In our country and worldwide in recent years, rental relations and parties of the rental relationship have been put in difficult situations, with many human factors and natural disasters making it harder for parties of the rental agreement to adhere to this contract. With the significant impact of the Covid-19 pandemic worldwide, economic depression, interest rates, inflation, and the earthquake disaster in our country last year, serious disputes over the determined rental fee in rental relations have been brought before the judiciary and continue to be. For the solution of these situations, the legislator has provided the parties with the opportunity to file a lawsuit for the determination and adjustment of the rental fee under certain conditions.
What is a Rent Determination Lawsuit?
The lawsuit where the determination of the rental fee is requested by the court is called the "Rent Determination Lawsuit". One of the main differences between this and the "Adaptation Lawsuit", which will be detailed below, is that the rent determination lawsuit can only be filed for residential and roofed commercial rentals.
In the rental contract, parties can freely determine the rental fee. This freedom of contract pertains to the formation stage of the agreement. If disagreements arise between the parties during renewed rental periods, the rental fee cannot be determined by the free will of the parties. At this stage, to prevent the tenant, who is in a weaker position against the landlord, from suffering injustice and to ensure fairness, the legislator has set an upper limit on the rent increase rate in the law. Accordingly, the rent increase rate cannot exceed the change rate based on the twelve-month average in the consumer price index. However, according to the Temporary Article 1 added to the Turkish Code of Obligations No. 6098 with Law No. 7409, the increase in residential rental contracts renewed between 10.06.2022 and 01.07.2023 cannot be more than 25%.
(According to the relevant changes, effective from 02.07.2023, in line with the provisions of Temporary Article 2 added to the Code of Obligations No. 6098 stating that the rent increase rate in residential rental contracts is limited, the 25% rental increase rate will continue until 1 July 2024.)
When Can a Rent Determination Lawsuit Be Filed?
1) If Rent Increase Has Been Determined Above the Legal Limit;
Parties can freely determine the rent in the rental contract. However, to prevent the tenant from suffering injustice and to ensure fairness, the legislator has limited the rate of rent increase. The rent increase rate cannot exceed the change rate based on the twelve-month average in the consumer price index. However, according to the Temporary Article 1 added to the Turkish Code of Obligations No. 6098 with Law No. 7409, the increase in residential rental contracts renewed between 10.06.2022 and 01.07.2023 cannot be more than 25%. (According to the relevant changes, the 25% rental increase rate will continue until 1 July 2024, effective from 02.07.2023, in line with the provisions of Temporary Article 2.)
If the parties have agreed on an increase within the legal limits, it is not possible to file a rent determination lawsuit before a 5-year period has passed. However, if the increase rate specified in the contract exceeds the twelve-month average CPI rate, the tenant will have legal benefit in filing a lawsuit, and a rent determination lawsuit can be filed even if five years have not yet passed in the contract between the parties.
2) If the Parties Cannot Agree on the Rent Increase Rate;
If the parties cannot agree on the rent increase rate, they can apply to the court to determine the rent. The court will determine the rent increase rate within the legal limits, taking into account the property's condition and comparable rent rates. (All factors affecting the rent of the place in question, such as location, surroundings, quality, usage, rental start date, rental periods, etc., should be compared, and why comparable rents are or aren't suitable should be explained with concrete reasons.)
3) Determining the Rent in Rental Agreements Lasting at Least Five Years;
In the rental agreement, even if the increase rate is determined in accordance with the law, a right to file a rent determination lawsuit arises at the end of every five years for rental agreements that last longer than five years. With the fluctuations in today's economic conditions, significant changes in rent amounts can occur. The disagreements in the rental price of the leased property can sometimes be due to economic changes, or sometimes changes specific to the location of the rented property. Considering all these reasons, it is clear that there can be adverse effects for parties who have long-term rental agreements. The importance of the five-year condition in rent determination is here.
In this case, the court is not bound by the CPI increase rate of the previous year when determining the new rent. If fairness requires, an increase over this rate can be applied. When determining the new rent, the court still considers the CPI increase rate, the condition of the rented property, and comparable rent rates. In this situation, experts need to inspect the property, and research is required regarding the property's condition and comparable rent rates.
Who Can File a Rent Determination Lawsuit?
The rent determination lawsuit can generally be initiated by the tenant or the lessor (home/business owner). What's important here is that the plaintiff has a legal interest in filing the lawsuit. Moreover, in situations where there are multiple owners of the property, regardless of whether they are the lessor, any owner can file the said lawsuit.
If the property is under Joint Ownership, all owners must file the lawsuit together, join a lawsuit already filed, or give their consent.
If the property is under Shared Ownership, each co-owner can request the rent to be determined in proportion to their share.
