Turkey: In Accordance With The Turkish Code Of Obligations Rent Determination And Rent Determination Lawsuit

A. Introduction

A lease agreement is an agreement in which the lessor undertakes to leave the use of a thing or the use and benefit from it to the lessee, and the lessee undertakes to pay the agreed rental price in return, and the rental price is one of the objective essential elements of the lease agreement. In accordance with the principle of freedom of agreement, as a rule, the parties may freely determine the rental price. However, with the provisions regulated in the second part of the fourth section of the Turkish Code of Obligations Law No. 6098 ("TCO"), the identification and/or determination of the rental price during the continuation of the lease agreement and in new lease periods are subject to certain limitations. In Articles 344 and 345 of the TCO, which contain the limitation on the determination of the rent, the term "identification of the rent" and the rent determination and the rent determination action that can be brought for rent determination are mentioned. In this article, firstly, the concept of rent determination will be briefly mentioned in accordance with the provisions of the TCO, and then explanations regarding the rent determination lawsuit will be given.

B. The Notion of Rent Determination and Application Area of the Provisions on Rent Determination

It has been mentioned that the parties can freely determine the rental price during the conclusion of the lease agreement. However, as it is already known, the termination of residential and roofed workplace lease agreements by the lessor is subject to certain conditions. For this reason, since it may be unfair for the rental price to remain as determined at the time of the conclusion of the lease agreement in the renewed lease periods, the concept of determining the rental price in the renewed lease periods, in other words determination, has arisen.

The determination of the rental price is a legal problem that arises after the conclusion of the agreement. Pursuant to Article 344 of the TCO, the parties may freely determine the rate of increase for the renewed lease periods in the lease agreement, if it does not exceed the rate of change in the consumer price index in the previous lease year according to the twelve-month averages. However, in some circumstances, the rent that the lessee is obliged to pay under the lease agreement must be determined by the judge. The determination of the rent by the judge is possible through a rent determination lawsuit. Before giving explanations regarding the rent determination case, it is beneficial to mention the application area of the provisions regarding rent determination.

Firstly, it should be noted that the provisions on the determination of the rental price are applicable only for residential and roofed workplace leases. This issue is based on two grounds in the doctrine. One of them is explained as it would be unfair to continue to apply the rental price at the time of the conclusion of the lease agreements that continue for many years without expiry due to the limited circumstances of the expiry of the lease agreements in accordance with the regulations of the TCO on residential and roofed workplace lease agreements. The other is explained as the need to limit the determination of the rental price in order to ensure the economic order of the country.

In addition, Article 1 of the Law No. 6101 on the Enforcement and Implementation of the Turkish Code of Obligations stipulated that the provisions of the law shall apply to the acts and transactions prior to the date of entry into force of the TCO, whether they are legally binding or not, and their consequences, whichever law was in force when these acts and transactions took place. However, in the continuation of the same article, an exception has been made to this "non-retroactivity" rule, and Article 2 of the Law stipulates that the rules of the TCO regarding general morality and public order shall apply to all acts and transactions, regardless of the date of their occurrence. In the light of these regulations, the predominant opinion in the doctrine is that Articles 344 and 345 of the TCO regarding the determination of the rental price shall also apply to the lease agreements concluded before 1 July 2012, the date of entry into force of the TCO. As a matter of fact, in accordance with the established decision of the Court of Cassation, the provisions regarding the determination of rent within the scope of the lease agreements concluded before the entry into force of the TCO can be applied and a rent determination lawsuit can be filed.

C. Rent Determination Lawsuit

1. Rent Determination Lawsuit in General

Requesting the determination of the rental price through a lawsuit is called a rent determination lawsuit. As a result of the judgement established as a result of the rent determination lawsuit, a change occurs in the legal relationship between the parties and the rent is re-determined. As such, the established jurisprudence of the Court of Cassation and the predominant opinion in the doctrine is that rent fixation lawsuits are not in the nature of a declaratory action, but in the nature of a lawsuit giving rise to novelty. Due to the nature of this lawsuit, although it is not possible to divide the claim for the determination of the rental price, the rental price must be clearly and clearly requested by the plaintiff. In other words, in lawsuits for the determination of the rental price, rights related to surplus cannot be reserved, rent determination lawsuits cannot be submitted as an indefinite receivable lawsuit, and no request for amendment can be made regarding this reserved right. Furthermore, the action for rent fixation may be brought by the lessor, the lessee, the new owner in case the lease is transferred, and the new lessee in case the lease relationship is transferred by the lessee. In addition, since there is no prescription period or limitation period for the filing of a rent determination lawsuit, this type of lawsuit can be filed at any time. The time of filing the lawsuit is important in terms of the plaintiff's claim and the explanations regarding this issue are given below.

