Turkey: Commercial Lease Contracts Should Be Taken Separately

Last Updated: 22 May 2017
Article by Mustafa Gunes

Housing and Commercial rents should be taken separately in legislative regulation about lease agreements.

Turkish modern retail sector is a fast-growing sector by comparison with many countries. But despite this rapid growth, it is not possible to say that the potential in this area is being fully used.One of the main reasons is that the applicable legislation contains some limitations and regulations needed by the sector are not satisfied.

The Law on Regulation of Retail Trade numbered law 6585 on the Regulation of Retail Trade and by-laws which are connected with this law offered an opportunity to pave the way for, but even this opportunity is not fully evaluated. The shopping mall sector states as a subdivision of the retail sector and relations between the shopping mall investors as a place provider in business and lessees in retail trade sector are determined by Turkish Code of Obligations.

Some provisions have been postponed for 8 years (until 01.07.2020) when new Turkish Code of Obligations go into operation on 01.07.2012 to eliminate objections which created by the regulations on commercial real estate. This postponement regulation protects the shopping mall sector from some fatal effects but still regulations about the lease agreement of Turkish Code of Obligations, which do not take economic realities into account in the sectoare in force with all faults. Primarily, provisions related for housing and Commercial rentals of Turkish Code of Obligations contain regulations which are far from the reality of commercial life. Whereas "housing rent" and "Commercial rent" stand for two very different forms of relation. While constitutional housing immunity and family privacy from matters related to public order are inevitable to look out for at first, the second relationship is entirely commercial and that the tenant, the protected party, is often a merchant and because of this liberty of contract principle should be current most of the time. In one sense housing tenants are not protected as much as they need to be protected, on the other hand Commercial tenants are making use of some preventive regulations that they should never take advantage of unless there is a simple twist of this simple truth. Because of this a radical change to the Turkish Code of Obligations and a distinction between housing rents and Commercial rents should be made. Regulation of the tenant side tradesman lease contract in a separate department and prioritization of parties willpower in this arrangement are necessary in many ways.

1-No Need for Protectionby means of Parties

Retail managements in the modern (organized) retail sector are crackerjack and often on the side of the landlordship and much larger then disponer by active size firms. In this case, when you give parties protective provisions who do not need to be protected, it is certain that the results will not be equitable.

Again when it is about commercial reality, we know that big brands are very effective in the investment decisions of the shopping mall projects and Commercial plazas of big companies. As it is known to all, the shopping mall projects which are not supported by the stores called Anchor, are weak beside. On the other hand, it is a known fact that large companies are almost "ordering" Commercial plazas to disponer in return from long-term lease agreements. Because of this, this reveals to extremely unfair consequences that judgements of centered on the burning of the need for housing and providing tenant protection in Turkish Code of Obligations practice big companies who have contracted for the design and construction of the project itself.

2- Compoundof Common Expenses

The common expenses of commercial real estates are very different from housing or ordinary Commercial expenses due to natureof expenses, the most accurate naming must be "common expenses" or "service charges" but which is named as "side expenses" in The Turkish Code of Obligations, "mutual expenses" in The Property Law, "expenses for common use areas" in the Law on the Regulation of Retail Trade.

For example, shopping centers have a marketing budget and an important part of the tenants benefit from this; there is no indirect relationship as you think. Again, there is no regulation about the "visitor service" to the shopping center and expenses arising from this neither in The Turkish Code of Obligations nor in Law of Property Ownership. Likewise, the fixture budget in the common areas which is a cross to carry at the first opening is a type that is not in the ordinary Commercial and housing structures. All this the way of featured expenses and how to apportion them to tenants have been tried to be solved by the Law on the Regulation of Retail Trade numbered 6585 and the Shopping Center Regulation. However, provisions for common expenses of the Shopping Center Regulation as it is conflict with provision for side expenses in the Turkish Code of Obligations. It is more suitable to organize commercial lease agreements with different dynamics and motives separately to the law technique rather than put up with this discrepancy.

3-Form of Managing

Turkish Code of Obligations and Law of Property Ownership approach to real estate property administration and administration costs are far from the economic realities of modern times. It is widely accepted that it is possible to keep the value of the property high thanks to the administration of professional and branded companies. At the same time this status gives opportunity to provide a sub-sector under the name of "property management" and causes a competitive atmosphere among these companies and among different immovables. It is positive that such a competitive environment that targets quality of service but Turkish Code of Obligations sabotage development in this area by forbidding management techniques which are necessary for such a competition to effort to "make a difference" at different costs. Because Turkish Code of Obligations count "side expenses" as limited and actually kill this competitive environment with prohibit the collection of any other amount from the tenant.

4- Turnover Rent Practice

Turkish Code of Obligations ignore "business partnership" fact between retail businesses in the retail sector and shopping center investors providing space to them by handling in as single scope "housing and Commercial rents" and ignoring turnover rent. Whereas many shopping mall is rented with turnover rent either entirely or partially with a certain minimum rent amount. That is to say a certain rate of the tenant's rent income constitutes the landlordship's rent income. It is certain that maximizing this revenue will be proper in the common interest of both sides but it is often seen that parties sometimes think differently about how to make maximization. Fundamentally, it can not be expected that the disponer and the tenant will think the same way, it is not a secret even the tenants have very different thinking from each other. It is a case that different groups of tenants (food court, small store, middle store, big store, cinema, show center, hypermarket) have different interest groups and in fact, the only common ground of all these different groups is to increase total turnover. But there is no the Turkish Code of Obligations to give oppurtinity to set a budget for this single common interest.

5-Offer for Commercial Lease Contracts

In order to prevent further problems in practice, it would be useful to make a change of law that only the general provisions on the Turkish Code of Obligations would be applied to lease contracts whose parties are "tradesman" according to the Turkish Commercial Code . In this way, artisans and self-employeds who are busy working with labors will leave out of this regulation, their rental relationships will take place in the scope of Commercial rent, some protectionist provisions will continue for them. Thus, a temporary solution to the problem will be found and the pressure on the parties to this commercial lease relationship will be removed.

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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