during the postponed period, as of 01.07.22020, there shall be no change in the implementation.

FUEL STATIONS LEASE AGREEMENTS QUALIFICATION

Concept of Roofed – Roofless Workplace

There were two types of of rent separation in the abrogated Code of Obligations numbered 818: “ordinary lease” and “building lease”. Distinctly, in TCO, after general provisions to cover all types of lease agreements, the main distinction between “Residents and Roofed Workplace Lease” and “Usufructuary Lease” has been introduced. Thus, while roofless workplace leases are subject to general provisions, roofed workplace leases are specially arranged. Therefore, lessee is protected.

Therefore, the definitions of residential and roofed work place concepts have become important in terms of determining the provisions to be applied. 

Roofed workplace is defined as manmade, covered construction works for the performance of art or a profession or devoted to commercial or industrial or agricultural enterprise. As can be understood from the term of roofed workplace, the workplace must be covered. As an example of roofless, uncovered places: car washes, car parks, sales areas in the open areas can be given as examples.

With the understanding of being covered from the concept of being roofed, the issue of whether semi-covered properties shall be included in the concept of a roofed workplace is controversial. In terms of these structures, according to the majority opinion of the doctrine, in order to determine whether the semi-covered lease is included in the concept of a roofed workplace, it is necessary to consider the ratio of closed areas to open areas and the qualification dominating the immovable property in every concrete case. Supreme Court practice is in this di- 82 rection and the opinion that in case the real estate is semi-covered, determination shall be made according to the proportion of closed and open spaces shall be adopted.

As a result, the Supreme Court accepts that a proportional assessment is made between the open areas and the covered areas and a decision is made according to the dominant party as a result of this proportional assessment

Status of The Fuel Stations

As a result of the emergence of the concept of a roofed workplace with TCO, there were hesitations about whether the fuel stations were a roofed workplace or a roofless workplace.

Although the fuel stations have covered areas, according to the generally accepted view, the areas where the main activity is carried out do not have a roofed workplace since they are not covered.

The Supreme Court also adopted the view that the quality of fuel stations is not a roofed workplace.

Civil Department No. 6 of the Supreme Court, 2015/10821 E. 2016/7767 K. 22.12.2016 T

“…In the case that the leased property has a roof, the main thing is that the lease agreement continues at the end of the lease term…Regarding the rent money if the parties fall into conflict the gap arising in the agreement, shall be filled by the judge in accordance with the unified decisions of supreme courts , 18/11/1964 dated and 2/4 numbered…in the current case with the ….dated expert report it is determined that the closed area of the leased area is 150 m2 and the open area is approximately 1.000 m2… it is understood that the leased fuel station is subject to the general provisions of TCO… The leased property is an immovable rental that is subject to the general provisions of the TCO, and cannot benefit from the 339-344th provisions of the TCO, which are applied to residential and roofed workplace lease. 

On the other hand, many fuel stations operate its businesses with offering different products and services, such as grocery stores and even food and beverage areas. When all these issues are evaluated, it should be taken into account that fuel stations may also have a roofed workplace according to the concrete case. Thereafter, in the light of every concrete case, the estimating should be made according to the event, the expert report should be prepared with expertise and the qualification of the station should be determined.

Civil Department No. 6 of the Supreme Court, 2015/3132 E., 2015/11384 K., 23.12.2015 T

“… There is no dispute between the parties that the lessor was granted the lease by the defendant Ç.R. in accordance with Article 51/g of the DIK by bargaining procedure to the plaintiff with a 3 year lease agreement with the…starting date…. It is not possible to apply DİK m.75 f.3, f.4 about the defendant Rectorship, which is not among the institutions mentioned in DİK m.75. The quality of the leased is shown in the contract as a fuel station and a service building. It cannot be understood whether the quality of the leased property is a roofed workplace or not. In case the leased property is a roofed workplace, the plaintiff can not request the termination of the agreement due to the expiration of the agreement according to article 347 of the TCO, but may request the evacuation of the property based on one of the reasons of the eviction specified in the law. In case the superior quality of the property is determined as an open area, the agreement expires automatically at the end of the period in accordance with article 327 of the TCO…after determining the quality of the lessee and determining the provision of the law to be applied by the court, it is not right to decide to dismiss the case on the grounds that the lessee was rented by tender according to DIK, while it is necessary to make a decision in line with the principles described above.”

