Turkey: Tenants Are In Panic

Last Updated: 7 April 2014
Article by İlknur Coşkun

The new Turkish Code of Obligations numbered 6098 ("TCO")1 became effective on 1 July 2012 and annulled the former Code of Obligations numbered 8182 and the Code of the Lease of Immovables numbered 65703. Apart from the similar or same provisions, it brought certain brand new issues regarding lease agreements such as termination right of landlords for any reason. When the TCO became effective, the tenants of lease agreements for residential and roofed workplace did not pay much attention to any possible termination threats they may face as from 1 July 2014. However, time passes quickly and the critic date for the landlords who desire to end their lease relations renewed for more than ten years is approaching.

Term and termination

Lease agreements may be executed for definite or indefinite term. If a tenant has not given a termination notice at least 15 days prior to the end of a lease agreement for residential and roofed workplace with a definite term, then the agreement is deemed to be renewed for a period of one year with the same conditions and becomes an indefinite-term lease agreement. The termination notice must be in written form to be deemed as valid; and such 15-day-period cannot be shortened or extended since it is a mandatory term.

While regulating the tenant's termination right in detail, Article 347 of TCO clearly states that landlords cannot terminate the agreement based on the fact that the term of the lease agreement has expired with an exception of ten-year-renewal term as detailed below.

Landlord's termination right "for any reason"

According to Article 347 of the TCO, upon end of ten years of renewals, a landlord may terminate lease agreement for any reason provided that he/she has given a termination notice at least three months prior to the end of the respective renewal year. However, this provision was not applicable for lease agreements as of 1 July 2012 which were executed before the effectiveness date of the TCO. Temporary Article 2 of the Law Regarding Enforcement and Implementation of the Turkish Code of Obligation4 governed certain terms regarding the completion of the renewal terms for the transition period of the TCO. Accordingly, there can be three cases: (i) ten-year-renewal term is completed before the effectiveness date of the TCO; (ii) remaining term for completion of the ten-year-renewal term is less than five years; and (iii) remaining term is more than five years.

I. Ten-year-renewal term is completed

A lease agreement which completed the said ten years of renewals before the effectiveness date of TCO will have two more years of renewals to be subject to the landlord's termination for any reason. As an example, a lease agreement executed on 1 November 1998 for one-year-term and renewed for ten years after 1 November 1999, has completed the said ten-year-period on 1 November 2009. The TCO became effective on 1 July 2012 and the landlord's above-stated termination right will become effective as from 1 July 2014 for the said lease agreement. Accordingly the landlord may give a three month prior notice at the latest before 1 August 2014 and terminate the lease agreement for any reason and without any just cause.

II. Remaining term is less than five years

If the lease agreement has less than five years to complete the ten-year renewals as of 1 July 2012, five years has to pass for landlord's termination right for any reason. Accordingly, if the lease agreement is executed in 2003 and renewed in 2004, the eighth renewal will take place in 2012. Then the landlord will have the right to terminate the lease agreement as from 1 July 2017, five years after the effectiveness date of the TCO and Article 347.

III. Remaining term is more than five years

The lease agreements which are subject to renewals for more than five years, the remaining renewal term must be completed for the landlord's termination for any reason. As an example if the lease agreement is executed in 2008 and renewed as from 2009, then 2012 will be third renewal term and it may be terminated after the tenth renewal is completed in 2019.

Probable Solution

In order to prevent any termination notification and continue the lease relation for ten more years, most of the tenants will offer to re-sign their lease agreements as a new lease agreement. However, there is a risk for such "new" lease agreements to be considered as continuity of the former lease agreement –since the parties and the subject is the same– by the Court in case of any conflict. Accordingly, this solution will be tested and approved based on practice and court decisions.

Other termination rights of the landlords

In addition to the landlord's right of termination detailed above, the landlord may also terminate a lease agreement for residential and roofed workplace based on reasons originating from a tenant: (i) an evacuation commitment; (ii) two justified notices regarding non-payment of the rent amount; and (iii) tenant or his/her spouse having another residence within the same municipal borders suitable for habitation.

The landlord may also terminate a lease agreement for residential and roofed workplace for (i) need of landlord or the new landlord; and (ii) re-construction or development of the leased property.

Conclusion

Lease agreements with indefinite terms may be terminated by the tenant at any time and by the landlord, upon expiry of ten years, pursuant to the termination notice given in accordance with the general terms. First the good relation between the parties and new agreement may renew the ten-year-period, practice and the court decisions will determine the long lease relation's fate.

Footnotes

1.The TCO was published in the Official Gazette dated 4 February 2011 and numbered 27836.

2.The Code of Obligations was published in the Official Gazette dated 8 May 1926 and numbered 366.

3.Code of the Lease of Immovables was published in the Official Gazette dated 27 May 1955 and numbered 9013.

4.Published in the Official Gazette dated 4 February 2011 and numbered 27836 and became effective on 1 July 2012.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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İlknur Coşkun
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