Considering the significant increase in real estate prices in Türkiye, potential investors prefer to lease commercial real properties rather than making a direct purchase. Investors incur significant decoration and operational expenses for the properties they lease and thus want to use the rented properties for a long period of time. Lease agreements are negotiated and executed accordingly. However, real property owners may prefer to sell the commercial property subject to a long-term lease agreement to third parties before the lease term expires if they receive a good offer. This poses an early termination risk for existing lessees if the lease agreement is not annotated with the land registry.
The transfer of the property does not affect the validity of the lease agreement. Under the applicable legislation, third parties who purchase the property as a result of the sale transaction become direct parties to the lease agreement executed between the previous owner and the lessee. However, if the new owner has a necessity to use the property as a residence or workplace for themselves, their spouse, descendants, ancestors, or other persons whom they are legally obligated to support, the new owner may notify the lessee within one month of the purchase date and file an eviction lawsuit based on necessity following the end of a six-month period after the transfer date.
As mediation became a prerequisite for filing an eviction lawsuit arising from a lease agreement, the parties must first initiate a mediation process before filing a lawsuit. If the parties cannot reach an agreement on eviction, the new owner must file a lawsuit before the competent civil court of peace (sulh hukuk mahkemesi). If the court determines that the new owner's need to use the property is genuine, it will decide to evict the lessee from the property before the lease term expires.
The annotation of the lease agreement with the land registry transforms the lessee's personal right, which can only be asserted against the lessor under the agreement, into a right that can also be asserted against third parties, thereby eliminating the risk of early termination. As the new owner can see that the lease agreement has been annotated with the land registry during the transfer process, the transfer is deemed to have been accepted with the existence of the lease agreement in accordance with the principle of reliance on the land registry records, and the new owner cannot request eviction until the end of the lease term.
There are certain conditions for annotating a lease agreement with the land registry. First, the parties must agree on the annotation of the lease agreement with the land registry and acknowledge this in the lease agreement. In this regard, a written agreement is required for the lease agreement to be annotated with the land registry. If the lease agreement is not executed before a notary public or at the land registry office, the lessor and the lessee must jointly apply to the land registry for the annotation of the agreement. If the lease agreement is executed before a notary public in statutory form or directly at the land registry office, the lessee can apply to the land registry office unilaterally to request annotation, without the presence of the lessor. In order to annotate the lease agreement, the parties must pay the stamp duty amounting to 0.189% of the total rent amount and the annotation fee corresponding to 0.683% of the total rent amount to the respective authorities.
The annotation term cannot exceed the lease term. At the end of the annotation term, the property owner can unilaterally request the cancellation of the annotation from the relevant land registry office. Under Article 347 of the Turkish Code of Obligations, in commercial leases, if the lessee does not terminate the lease agreement at the end of the initial term, the lessor is not entitled to unilaterally terminate the agreement solely due to expiration of the term, and the agreement will be extended for one year. In the event of extension, the lessee cannot request the extension of the annotation from the relevant land registry office unless there is a specific provision in the lease agreement. In this regard, it is advisable to explicitly regulate the extension of the annotation under lease agreements.
In light of the above, investors in our jurisdiction should consider annotating their commercial leases with the relevant land registry despite all the additional costs and expenses to enhance the security of their long-term investment.
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.