2. Conditions of Rent Determination Lawsuit

Article 344 of the TCO constitutes the legal basis of rent determination lawsuits. Although it is useful to state again that the rent determination lawsuit can only be filed for residential and roofed workplace lease agreements, the conditions of the rent determination lawsuit vary depending on which provision of Article 344 of the TCO the lawsuit is filed based on.

In paragraph 1 of Article 344 of the TCO, it is regulated 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 according to the twelve-month averages in the previous lease year. In this situation, the substitution of a rent determination lawsuit based on paragraph 1 of Article 344 of the TCO will be possible only if the parties make an agreement on the rental price to be applied in the renewed lease periods, but have a dispute about the rental price according to the agreement.

Paragraph 2 of Article 344 of the TCO stipulates that if there is no agreement between the parties regarding the renewed lease period, the rent shall be determined by the judge, provided that it does not exceed the rate of change in the consumer price index of the previous lease year according to the twelve-month averages. In this case, the submission of a rent determination case based on paragraph 2 of Article 344 of the TCO is subject to the condition that the parties do not agree on the rental price to be applied in the new lease period.

Paragraph 3 of Article 344 of the TCO stipulates that the rental price may be determined by the judge in lease agreements with a term longer than five years or renewed after five years and at the end of each five years thereafter, regardless of whether there is an agreement between the parties regarding the rental price. In other words, if the rent increase rate is to be determined for the sixth lease year at the end of the five-year lease relationship, regardless of whether an increase rate is agreed in the lease agreement or not, the judge shall determine an equitable rent by taking into account the condition of the leased property and the precedent rent rates. In this situation, in the submission of a rent determination case based on paragraph 3 of Article 344 of the TCO, regardless of whether the parties have made an agreement on the rental price to be applied in the new lease period, only the existence of a lease agreement for more than five years or renewed after five years is required.

Paragraph 4 of Article 344 of the TCO regulates the cases where the rent is agreed in foreign currency. The submission of a rent determination lawsuit based on paragraph 4 of Article 344 of the TCO depends on whether the rent is determined in foreign currency or indexed to a foreign currency and at least 5 years have passed since the lease agreement was concluded.

3. Retroactive Application of the Judgement in the Rent Determination Lawsuit

In principle, the judgement issued as a result of the rent determination lawsuit is effective prospectively and is applied for the lease period following the date of the lawsuit. However, Article 345 of the TCO provides some exceptions to the prospective application of the rent determined as a result of the lawsuit. Pursuant to paragraphs 2 and 3 of Article 345 of the TCO, if (i) the lawsuit is filed at the latest thirty days before the beginning of the new lease period (ii) a written notification regarding the increase of the rent is made at the latest thirty days before the beginning of the new lease period (iii) there is a provision in the lease agreement regarding the increase of the rent in the new lease period, the rent to be determined by the court in the lawsuit to be filed until the end of the new lease period is valid from the beginning of the new lease period. To give an example to the cases in (i) and (ii), if it is requested that the rent determination lawsuit to be substituted within the scope of the lease agreement with a starting date of 28.01.2020 and to be renewed on 28.01.2021 be valid as of 28.01.2021, the lawsuit must have been filed on 30.12.2020 at the latest or a written notification must have been made regarding the increase in the rent. On the other hand, if there is a provision in the lease agreement that the rent will be increased in the new lease period, the rent to be determined by the court in the lawsuit to be filed until the end of the new lease period will be valid from the beginning of the new period, even if the lawsuit is not filed at the latest thirty days before or a written notification is not made regarding the increase of the rent.

D. In Conclusion

The provisions of the TCO on rent determination and rent determination lawsuit aim to resolve the disputes between the lessee and the lessor regarding the determination of the rental price of the leased property, and Article 344 of the TCO stipulates the regulations regarding the determination of the rental price. In the rent determination case, the court makes an equitable decision by taking into account various factors such as the nature of the immovable property, its location, its intended use, market conditions, the prices of similar rented properties. The first thing to be considered in the lawsuit to be filed for the determination of the rental price is the retroactive application of the decision, and if the lawsuit is not filed in accordance with the deadlines specified in the TCO, the decision regarding the determination of the rental price can only be applied in the next lease period. Lastly, it should be noted that the rent determination lawsuits should be filed as an indefinite receivable lawsuit and that it is not possible to amend the rent determination lawsuit.

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