LEASING AGREEMENTS

WHAT IS A LEASING AGREEMENT?

A rental agreement is a type of contract that most people come into contact with primarily due to their need for accommodation, but they also find themselves in many other areas of these contracts, either verbally or in writing, without realizing it.

Turkish Code of Obligations No. 6098 Article 299

“A lease agreement is a contract in which the lessor undertakes to leave the use of a thing or the use and enjoyment of it to the lessee, and the lessee undertakes to pay the agreed rent in return.”

ELEMENTS OF THE LEASING AGREEMENT

1- Agreement of the Parties: The first condition for the formation of a lease agreement is the mutual agreement of the parties.

2- Transfer of Use of a Thing: By establishing a lease, the lessor grants the other party the right to use the property or right subject to the agreement for a temporary period. The right of use transferred to the lessee is limited to the lease term, and the lessee is obligated to return the leased thing to the lessor upon termination.

3- Rental Fee: The tenant is obligated to pay the lessor a certain amount of money in exchange for using the leased property. However, the parties may agree to pay another payment in lieu of the rent.

The establishment of a lease agreement is not subject to any formal requirements. However, for purposes of proof, it would be more appropriate for the lease agreement to be in writing.

Once all these elements are present, a lease agreement is established. This creates certain rights and obligations for both the tenant and the lessor.

LESSOR'S DEBTS

I. Delivery Obligation

The lessor is obligated to deliver the leased property on the agreed-upon date in a condition suitable for the intended use in the contract and to maintain it in this condition for the duration of the contract. This provision cannot be changed to the detriment of the tenant in residential and roofed workplace leases; in other lease agreements, no provisions contrary to this provision can be made to the detriment of the tenant through general terms and conditions. (Article 301 of the Turkish Code of Obligations)

It is crucial to note that the lessor's simple performance of the delivery obligation is not sufficient; the lessor is obligated to ensure the usability of the leased property and its availability for the duration of the contract. Furthermore, the timing of the lessor's delivery of the leased property is also crucial. While lease agreements often include a provision requiring the prepayment of rent, this may not always apply to the lessee. As stated in the relevant article, unless the leased property is delivered by the lessor in a usable condition , the lessee will not be subject to this obligation. Furthermore, according to Article 97 of the TCC No. 6098, "The party requesting the performance of a contract imposing a mutual obligation must have fulfilled or offered to fulfill its obligation, unless it has the right to perform later, according to the terms and conditions of the contract." Therefore, the rental fee agreed upon in advance in the lease agreement will commence upon the lessor's fulfillment of its primary obligation.

Our law does not provide for a formal delivery method for the rental property. Therefore, it is sufficient for the property to be ready for the tenant's use. However, there are customary delivery methods that have become commonplace due to widespread practice. For example, in real estate leases, the rental property must be cleaned and returned, or the keys must be returned.

While the landlord's return of the leased property is crucial, the tenant is under no obligation to take it over. The tenant may choose not to use the property at all after paying the rent.

II. Obligation to Bear Taxes and Similar Liabilities

Unless otherwise agreed upon or stipulated by law, the lessor shall bear the obligations of compulsory insurance, taxes and similar liabilities related to the leased property. (Tbk Art. 302)

During the lease term, the lessor may incur certain expense obligations. This could lead to a debt arising from the ownership right or a tax liability to the state arising from the rental income. As clearly stated in the law, such obligations are the responsibility of the lessor, unless otherwise agreed upon or stipulated by law.

For example, since apartment cleaning and lighting are generally included in the rental fee, they are not included in the rental fee, and the landlord cannot terminate the lease based on the tenant's default. Similarly, the landlord will be responsible for taxes such as mandatory earthquake insurance, income tax, and property tax.

Supreme Court of Appeals 3rd Civil Chamber, 2017/9272 E., 2017/4570 K., 04.04.2017 T. Decision

"The obligation to bear taxes and similar liabilities in Article 302 of the Turkish Code of Obligations is regulated separately from the obligation to bear ancillary expenses related to the use of the leased property in Article 303 of the same law and is not included in the ancillary expenses. Taxes on real estate, environmental cleaning, etc., are not compensation for the use of the leased property, but are obligations to be paid to the administration in return for a service performed by the administration."

III. Obligation to Bear Side Expenses

The lessor is liable for any ancillary expenses incurred by himself or a third party in connection with the use of the leased property. (Tbk Art. 303)

In discussing the lessor's delivery obligation above, we mentioned the leased property being fit for use during the lease term. According to this legal provision, which is directly related to this, the lessee is obligated to bear the burden arising from any deficiencies or interventions required by the lessee during this period.

For example, cold air entering from the edges of balconies or windows, malfunctioning of the lock system of the outer door, mold and paint blistering on the walls due to temperature differences are liabilities that create side expenses for the lessor.

Supreme Court of Appeals 3rd Civil Chamber, 2009/9043 E., 2009/10720 K., 22.06.2009 T. Decision

While the tenant is responsible for repair costs proportional to the rent and related to ordinary use in exchange for using the property, the cost of major repairs falls on the lessor. Renovating the transformer center and elevator system of the business center and completely painting the building constitute major repairs.

