ARTICLE
26 February 2024

The Concept Of Implied Acceptance In Residential And Roofed Workplace Lease Payments And The Collection Of Retroactive Deficient Lease Payments

KC
Kilinc Law & Consulting

Contributor

Kilinç Law & Consulting established by Levent Lezgin Kilinç currently operates in Istanbul, Izmir and London. Our firm, provides services to clients in a wide range of complex matters including Project Finance, Corporate Law, M&A, Energy Law, Dispute Resolution, Maritime Law, IP Law, International Transactions as well as Litigation of the disputes.
As it is known, lease agreements, in their most basic form, are contracts that create a continuous debt relationship in which the lessor leaves the use of something...
Turkey Real Estate and Construction
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INTRODUCTION

As it is known, lease agreements, in their most basic form, are contracts that create a continuous debt relationship in which the lessor leaves the use of something to the lessee and the lessee undertakes the payment obligation in return for this use, which imposes obligations on both parties. Lease agreements may be concluded for a definite term or indefinite term. 

Pursuant to the principle of freedom of contract, which is one of the principles of the Turkish Code of Obligations Law No. 6098 (“TCO“), the parties may agree on all terms of the lease agreement, including the rental price, freely and as they wish. However, the legislator may limit the parties' agreements regarding the determination of the rental price. The amendments in the legislation can potentially render the relationship between the tenant and the landlord contentious, leading to issues in practice.

A. CURRENT SITUATION REGARDING THE RENT INCREASE RATE IN RESIDENTIAL AND ROOFED WORKPLACE LEASE AGREEMENTS

Article 344 of the TCO stipulates that “The agreements of the parties regarding the rental price to be applied in the renewed lease periods are valid, provided that they do not exceed the rate of change in the consumer price index in the previous lease year according to the twelve-month averages.” Pursuant to this provision of law, the rent increase rate to be determined in the new period in residential and roofed workplace rents cannot be higher than the twelve-month average of the CPI (Consumer Price Index). 

However, it is important to note here that while the limit for the increase in the rental price in the TCO was the twelve-month average of the CPI, pursuant to the Provisional Article 1 added to the TCO by the Law No. 7409 published in the Official Gazette on 08.06.2022, the upper limit of the increase rate to be applied to the residential rents for the periods between 11.06.2022 and 01.07.2023 was determined as 25% and was extended again until 01.07.2024 pursuant to the Provisional Article 2 added to the TCO by the Law No. 7456.

B. UNDERPAYMENT OF THE NEW TERM RENT BY THE LESSEE THAN AGREED IN THE CONTRACT

As stated above, the rent will increase each year at the rate determined in the contract. However, this situation sometimes varies in practice.

For example; in a contract with a rent of 10.000-TRY, the rate of increase was determined as the CPI twelve-month average in accordance with Article 344 of the TCO. Although the announced CPI twelve-month average is 60%, the lessee makes a 30% increase in the new lease period and pays 13.000-TRY to the lessor. In the event that this situation is not realized by the lessor during the year or if the lessor cannot agree with the lessee, if the increase is made over the under-increased rent in the following year, the rent will again be underpaid compared to the agreed rate. In this case, the lessor has the right to demand the missing rent retroactively. Because, as we will explain below, contrary to what is believed in practice, this situation will not be considered as the implied acceptance of the lessor according to the case law of the Court of Cassation.

In practice, the lessor and the lessee verbally agree on the rental price by determining a rate below the increase rate specified in the contract. However, it is important to note that it would be legally safer to make this agreement in writing, i.e. to add it as an additional protocol to the original lease agreement. If an increase rate has been determined between the parties in the lease agreement, the jurisprudence of the Supreme Court is that the new agreement that the rent will increase at a lower rate must be in writing and the lessor may retroactively claim the missing rent amounts, provided that it does not exceed the statute of limitations.

In this regard, the decision of the 3rd Civil Chamber of the Court of Cassation dated 13.04.2017, numbered 2017/1943 Main and 2017/5241 Decision is as follows; “The plaintiff requested the collection of 3,520 TL underpaid in August and September 2013 with the enforcement proceeding initiated on 23.09.2013.  The increase clause agreed in the lease agreement is valid and binds the parties. The defendant debtor is responsible for the increase in accordance with Article 4 of the lease agreement. In this case, the court should calculate the amount of the receivable over the increase rate in Article 4 of the contract, taking into account that the increase condition is valid after the period after the rent determination, and decide to collect it, while it was not deemed correct to decide to dismiss the case on the grounds that the increase condition was not valid as a result of the determination case, and it required a reversal.” As it is clearly seen in this decision, the contract with a certain rent increase rate is accepted as the basis. In the event that a new rent increase rate is determined between the parties, the rent agreed for the new period must be proved in writing in a possible legal dispute that may arise in the future.

C. RETROACTIVE COLLECTION OF DEFICIENT RENT FEES BY THE LESSOR

In lease agreements with a certain rate of rent increase, it is possible to retrospectively claim the missing rent payments made by the tenant. However, the general 5-year statute of limitations rule also applies here. To explain as an example; Let's assume that the rent increase rate in a contract with a rent of 10.000-TRY is the CPI twelve-month average rate. Let's assume that the CPI rate announced in the next period is 60% and that the tenant pays 13.000-TRY when 16.000-TRY should be paid. In this case, the difference of 3.000-TRY per month can be claimed from the lessee retrospectively within 5 years.

In such a case, there are two ways that can be taken; firstly, the lessor initiates an execution proceeding against the lessee for the missing amounts in accordance with Article 269 of the Enforcement and Bankruptcy Law, and the lessee is given a 7-day objection period and a 30-day payment period from the notification of the payment order. If there is no objection or payment in due time, the proceeding becomes final and a decision is made to collect the missing amounts from the tenant. However, in case of objection, a lawsuit for the removal of the objection should be filed at the Enforcement Law Court to ensure the continuation of the process.

Another way is to file an eviction lawsuit against the tenant before the Civil Courts of Peace and demand the eviction of the immovable property due to underpayment of rent, provided that the other conditions required by the TCO are met and the mediation process is exhausted first.

D. CONCLUSION

In roofed residential and workplace lease agreements, if the increase rate has been determined by the parties in the contract, it is possible for the lessor to request the missing amount in the event of an increase less than the determined rate in the new period. Contrary to popular belief, it is not correct in our opinion, as it is fixed by the jurisprudence of the Court of Cassation, that the missing rent paid will be deemed accepted by the lessor and that the retroactive request for the missing rent is malicious.

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.

ARTICLE
26 February 2024

The Concept Of Implied Acceptance In Residential And Roofed Workplace Lease Payments And The Collection Of Retroactive Deficient Lease Payments

Turkey Real Estate and Construction

Contributor

Kilinç Law & Consulting established by Levent Lezgin Kilinç currently operates in Istanbul, Izmir and London. Our firm, provides services to clients in a wide range of complex matters including Project Finance, Corporate Law, M&A, Energy Law, Dispute Resolution, Maritime Law, IP Law, International Transactions as well as Litigation of the disputes.
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