Although the legislator has emphasized regulations taken to prevent the tenant's victimization and ensure fairness, giving an impression that the rent determination lawsuit is primarily filed by the tenant; the lawsuit is commonly initiated by home and business owners to increase the rent that is lower compared to its counterparts. In practice, especially in recent times, it is observed that the rent determination lawsuit is filed for this reason.
Time Limit for Filing a Rent Determination Lawsuit
The rent determination lawsuit can be filed as long as the rental agreement continues. However, when the lawsuit is filed plays a crucial role in determining from which period the newly determined rent will be valid.
If the new rent is to be effective in the new rental period;
The lawsuit should be filed at least 30 days before the start of the new rental period. If a notice indicating the rent will be increased has been sent at least 30 days before the start of the new rental period, the lawsuit can also be filed within the new rental period.
If there's a provision in the contract indicating that the rent will be increased in the new rental period, the rent determined by the court in the lawsuit filed until the end of the new rental period will also be valid from the beginning of this new period.
Competent and Authorized Court for Rent Determination and Adaptation Lawsuits
According to Article 4 of the Law on Civil Procedure No. 6100, Civil Peace Courts are competent in all lawsuits arising from rental disputes, regardless of the value or amount of the subject matter. In rent determination and adaptation lawsuits, the competent court is the court at the place of performance according to the Law on Civil Procedure Article 10. In rental agreements, unless otherwise specifically agreed upon, the place of performance is the court in the lessor's place of residence. Another competent court is the defendant's place of residence court according to the general jurisdiction rule in HMK Article 6.
If the parties to the lease agreement are merchants or public legal entities, the civil peace court at the place specified in the agreement is also authorized to hear the rent determination lawsuit (HMK Article 17).
Mediation as a Requirement for Lawsuits on Rent Determination, Rent Adaptation, and Eviction
The mediation process, which is mandatorily applied in commercial law, labor law, and consumer law, will now also be applied in rental law. With the Law No. 7445 titled "Law on Amendments to the Enforcement and Bankruptcy Law and Some Other Laws", published in the Official Gazette dated 5 April 2023 and numbered 32154, significant changes have been made to the "Mediation in Civil Disputes Law" No. 6325, and the scope of disputes that can be resolved through mandatory and voluntary mediation has been expanded. In this context, it has been made mandatory to apply to a mediator before filing a lawsuit for rental disputes as of 1 September 2023.
Execution Process with Rent Determination Decrees
According to the Unification of Precedents decision dated 12/11/1979 and numbered 1/3, rent determination decrees cannot be subject to execution proceedings without being finalized. If no appeal or cassation request is made regarding the verdict given as a result of the trial conducted by the first-instance court, the verdict becomes final. However, if an appeal has been made to higher courts against the verdict given as a result of the trial, the end of this review should be awaited.
Can a Rent Determination Lawsuit Be Filed for Rent Set in Foreign Currency?
Firstly, it's essential to note that the decision "On the Amendment of Decision No. 32 Regarding the Protection of the Value of Turkish Currency", published in the Official Gazette dated 13.09.2018 and numbered 30534, states:
"Individuals residing in Turkey, except in cases determined by the Ministry, cannot agree upon contract prices and other payment obligations arising from these contracts in foreign currency or indexed to foreign currency for contracts including the buying and selling of movable and immovable properties, all types of movable and immovable property leasing, including vehicle and financial leasing, leasing, and service and work contracts."
This decision imposes restrictions on making contracts in foreign currency or indexed to foreign currency.
Those not residing in Turkey are not subject to this prohibition of making contracts in foreign currency. Therefore, it's crucial to collaborate with an experienced attorney in the field to determine which contracts fall under the scope of this decision.
If a contract not subject to the aforementioned restrictions is in question, the parties may have agreed upon the rent being paid in foreign currency. In rental contracts where the rent is set in foreign currency, the rent cannot be changed before the 5-year period expires. This situation is explicitly stated in Article 344/4 of the Turkish Code of Obligations (TBO) No. 6098. However, the article also provides an exception to this main rule: if the "Excessive Performance Difficulty" conditions specified in TBO Article 138 exist, a lawsuit can be filed before the 5-year period ends.
What is a Rent Adjustment Lawsuit?
A rental contract imposes obligations on both parties. Both the tenant and the lessor have mutual responsibilities. The lessor is obliged to deliver the rented property suitable for the intended use in the contract and to maintain its suitability throughout the contract. The primary obligation of the tenant is to pay the rent.
A rent adjustment lawsuit is a type of lawsuit filed to adapt the rent in the rental agreement between the parties due to unforeseen and unexpected changes in circumstances.
