Regulatory & Compliance

THE UPPER LIMIT FOR RENT INCREASE IN RESIDENTIAL RENTS UNTIL 2023 HAS DETERMINED UP TO 25% IN TURKEY

Rent increase rate concerning residential and roofed workplace rents has been regulated under the Turkish Code of Obligations.

In line with such regulation, the rent increase rate has been determined according to the following provision;

“Agreements of the parties regarding the rental price to be applied in the renewed rental periods are valid provided that it does not exceed the change rate according to the twelve-month averages in the consumer price index in the previous rental year.” The rent increase rate is announced by the Turkish Statistical Institute at the beginning of each month. The increase in the renewed rental year is also realized by considering this rate.

The economic conditions and inflationary environment in our country cause the rent increase rates to be rather high. Such a situation is particularly challenging concerning lessees and also causes the lessors to evict the lessees due to the unpaid rent. In order to prevent this, the lawmaker has brought a new regulation regarding rent increase rates. Article 4 of the The Law on Amending Attorneyship Code Numbered 7409 and the Turkish Code of Obligations has been regulated as follows;

    The following interim article has been added to the Turkish Code of Obligations dated 11/1/2011 and numbered 6098.

“INTERIM ARTICLE 1- Agreements regarding the rental price to be applied in the renewed rental periods between the effective date of this article and 1/7/2023 (including this date) in terms of residential rents are valid provided that it does not exceed twenty-five percent of the rental price of the previous rental year. In the event that the change rate in the consumer price index of the previous rental year is below twenty-five percent compared to the twelve-month averages, the change rate will be valid. Such a rule also applies to lease agreements for more than one year. Contracts which concluded to exceed such rates are invalid in terms of the excess quantity. Such paragraph is also applied in terms of decisions to be rendered by the judge in line with the second paragraph of Article 344”

The rent increase rate has been rendered valid within such an article added to the Turkish Code of Obligations provided that it does not exceed twenty-five percent of the rental price of the previous rental year. Thus, even in case of the rent increase rate announced by Turkish Statistical Institute is over twenty-five percent, the increase rate may be applied to twenty-five percent at the furthest. However, the twenty-five percent limit is not a limit to be applied decisively. Pursuant to the Law, in the event that the change rate in the consumer price index according to the twelve-month averages remains below twenty-five percent, such change rate will be applied. In other words, in the event that the rate of change in the consumer price index is announced as, for instance, fifteen percent, the lessor will not be able to demand an increase of twenty-five percent. Since it is provided under the law that such regulation is valid in terms of residential rents, we evaluate that such provision will not be valid in terms of workplace rents and such rent increases will continue at the rate announced by the Turkish Statistical Institute.

Pursuant to the additional article added to the Turkish Code of Obligations by the Law Numbered 7409, the twenty-five percent increase rate limitation may be applied concerning renewed rental periods between the effective date of the Law and 01.07.2023. The effective date of the Law has been determined as the publication date and the date of publication in the Official Gazette is 11.06.2022. Accordingly, the increase rate to be applied in renewed rental periods between 11.06.2022 and 01.07.2023 (including these dates) is limited to twenty-five percent. It is provided in the law that the rental prices of the previous rental year will not exceed twenty-five percent and since the last renewal date to apply such provision has been determined as 01.07.2023, such an article shall not affect the lease agreements to be signed after 01.07.2022.

In the continuation of the interim article added by the law, within clause “Such paragraph is also applied in terms of decisions to be rendered by the judge in line with the second paragraph of Article 344”,   the twenty-five percent limitation is considered to be applicable pursuant to Article 344/2 of the Turkish Code of Obligations in the event that an agreement has not been concluded by the parties regarding the rent increase rate.Nowadays, since almost all lease agreements include rent increase rates, it will be very difficult for such provision of the interim article to find an application area.

Article 344/3 of the Turkish Code of Obligations regulates that the new rental price should be determined by the judge by bringing a rent declaratory action, regarding lease agreements for more than five years or renewed after five years. However, under the interim article added to the Turkish Code of Obligations by Law Numbered 7409, there is no regulation available regarding such provision. Therefore, it is not certain at the moment whether the twenty-five percent limitation provided by the interim article will also be applied regarding the rent declaratory action to be filed in accordance with article 344/3 of the Turkish Code of Obligations. In the event that we carry out an evaluation with the textual interpretation of the interim article, it can be said that such limitation will not be applied regarding rent declaratory action to be filed pursuant to article 344/3 of the Turkish Code of Obligations and the judge can determine the new rental price by considering the precedent rental prices and market conditions. However, it will be possible to observe with future decisions whether the provision of the interim article will be applied in practice by analogy in terms of rent declaratory actions.

In conclusion, although the interim article added to the Turkish Code of Obligations with the Law Numbered 7409 is a provision created in order to protect the lessee from inflation in the short term, it will become clear in the forthcoming days how the interim article will be reflected in the practice.

 

Şeref Şen, Attorney at Law

About Us

We are aware of legal expectations of corporates and business community in need of sustainable growth, development and stability, when they do business in a complicated and emerging jurisdiction.

Recent Posts

error: Content is protected !!