Turkey: Lawsuits For Determination Of The Rental Price Under The Turkish Law

In the past two years, due to the point where the exchange rates have reached and the price increases in the real estate market, real estates have started to find tenants at much higher prices than before, and as a result, the existing tenants of many real estates have started to use the real estates rented at low rents compared to their peers in their neighborhood. For this reason, property owners have started to look for ways to evict their existing tenants or to revise the rental prices, and more rent disputes have arisen in our country on an annual basis than ever before. In this article, we will provide information about the lawsuits for the determination of the rental price under the Turkish Law, which enables the property owners to request a decision to redetermine the rental prices that are below their peers in an equitable manner in terms of residential and roofed workplace rents.

Pursuant to Article 344, paragraph 3 of the Turkish Code of Obligations No. 6098 ("Code"); regardless of whether the parties have made an agreement on the rate of increase in the rental price in the content of the lease agreement, in lease agreements for more than five years or renewed after five years and at the end of each subsequent five years, upon the application of one of the parties, the rental price to be applied in the new lease year may be determined by the judge in an equitable manner, taking into account the rate of change in the consumer price index according to the twelve-month averages, the condition of the leased property and the comparable rental prices. Undoubtedly, this application appears as lawsuits for determination of the rental price filed in the civil court of peace, which is the competent court for rent disputes pursuant to Article 4 of the Code of Civil Procedure.

Although the rental price may be agreed upon by the free will of the parties at the beginning of the lease agreement, as we have mentioned above, sometimes the rental price determined in the agreement is well below the arm's length prices and the landlords are obliged to demand that the rental prices be brought in line with the arm's length prices. Undoubtedly, although the right to file a rent price determination lawsuit can be exercised by both parties to the contract, in practice, it is seen that this right is exercised by the lessor with the request to increase the rental price on the grounds that the rental price is below the peers, except for the relatively exceptional cases filed with the request to reduce the rental price.

For which kind of lease agreements can a lawsuit for determination of the rent be filed?

First of all, as can be understood from the clear wording of the law, in order to file a lawsuit for the determination of the rental price, there must be a lease relationship that has been continuing for more than five years in total. In other words, it will not be possible to file a lawsuit for the determination of the rental price for lease relationships that have not completed their fifth year. Again, as it is understood from the clear wording of the law, a lawsuit for the determination of the rental price can be filed regardless of whether the rent increase rate is determined in the contract between the parties. Finally, the lawsuit for the determination of the rental price is regulated in the special provisions of the law on residential and roofed workplace leases and will only be applicable to residential and roofed workplace leases.

Although it is a controversial issue in the doctrine as to whether Article 344, Paragraph 2 of the Law can be applied to indefinite-term lease agreements, the doctrine is of the opinion that it should be possible for the lessor to request an increase in accordance with Article 344/II of the TCO at the end of the one-year lease periods to be calculated from the beginning of the agreement.

Is it mandatory to notify the other party before filing a lawsuit for the determination of the rent or to file the lawsuit before the new lease term?

In order to protect the tenant, the Code provides a comprehensive procedure for the eviction of residential and roofed workplace leases, including the obligation to notify and certain time limits for filing a lawsuit. On the other hand, for the cases regarding the determination of the rental value, it is possible to file a lawsuit at any time pursuant to Article 345 of the Code titled "the period for filing a lawsuit and the effect of the decision".

Therefore, the lessor is not obliged to file the lawsuit within a certain period of time starting from the month in which the lease agreement is renewed, and may file the lawsuit on any date in the middle of the new lease period. However, pursuant to the regulation in the continuation of Article 345 of the Code, in cases where there is no provision in the contract regarding the increase in the rental price in the new lease periods, in case of filing a lawsuit thirty days before the beginning of the new lease period or notifying the tenant of the rent increase request within the same period, the rental price to be determined by the court will bind the tenant from the beginning of the new period.

However, it should be noted that, as it is frequently encountered in practice, if there is already an increase clause in the lease agreement stating that the rent will increase in the new period, the rent will be valid from the beginning of this new period. In other words, if there is an increase clause in the contract, a retroactive determination can be requested to bind the tenant from the beginning of the new lease period, without the need to send a notice to the tenant or to file the lawsuit one month before the new period.