For the fuel stations, the type of lease must be determined separately in each lease agreement. This matter is determined by means of experts in accordance with the decisions of the Supreme Court and the property quality and contract are examined and compared with the ratio of the closed area of the station to the open area and the way the station is used commercially. To give an example to the importance of this distinction, in case of acceptance that the fuel station has no roofed workplace, the article 344 of the TCO, which regulates the upper limit of the legal lease increase, cannot be applied to the agreement 83 concluded between the parties.

Civil Department No. 3 of the Supreme Court, 2019/3021 E., 2019/5814 K. 

“With the Turkish code of obligations No. 6098 which entered into force on 01/07/2012, Code of Obligations numbered 818 and the Law No. 6570 on Real Estate Rents has been abrogated, and arrangements for disputes arising from the lease relationship in these Laws are listed in the fourth section of the Law. In case the rented place is roofed, the provisions of the lease agreement regarding the places subject to general provisions regulated in article 299 of the TCO No. 6098 and the continuation articles, if the rented place is roofless, the law articles related to the residential and roofed workplace lease agreements regulated in articles 339 and above of the same law shall be apply…It must be understood from the superior quality or the victorious qualification that the leased property must be the property that defines it according to the intended use for which it is allocated. Even if compulsory buildings are built on the beaches, tea gardens, land leased as fuel stations, these immovables cannot be accepted as roofed in terms of superior utilization. In this respect, since the lease is without roof made in masonry style it is understood that the lease agreement that is subject to the general provisions of the TCO.”

According to Supreme Court decision, as a result of the examination of the fuel station, it was determined that it did not fall under the status of a roofed work place. With the decision stated below, this time it has been stated that Article 344 of the TCO station cannot be applied to a fuel station lease, which is made in the form of product lease, and not in the form of a lease roofed workplace.

Civil Department No. 3 of the Supreme Court, 2018/7771 E. 2019/6309 K. 

“The defendant stated that the leased fuel station is the subject of the lawsuit and that because of its nature, it is subject to the provisions of the revenue rent, no case can be filed for the determination of the rental price. The defendant, subject of the case was the fuel station and that the case for the determination of the rental fee could not be opened due to its characteristics and revenue rental provisions…In the present case, Civil Department No. 6 of the Supreme Court, 2008/8024 -2008/10005 22.09.2008 T., stated that it has been determined that the lease contract subject to the case is subject to the revenue / product rental provisions regulated in articles 270 (TCO 357) of the Code of Obligations No. 818… It is a real estate rent subject to the provisions of the product lease of the TCO, which is the subject of the dispute, and it cannot benefit from the provisions of article 339, 344 and continuation articles of TCO. According to this, while the court has to decide on the rejection of the case, it has been decided to revoke the verdict by removing the verdict of the cancellation by understanding from the examination this time, in which it was decided to partially accept the case in writing, for these reasons.

Fuel Stations in Terms of Provision That Entered into Force on 01.07.2020

As said above, reasons, the question of whether fuel stations have roofed workplace qualities should be evaluated separately in each concrete case. Within the scope of the examination, in case we can reach a conclusion that the property is roofed, it shall be subject to the provisions of the “residential and roofed workplace” distinction of TCO however, in case we can reach a conclusion that the property is roofless workplace then the disputes shall resolved with the general provisions to be applied to for the lease agreements of the TCO. 

On the other hand, it is necessary to make the same distinction in terms of the articles that entered into force as of 01.07.2020. The postponed 340, 342, 343, 344, 346 and 354 articles of the TCO are regulated under the section of the residential and roofed workplace, while the articles 323, 325 and 331 are under the heading of general provisions and are applied in terms of all rental agreements. 

Therefore, in case it is concluded that the station is a workplace roofless, the articles containing the changes/innovations regarding the transfer of the lease relationship in terms of fuel oil stations, the return of the lessee before the end of the agreement and the termination of the lease agreement for extraordinary reasons are entered into force as of 01.07.2020. However, In case it is concluded that the fuel station has the roofed workplace qualification, this time, all postponed provisions are entered into force on 01.07.2020 in terms of fuel station lease agreements and find application area.