Announcement for the Articles of The Turkish Code of Obligations Related to Workplaces Lease Agreements
I. Developments Up to Date

The articles of the Turkish Code of Obligations No.6098 (''TCO'') had been postponed for workplaces lease agreements. It will be entering into force on July 1,2020 for office leases. The articles of the TCO will come into effect if not postponed again. This is known to cause considerable effects to the ongoing office lease agreements.

II. The Impact of The Articles Which Will Not Be Coming into Force

· Lease Assignments

Article 320 of the TCO concerns regulating the agreement of the lease to third parties. As a rule, the written consent of the landlord is needed for a lease agreement to be assigned to a third party. However, when it comes to office lease agreements, a landlord cannot abstain from providing the written consent if there is a fair cause. To put in a different way, from July 1, 2020, the landlord cannot refuse to give consent to the assignment unless there is a valid cause if the tenant wants to assign the lease agreement.

III. The Return of the Leased Property Prior to the End Date

Article 325 of TCO states that; in an event where the leased property is returned without conforming the termination period or the lease term, the tenant will need to continue performing its obligations under the agreement for a reasonable period of time where the property may be leased under alike conditions. Under the same article of the TCO, if a tenant finds another potential tenant that can pay the rent and is ready to sign the agreement, and if the landlord would reasonably accept that person as a tenant, the original tenant's obligations would no longer have effect.

With the entry into force of the article on July 1, 2020 subject to office leasers, in an event where the tenant wishes to evacuate the property before the lease agreement comes to an end, if they will find a potential tenant (as described above), they may be released from any obligations of the lease agreements.

IV. Termination Placed on a Probable Cause

Article 331 of TCO based on probable cause for termination. Although the article has been postponed until July 1, 2020, includes an alike clause (Article 264), parties may terminate the agreement if it is based on a probable cause for fixed-term lease agreements.

From July 1, 2020, the office leases concerning indefinite terms may be terminated if based on a probable cause. As given in Article 331, another change will be on determining the amount of indemnity, which will now be determined by considering the characteristics of the case by the judge.

V. Prohibition of Linked Transaction

The article 340 of TCO that regulates the prohibition of linked transactions is prohibited for the landlords to ask a tenant to bargain any obligation that is not related to the using of the leased property, and against their benefit. If a contract will be based on such conditions, will be deemed to be invalid.

VI. Security Deposits

Article 342 of TCO, gives that in an event where the security deposit has been foreseen within the lease agreement, the amount cannot exceed the amount of three months of rent. Additionally, the parties cannot withdraw the amount without having either parties' approval, final court decision or a final execution order and the deposit should be deposited in a bank account. From July 1, 2020 onwards, Article 342 will be applied to the security deposits under office leases.

Nevertheless, since there is a considerable risk for the banks on the conditions of the withdrawal, the banks are seen as reluctant to open up such accounts.

Additionally, although the lease agreements predict that there will be no interest applied to the security deposits, the tenant will have the chance to ask for interest after the termination of the agreement and the evacuation of the property.

VII. Prohibition as to Changes to the Detriment of the Tenant

In Article 343 of the TCO it is given that there cannot be any changes made following the signing of the contract to the deterioration of the tenant excluding the rent amount. Although the enforcement of Article 343 has also been postponed, there is a similarity of the clauses between the ACO and the Real Estate Rents Law. Therefore, there will not be a change in practice after the enforcement of the article.

VIII. Prohibition as to the Regulation to the Detriment of the Tenant

Practically, this article will most probably the most discussed article among other articles that will come into force after July 1, 2020.

The difference between the prohibition of the regulation to loss of the tenant and the prohibition of changes to the loss is controlled by Article 346 of the TCO. There is no obligation excluding the payment of the rent and side costs under the Article. From July 1, 2020 onwards the clauses obliging a penalty for non-payment and acceleration, will be invalid.

Acceleration clauses (states that in situations where if the tenant has failed to pay the rent in the required time phase, all the endured payments will be due). Nevertheless, other penalty clauses such as clauses which deal with the obligation to keep stores located in shopping malls etc., have been having discussions evolving around them that will need to be looked at into more depth by following the Supreme Court verdicts.

IX. Conclusion

The articles of TCO that have been postponed will be applicable to the lease agreements from July 1, 2020 since essential. This will cause substantial differences in the lease agreements. Many articles safeguarding the tenants especially during the COVID-19 measures relevant to sectors including retail, restaurants etc., will be a crucial one for the relationships between tenants and landlords.
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