Turkey: Tenancy In Organized Industrial Zones: Conditions, Subletting And Invalidity Problem

The term "Organized Industrial Zones" is defined as the goods and service production zones, which are formed by allocating the land parcels, the borders of which are approved, for the industry in a planned manner and within the framework of certain systems by equipping such parcels with the necessary administrative, social, and technical infrastructure areas and repair, trade, education, and health areas as well as technology development regions within the ratios included in zoning plans and which are operated in compliance with the provisions of the Organized Industrial Zones Law No. 4562 in order to ensure that the industry is structured in approved areas, to prevent unplanned industrialization and environmental problems, to guide urbanization, to utilize resources rationally, to benefit from information and informatics technologies, and to ensure that the types of industries are placed and developed within the framework of a certain plan.

As per the Organized Industrial Zones Law No. 4562, real persons or legal entities to whom parcels are allocated or sold for the establishment of an enterprise and those who make or undertake to make production on the parcels owned by them and operate in line with the purpose of the Law are defined as "Participants" and those who rent the facility of the participant in compliance with the procedures and principles determined in the Regulation are defined as "Tenants".

Principles of letting in Industrial Zones are defined in the Governing Regulations for Industrial Zones dated 08/22/2009 No. 27327 that has been prepared on the basis of Articles 2 and 9 of the Legislative Decree on Organization and Duties of the Ministry of Science, Industry and Technology dated 06/03/2011 No. 635 and Article 27 of the Organized Industrial Zones Law No. 4562. The aim of the Regulations is to govern the procedures and principles for establishment, building and operation of industrial zones. And the arrangements regarding letting in Organized Industrial Zones are included in the same Regulations.

WHAT ARE THE CONDITIONS OF LETTING THE FACILITIES BY THE PARTICIPANTS IN ORGANIZED INDUSTRIAL ZONES?

Lands allocated to Organized Industrial Zones are divided into various types of parcels. If a parcel on which the facilities take place is an industrial parcel, only manufacturing/production (and packaging and storage as well) activities are allowed therein and the facility can be let as a whole without establishing any independent sections. In other words, subletting is not permitted.

In some zones, commercial parcels may be allocated as well. Such parcels may be used specifically for packaging and storage or sublet after establishment of independent sections.

WHAT ARE THE PROCEDURES FOR RENTING?

Title deed of the facility should have been obtained, the Participant should not owe any overdue amount to the Organized Industrial Zone, the Board of Directors of the Organized Industrial Zone should make a decision that renting of the facilities conforms to legislative procedures and principles and the "Document of EIA Positive" or "Document of EIA Not Necessary" should be attached for the projects subject to the provisions of the Regulations on Environmental Impact Assessment.

WHICH DOCUMENTS ARE REQUESTED FROM THE LESSOR AND THE TENANT FOR LETTING AND RENTING?

From the lessor: Newly dated land registration certificate; decision of the Board of Directors or General Assembly for letting of the facilities, if a legal person lessor; specimen signatures of the signatories; a copy of the rental contract; the lessors statement that the facilities shall be let as a whole without establishing any independent section if situated on an industrial parcel.

From the Tenant; Good standing certificate attested by a trade registry office; decision of the Board of Directors or General Assembly for renting of the facilities, if a legal person tenant; specimen signatures of the signatories; documents evidencing the activities to be carried out; an information sheet prepared by the Organized Industrial Zone about the utilities (e.g. electricity, water, natural gas, number of employees, wastes and characteristics of wastes, etc.); a copy of the rental contract; a written and notarized undertaking stating that the relevant legislation and internal regulations and agreements of the Organized Industrial Zone shall be complied with.

WHAT ARE THE OUTCOMES OF UNDUE LETTING AND RENTING?

The title of a "Tenant" shall not emanate in case of undue letting or renting as per the applicable legislation.

A decision taken by the Board of Directors of OSB to confirm compliance of the letting process with the legislative procedures and principles is a requirement as to form. The transaction of letting shall be deemed null and void unless the said decision is taken.

Letting may cover the entire facilities if situated on an industrial parcel. Letting of sections is not allowed. The Participant/Owner may not occupy a specific section of the facilities and let the Tenant use the remaining sections; the entire facilities should be transferred to the use of the Tenant. The Tenant may be entitled to sublet and/or transfer the contract by the Participant/ Owner in which case the entire facilities may be used by the sub-tenant or the transferee. Therefore, the absence of a subletting clause or a contract allowing subletting or nullity of the rental contract may be claimed.

In case the Participant/Owner uses some sections of the facilities and sublets the remaining sections, the management of the Organized Industrial Zone and/or the Lessor/Participant/Owner may cause the Tenant to discharge the facilities before expiration date of the rental contract on the grounds of nullity and the Tenant shall be entitled to discharge the rented facilities any time before such expiration date for the same reason.

Rental contracts inconsistent with the procedures and the legislation should not be consented by the Organized Industrial Zones for the reasons mentioned above.

Since nullity of a contract shall render it as if it has never been enacted, the management of the Organized Industrial Zone and/or the Lessor/Participant/Owner or the Sub-lessor may cause the Tenant to discharge the facilities before expiration date of the rental contract on the grounds of nullity and the Sub-tenant shall be entitled to discharge the rented facilities any time before such expiration date for the same reason.

It is a slight chance to claim any payment from the Tenant/Sub-tenant by the Lessor who made the facilities used by such Tenant/Sub-tenant in accordance with the rental contract since the judge in charge shall not consider being aware of but not applying an imperative provision of the law as an abuse of a right pursuant to Article 2 of the Turkish Civil Code.

The Tenant's/Sub-tenant's not discharging the facilities following its receipt of a notification to do so as served by the Participant/Sub-lessor may be considered as an unlawful occupation. However, no unlawful occupation comes into question unless the "Discharge" notification is received even when the contract is null and void. But since the occupation is ended consentingly at the beginning, the judge would not decide for an adequate pay directly but may make his/her decision possibly but not likely by analogy.

If the expenses made for the rented property caused enrichment, then the costs incurred for this purpose may be claimed on the grounds of unjust enrichment or, any equipment assembled in the rented property after signing of the rental agreement may be removed without harming the property.

Furthermore, Business Licenses are granted and controlled by the Organized Industrial Zones. In the absence of a rental contract duly enacted as mentioned above and approved by the management of the Organized Industrial Zone, no business license shall be issued and granted by that Organized Industrial Zone. Any workplace operated without a business license shall be closed and red tagged. In addition, administrative fines or, if infringement in question constitutes an offense, criminal proceedings may apply.

No utilities including electricity, water, natural gas, etc. shall be provided to facilities that are allocated to the use of third persons without obtaining the consent of the Organized Industrial Zone.

CONCLUSION

A Tenancy relationship in an Organized Industrial Zone may be established upon satisfaction of specific conditions defined above and the further consent of such Organized Industrial Zone. Despite the existence of a number of tenancies established without satisfying the applicable conditions in practice, the rental contracts enacted thereunder with no legal infrastructure remain invalid in legal terms. And the parties of such contracts are exposed to the risk of commercial damages as those contracts are deemed null and void. Therefore, the parcel of the property to be rented and the extent of activities allowed on such parcel and whether the management of the Organized Industrial Zone permits establishment of the planned tenancy should be checked prior to execution of a rental contract including consistency of such tenancy with the applicable legislation.

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.