Turkey: The Status Of Tenants Given CAP In 2016 For Shopping Centers Partner Expenses

Last Updated: 18 May 2017
Article by Mustafa Gunes

Some changes have just been made to the Shopping Centers 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. It seems that the 11th article of this Regulation, which related to the common expenses, has been made the Shopping Center's common expenses problem more complicated.

These recent changes in the regulation seems problematic in many aspects. At first Article 11 of the Law Numbered 6585, which gives authority to the Ministry to issue regulations regarding to matter gave authority "expenditures on common areas"  matter. However at this time the Ministry has made a regulation on "common expenses"  which includes a much broader category. Accordingly to this broad, this regulation has exceeds the it's authority on first day. The amendment text published on December 30 has a completely 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 to ignore last distribution rule. Just as in which economic and legal grounds made such an arrangement is unknown, with this amendment it would penalize those who rely on public authority and practice in that way.

It seems that this amendment cause many more problems in addition to above brief mentioned handicaps. One of the most prominent of these is the CAP implementation, which is the result of some tenants' commercial agreements limiting the participation to common expenses on a square meter basis in total. As it is known, the Regulation in it's 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 who were given the CAP by themselves, the amounts to be which would not paid out  by the tenants would be covered by the shopping center owner. In a way, the situation of tenants whose joint expense contributions have been capped were reserved and wished that the newly introduced distribution chart would be counted as 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 that 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 by unanimously consensus would be not possible 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 clearly is a "unanimity". And this unanimity shall involve "all tenants". Because  it has not specified that, an unanimity with 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:

1. All previously determined Provisions relating to the common expense allocation procedure  by the parties in the shopping center lease contracts are invalid.

2. Whatever the parties have previously agreed on, the parties shall enter into a new agreement and this agreement must be unanimously adopted by the tenants.

3. 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 had intervened in the contracts between the parties. However, this second intervention, made on December 30, 2016, is showing some differences from the first version. If a rule was applied to make the merger feasible and the condition of tenants with CAP (11.9) was hold 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. With this second intervention, a new agreement between is foreseen, rather than an agreement between the parties and in the event there is no such agreement, a distribution on a square meter basis is foreseen. Although the provision of Article (11.9) is repeated, the nature of the business must be deemed to be 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 Center Owners for making to 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 new agreement, it shall be negotiated that giving CAP again to tenants which 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 the paragraph (5) of 'Provisional Article, 1st ' will be regarded as advance and the distribution will be done according to the it's 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 center 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 not require the ignoring of a legislation which has already been enacted, Shopping Center Owners will look back to the data's from 2016 and thereafter without CAPs issued in the past, and in the event they have intend for giving a new CAP then they may  make negotiations 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, there is a necessary for the Shopping Mall Owners to declare the VAT of December and to close the year 2016 on the declaration by the time of 24th of January in this regard.

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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