While initial years of lease agreements often transpire without significant issues, subsequent years, influenced by the economic landscape and high inflation in our country, have resulted in rental prices significantly lagging fair market values. This has become a major problem, especially for lease agreements that have been in place for more than three or four years. This has become a critical problem for lease agreements that have been in effect for more than three to four years. This has led to a serious increase in rent determination lawsuits. This article aims to provide insights into the rent determination lawsuit process.
What is the Rent Determination Lawsuit?
In practice, while lessors commonly initiate rent determination lawsuits, lessees also possess the right to file this lawsuit. These lawsuits, which can be filed by both the lessee and the lessor, aims to determine the rental price in alignment with prevailing market conditions. The provisions regarding the lawsuit for the determination of the rental price are delineated in Articles 343 and subsequent sections of the Turkish Code of Obligations No. 6098 ("TCO"). Accordingly, the provisions on the determination of the rental price are applicable only for residential and roofed workplace leases. They do not extend to leases outside the scope of these categories.
What are the Conditions to be Fulfilled Filing a Rent Determination Lawsuit?
Contrary to common perception, a rent determination lawsuit can be initiated for lease agreements with a duration shorter than 5-years pursuant to Article 344 of the TCO. In this context, the issue to be considered regarding the conditions of the rent determination lawsuit revolves around whether the parties have stipulated provisions regarding the rental price increases within the lease agreement.
If the parties did not stipulate a clause regarding the rental price increase during the execution of the lease agreement and cannot reach an agreement on the new rental price, it may become viable to commence a rent determination lawsuit.
When the lease agreement includes a provision specifying the rental price increase, initiating a rent determination lawsuit requires the lease agreement to have been in force for a minimum of 5-years.
Considering the aforementioned explanations, the prerequisites for filing a rent determination lawsuit are as follows:
- There must be a valid lease agreement between the parties, irrespective of whether the agreement was notarized, documented in writing, or established verbally. The pivotal factor is the existence of an agreement between the parties.
- The plaintiff must have a legal interest in filing a rent determination lawsuit.
- The lease agreement either lacks a provision addressing rent increases, or the lease relationship between the parties has endured for a minimum of 5-years
One of the questions we frequently encounter in practice is whether it is necessary to have served a notice in advance filing a rent determination lawsuit. It is not mandatory to have a notice in rent determination lawsuit.
When is the Rent Determination Lawsuit Filed?
Unlike many other lawsuits arising from rental law, a rent determination lawsuit can be filed at any time if the above-mentioned conditions are met.
When Will the Rental Price to Be Determined Starts to Be Applied?While the legislature has not stipulated a specific timeframe for initiating the lawsuit, the validity of subsequently determined new rental price is contingent upon the date of filing the lawsuit.
If there is one of the following two possibilities, the rental price to be determined in the rent determination lawsuit will be valid from the beginning of the new lease period:
- Filing the rent determination lawsuit at least 30 days before the beginning of the new lease period, or
- Issuing a written notification to the other party, declaring the intent to file a rent determination lawsuit, at least 30 days before the beginning of the new lease period. It is important to emphasize that this written notice must be received by the other party within the designated timeframe. In practice, notification is often facilitated through a notary public.
If the relevant procedures are not carried out within the above-mentioned periods, the rental price determined in the rent determination lawsuit initiated will be valid for the next lease period, that is, the rental period following the filing of the lawsuit.
In cases where a valid lease agreement exists between the parties, explicitly outlining the method for rental price increases, the rental price established in rent determination lawsuits filed after a 5-year period will take effect at the commencement of the new lease period, regardless of the aforementioned timelines.
How is the Rental Price Determined?
In determining the new rental price, the judge mainly relies on the following criteria:
- Location of the immovable (environmental factors), condition of the immovable, intended use. These criterias are evaluated in the reports prepared as a result of the examinations made by the experts during the trial.
- Precedent rental prices. The rental prices of other immovable properties with similar characteristics in the region where the immovable is located will be taken into consideration.
- Consumer price index (CPI) rate of change.
Besides the above-mentioned criteria, the legislator has imposed an obligation on the judge to determine the rent based on principles of fairness and equity. This principle, commonly referred to as the 'former tenant discount' in practice, comes into play when the plaintiff is the lessor. The judge, in determining the new rental price, considers the lessee's established tenure within the relevant property and acknowledges a discounted price in line with comparable rates.
It is crucial to note that in rent determination lawsuits, the requested price remains unchanged in the lawsuit petition. Therefore, accurately determining the new rental price sought at the initiation of the lawsuit holds significant importance.
Which Court Should the Rent Determination Lawsuit Be Filed?
The court in charge of rent determination lawsuits is the civil courts of peace and the competent court is the court where the leased immovable is located or the defendant's place of residence.
Is It Necessary to Apply to a Mediator?As of September 1, 2023, it is mandatory to apply to a mediator before filing a rent determination lawsuit. If the lawsuit is filed without fulfilling this condition, it is likely that the court will decide to dismiss the lawsuit procedurally.
Conclusion
The number of rent determination lawsuits has increased rapidly in the last few years and has become one of the popular cases among the judicial proceedings. Despite this increased prevalence, rent determination cases are still not fully understood and may be subject to wrong practices.
The most common misconceptions are that rent determination lawsuits are the belief that such suits cannot be initiated before 5-years and that only lessors possess the right to file such claims. As elucidated in detail previously, in the absence of any stipulation concerning rent increase within the lease agreement, any party can initiate rent determination lawsuits without being confined by a specific timeframe. The 5-years rule comes into play when there exists a provision regarding rent increase within the lease agreement., anyone who is a party to the lease agreement can file a rent determination lawsuit without being subject to any period of time. The date of filing the lawsuit holds significance in determining the validity commencement of the newly determined rental price.Currently, rent determination lawsuits are not concluded before one to two years. Considering the economic conditions in our country, the amount requested to be determined while initiating the rent determination lawsuit does not yield the desired effect during the period leading to the final decision. Moreover, the incurred procedural expenses impose an additional financial burden on the involved parties. Consequently, we advocate that the mandatory mediation introduced as of September 2023 offers significantly more positive outcomes, both financially and ethically, by fostering reconciliation between the parties
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.