While a rent determination lawsuit can only be filed concerning residential and roofed commercial rentals, a rent adjustment lawsuit can be filed for any rental contract.
Understanding the Adaptation Lawsuit through a Relevant Example: The COVID-19 Pandemic
One of the best examples to understand the essence of the adaptation lawsuit is the COVID-19 pandemic, which has been the focus of the entire world and our country in recent years. Due to the coronavirus pandemic, businesses whose operations were halted by the Ministry's decision, or those that had to suspend their operations due to disruptions in supply and distribution channels, workforce loss, import and export barriers, are recognized as having a force majeure in terms of their rental agreements. The Supreme Court evaluates the existence of force majeure based on the specifics of each case.
The situation between those who could not operate during the quarantine and the business owners appears right here. During the quarantine process, lessors cannot fulfill their obligation to keep the rented property suitable for use for businesses that are mandatorily closed.
TBK m.97 :
"The party requesting the performance of a mutually binding contract must have either performed its obligation or offered to perform, unless it has the right to perform later according to the terms and characteristics of the contract."
In rental agreements, one of the types of mutually binding contracts, the lessor cannot fulfill its obligation. Based on this, the tenant can avoid performance.
Furthermore, the "Excessive Performance Difficulty" titled Article 138 of the Code of Obligations is a general provision applicable to all contracts.
TBK m.138 : '
'"If an extraordinary situation, unforeseen by the parties at the time of the contract and not expected to be foreseen, arises due to a reason not originating from the debtor, and this situation significantly changes the facts at the time the contract was made against the debtor in a manner contrary to the principles of good faith, and the debtor has not yet performed its obligation or has performed it while reserving its rights arising from the excessive difficulty of performance, the debtor has the right to request the court to adapt the contract to new conditions. If this is not possible, the debtor has the right to withdraw from the contract. In continuous performance contracts, the debtor generally uses the right of termination instead."
This article provides two options: Termination or adaptation. Adaptation doesn't have to be just a reduction in price. It is believed that adaptation in rental contracts can be done by suspending the contract, reducing the rent, not charging interest, not increasing the rental fee, linking the fee to a term or installment, postponing the maturity, allowing partial performance, shortening or extending the contract period, etc.
Whether the request for performance has changed against the debtor to an extent contrary to the principles of good faith must be evaluated according to each contract, property, and the parties involved. Moreover, the judge is not bound by the adaptation request chosen by the plaintiff and can freely determine the amount and method of adaptation, considering the balance of interests between the parties.
If the rental fee has been prepaid annually, a refund can be made for the months the property was not used by terminating the contract, based on unjust enrichment provisions.
For residences, it can be notified that the rental fee will be paid with reservation and subsequently, payment cannot be made, and an adaptation lawsuit will be filed. However, it should be remembered that, as a rule, the tenant is obliged to pay the rent until the adaptation lawsuit is concluded. After the court's decision becomes final, considering the newly adapted rental fee, the difference created from the date of the lawsuit is offset from the rent for the next rental period.
Who Can File a Rent Adjustment Lawsuit?
Rent adjustment lawsuits can be initiated by both the lessee (tenant) and the lessor (landlord) in the event of an extraordinary situation that did not exist during the contract. Consequently, this extraordinary development can manifest as a significant increase in the value of the property or as the tenant experiencing unexpected financial difficulties. Practical examples include the construction of a significant transportation network near the property or the property's location becoming an attraction center in the city, leading to increased rent. On the other hand, major disasters such as earthquakes or pandemics can cause a significant decrease in monthly income, leading to tenants experiencing payment difficulties.
Recently, the trend of filing rent adjustment lawsuits due to inflation varies in acceptance by the Supreme Court depending on who files the lawsuit. According to settled Supreme Court decisions, if a tradesman files the lawsuit based on inflation, the case will be rejected on the grounds that a tradesman is expected to be prudent and that increased inflation is not unforeseen or extraordinary for a tradesman.
However, there are also precedential decisions when the landlord files the lawsuit.
For instance, in the decision of the 3rd Civil Chamber of the Supreme Court (E.2017/14157 and K.2019/6526 T.11.09.2019):
''... In long-term rental contracts, if there is a severe imbalance between obligations and the contract becomes unbearable for the parties, an 'adaptation' lawsuit can always be filed. Therefore, the court should evaluate each rule to be applied in adaptation lawsuits, obtain a report from a panel of three experts specializing in these fields, considering all these data, the nature of the rented property, its use area, location, significant zoning and trade changes affecting the rental fee in the region, benchmark rental fees, increases in tax and depreciation expenses, sudden and excessive fluctuations in exchange rates, and serious economic crises or natural disasters that shake the country that would necessitate the reorganization of payment principles. It's seen that the decision was made according to the expert report prepared according to the procedures and principles of the rent determination lawsuit without considering the aforementioned issues...''