The role of precedent lease agreements in rent determination cases

In the cases for determination of the rental price, the court is required to investigate the precedent rental prices in accordance with the established case law of the Court of Cassation. In this context, in practice, in the determination of the rental price cases, the courts write a letter to the relevant water and sewerage administration, electricity and natural gas distribution companies, tax offices and provincial-district municipalities, depending on the location of the real estate, and request copies of the lease agreements regarding the real estate in the vicinity of the real estate subject to the lawsuit and the real estate that will constitute a precedent. In this way, lease agreements submitted to these institutions by third parties, mostly for subscription opening procedures or tax reasons, are included in the case file and constitute the basis for expert examination.

In addition, it is also possible for the parties to submit precedent lease agreements signed between third parties in their favor to the file, and in practice, it is generally seen that the courts usually give the parties a deadline in this direction. Also, during the discovery made by the real estate appraiser expert, the parties are expected to have the real estates subject to the lease agreements that they show as precedents, and in this way, the precedent real estates can also be examined by the experts. In the cases for determination of the rental value, the experts are assigned by the court to determine the rental value that they declare that the immovable will bring if it is rented out empty under free conditions.

In disputes where the parties cannot submit the precedent lease agreements and the court does not or cannot subpoena the precedent lease agreements to the file through the relevant writings, it is seen that the experts prepare a report in such a way that the advertisements taken from national advertisement websites are the basis for the determination of the precedent rent. In our opinion, determining the imputed rent in this way will not yield healthy results. Because, on the websites that are used to publish advertisements on a national scale, advertisements can be easily placed by anyone, and it is possible that these websites may contain advertisements that are open to manipulation and far from control. In this context, although it may of course be possible for experts to utilize such advertisements in determining the imputed rental values, we are of the opinion that if such advertisements are the sole and absolute basis for the determination of the imputed rental value, it will not be an expert report suitable for the audit envisaged in the established jurisprudence of the Court of Cassation and taking it as the basis for the judgment will lead to the establishment of a judgment with incomplete examination.

Things to consider when determining the amount of the claim in rent determination cases

The General Assembly of Civil Chambers of the Court of Cassation defines the actions for determination of the rental price as "a unique action and is close to the decisions rendered at the end of construction actions. In these cases, only the determination of the rental price that will be valid during the relevant lease period is requested and the case for determination of the rental price has a limited subject matter." In the continuation of the same decision, "In accordance with this nature of the case, the request for the determination of the rental price cannot be divided and the rental price must be requested by the plaintiff clearly and clearly at one time. In other words, in cases for the determination of the rental price, the rights regarding the surplus cannot be reserved and the request for amendment cannot be made regarding this reserved right."

This opinion of the General Assembly of the Court of Cassation is also adopted in practice, and it is not possible to amend the subject of the claim in terms of rent price determination cases. In other words, the full amount of the rent requested to be determined must be clearly stated at the time of filing the lawsuit, and even if the precedents of the immovable are found to be higher than the demand by the expert examination, the determination of the rent will be decided without exceeding the amount of the demand in accordance with the principle of adherence to the demand. In practice, due to the long duration of the proceedings due to the workload of the courts in our country and the rapid price increases in the real estate market in recent years, the rental price at the time of the filing of the lawsuit may remain below the precedents until the determination of the rental price is concluded. In this context, the correct determination of the rental price to be requested at the time the lawsuit is filed is one of the issues that should be taken into consideration.

In addition, another issue that should be taken into consideration while determining the amount of the claim is that while determining the rent at the end of the lawsuit, the court will apply a discretionary discount in accordance with the principle of fairness and equity, taking into account that the tenant has been a tenant in the real estate for a long time. However, in the established practice of the Court of Cassation; it has been adopted that if the rent determined by the experts exceeds the amount of the claim, the discount to be applied in accordance with the principle of fairness and equity should be made over the amount of the claim and then a decision should be made over this amount, depending on the claimant's request.

Conclusion

In conclusion, this article provides information on the nature of the action for determination of the rental price and its place in our law, the course of the case in practice and the issues to be considered when filing a lawsuit. However, it should be noted that this information is of a general nature and factors such as the specific characteristics of each lease relationship, the terms of the contract and the physical condition of the leased real estate may also affect the nature of a possible rent determination case. Therefore, each dispute will need to be evaluated on its own merits.

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.