What Are the Requirements to File a Rent Adjustment Lawsuit?
An extraordinary situation that was unforeseen and unexpected by the parties during the contract must have arisen.
This unforeseen and unexpected extraordinary situation should not originate from the debtor.
The existing balance at the time of the contract must have changed against the debtor. The debtor must not have yet performed its obligation or must have performed while reserving its rights arising from the excessive difficulty of performance.
Can a Rent Adjustment Lawsuit Be Filed for Retroactive Rent Amounts?
The adaptation lawsuit has a forward-looking effect. According to a decision by the 13th Chamber of the Supreme Court (E. 2001/1979, K. 2001/2831, T.22.03.2001), "Adaptation is related to the rental fee and does not eliminate the other conditions of the contract. Adaptation is not applied retroactively from the date of the lawsuit." Therefore, from the date the lawsuit is filed, an increase in the rent can be requested, but it is not possible to make any claims for rents paid previously. In other words, rents are adjusted from the date of the lawsuit. In the lawsuit, the contract can be requested to be adjusted step by step, and if this is not possible, termination can be requested. However, in light of the explicit wording of TBO Art.138, it is not possible to request only the termination of the contract in the lawsuit; the lawsuit must be filed alternately.
"Precautionary Injunction Decision" During Rent Determination and Adjustment Lawsuits
A precautionary injunction in doctrine is defined as "... a temporary legal protection that can be extensive or limited and is foreseen against damages that can occur in the legal status of the plaintiff or defendant (related to the subject of the lawsuit) during the ongoing litigation until the final judgment." (Source: Civil Procedure Law 12th Edition, Pg.714 - Prof. Dr. Hakan Pekcanıtez, Prof. Dr. Oğuz Atalay, Prof. Dr. Muhammet Özekes).
Apart from its other functions, the precautionary injunction is a temporary legal protection to prevent new disputes from arising over the subject matter of the lawsuit during its progress and until the final judgment becomes definitive.
A significant distinction concerning rent determination and adjustment lawsuits is the acquisition of a precautionary injunction decision while these lawsuits are ongoing. While precautionary measures are not customary in rent determination lawsuits, a new rent can be set by a precautionary injunction decision during rent adjustment lawsuits. In rent adjustment lawsuits, due to the existence of extraordinary circumstances, if it is feared that the performance of the obligation will become difficult or damage will occur, a "precautionary injunction decision" can be made. The Supreme Court has stated in a decision that it is appropriate according to HMK Art.389 and subsequent articles to issue a precautionary injunction decision in a lawsuit regarding the adjustment (modification) of rent contract terms (rent amount) due to a pandemic.
In the decision of the Supreme Court 3rd Civil Chamber (E.2021/3452 K.2021/6001 T.4.6.2021):
"... It is appropriate according to the HMK Art.389 and subsequent articles to issue a precautionary injunction decision in a lawsuit regarding the adjustment of rent contract terms (rent amount) due to a pandemic. Therefore, the decision of the Ankara 15th Regional Court of Justice, which rejected the request for a precautionary injunction in the rent adjustment lawsuit on the grounds that a precautionary injunction decision could not be made in a manner that would resolve the essence of the lawsuit and the dispute, is not appropriate. The conflict between the final decisions of the Bursa Regional Court of Justice 4th Civil Chamber and the Ankara Regional Court of Justice 15th Civil Chamber should be resolved within this framework."
In the decision of the Regional Court of Justice - Bursa BAM, 4th Civil Chamber, E. 2021/58 K. 2021/75 dated 19.1.2021, it was ruled that a precautionary injunction decision could be made due to the pandemic. The related decision;
"In a lawsuit and dispute, a precautionary injunction decision cannot be made in a way that resolves the essence. However, considering that some workplaces were completely closed during the pandemic period and did not generate any income, and there were significant declines in the volume of some businesses, it is clear that the tenant will not be able to pay the current rent and may be evicted due to default in the absence of a precautionary injunction decision...
... However, by the court, a precautionary injunction decision can be made, and in case of underpayment of rents, the landlord can request the difference according to the result of the lawsuit. It is possible to pay the rent at a reduced amount determined by the court during the lawsuit, and this will not result in irreparable damage. Considering this legal regulation, in a lawsuit opened for rent adjustment, considering the nature of the work done by the plaintiff tenant and all conditions and evidence submitted by the parties, the court should make a precautionary injunction decision to pay the rent over an amount to be determined by the court. However, this precautionary injunction decision should be reviewed by the court at regular intervals or upon the application of the parties, and if the situation and conditions change, it should be lifted or decided to continue over a newly determined amount."
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