IV. Lessor's Liability for Defects in the Leased Property

1. Liability for Defects of the Leased Property at the Time of Delivery

If the leased property is delivered with significant defects, the tenant may invoke the provisions regarding the debtor's default or the lessor's liability arising from the leased property becoming defective later.

If the leased property is delivered with minor defects, the tenant may invoke the provisions regarding the lessor's liability for defects that subsequently appear in the leased property. (Tbk Art. 304)

2. Liability for the Leased Goods Becoming Defective Later

a. In General

If the leased property subsequently becomes defective, the tenant may request the landlord to rectify the defect, provide a reduction in the rent commensurate with the defect, or compensate for the damage. However, requesting rectification does not preclude the exercise of other optional rights.

In case of significant defect, the tenant reserves the right to terminate the contract. (Tbk Art. 305)

b. Requesting the Remedy of the Defect and Termination

The tenant may request the lessor to rectify the defect in the rented property within a reasonable period of time; if the defect is not rectified within this period, the tenant may have the defect reimbursed to the lessor and deduct the resulting receivable from the rental fee or may request that the rented property be replaced with a similar one that is free of defects.

If the defect eliminates or significantly hinders the intended use of the leased property and is not remedied within the given time, the tenant may terminate the contract.

Instead of correcting the defect in the leased property, the lessor may replace it with a defect-free equivalent within a reasonable period of time.

The lessor may prevent the tenant from exercising his optional rights by immediately providing a defect-free equivalent of the same good and repairing all the damage he has suffered. (Tbk Art. 306)

c. Reduction of Rent Fee

In the event of a defect affecting the use of the leased property, the tenant may request a reduction in the rent proportional to the defect, for the period from the lessor's discovery of the defect until the defect is remedied. (Tbk Art. 307)

d. Compensation for Damages

Unless the lessor proves that he is not at fault, he is obliged to pay the lessee for any damages arising from the defectiveness of the leased property. (Tbk Art. 308)

The above article, titled "Lessor's Liability for Defects in the Leased Property," and the subsequent subheadings, clearly provide a solution. The aim is to prevent the landlord from suffering any hardship by exercising his or her optional rights, both in the event of initial defects and those that subsequently arise.

TENANT'S DEBTS

I. Obligation to Pay Rent

Unless otherwise stipulated in the contract or by local custom, the tenant is obliged to pay the rent and, if necessary, any additional expenses at the end of each month and at the latest at the end of the lease term. (Tbk Art. 314)

Rent is a vested income for the landlord, and the payment of the rent is generally in cash. However, the parties may mutually agree to a different payment other than cash. Furthermore, the timing and method of payment of rent are stipulated in the lease agreement upon the parties' agreement. However, if a contract does not stipulate these terms, it must be paid "at the end of each month and at the latest at the end of the lease term," as stated in the above legal article.

Another common problem in practice regarding rent is the failure of the tenant to pay the rent on time, despite a specified payment date in the lease agreement, and the tenant instead opts to pay it at a later date of their choosing. The Supreme Court of Appeals' decision explains this as follows.

Supreme Court of Appeals 13th Civil Chamber, 2009/12604 E., 2010/3043 K., 11.03.2010 T.

The plaintiff's bank statements regarding the payment of rent indicate that payments were made not on the third day of each month, as stipulated in the contract, but on later dates. Therefore, it is established that the parties did not actually comply with the contractual requirement that rent be paid on the third day of each month, thus creating a de facto practice. The defendant did not send any notice to the plaintiff before initiating enforcement proceedings, nor did they request that the payments be made on the date specified in Article 3 of the contract. Initiating enforcement proceedings to ensure collection of rents by the end of the term, based on the late payment of the October rent, contrary to the actual agreement between the plaintiff and the defendant, is unjust and constitutes an abuse of rights.

The location where the rent will be paid is also important. The parties can voluntarily decide on the location of payment in the lease agreement.

With the regulation made with the General Communiqué of the Income Tax Law No. 328, effective from October 17, 2024, the lower limit for residential rental payments below 500 TL to be made in cash has been removed and all rental payments, regardless of residence, workplace or duration, must be made through banks or the Postal and Telegraph Organization Joint Stock Company.

According to the regulation regarding tenants who default on rent payments , "If the tenant fails to pay the rent or any additional expenses due after the delivery of the leased property, the landlord may give the tenant a period of time in writing, informing them that if the tenant fails to pay within this period, the lease will be terminated. The period given to the tenant is at least ten days, and for residential and roofed workplace leases, at least thirty days. This period begins to run from the day following the written notice to the tenant." (Tbk Art. 315)

As clearly stated in this provision, written notice is required for rent arrears that are due but not paid by the tenant. If the landlord complies with this requirement, it may terminate the lease. The aforementioned 10-day period, and 30-day periods for residences and roofed workplaces, may be extended by mutual agreement between the parties, but cannot be shortened in a manner that violates this mandatory legal provision.

Another important issue is the statute of limitations that applies to the creditor when the tenant's primary obligation to perform a debt is not paid. This statute of limitations is five years for rent receivables. However, it's important to note that this statute of limitations is not five years for all debts arising from the lease. It's only five years for rent receivables, while other receivables, such as dues, are subject to the general statute of limitations of 10 years.

The current Supreme Court decision regarding the fact that the tenant can be held responsible for additional expenses in addition to the main rent debt, but if this is not paid, it cannot be kept under the same item as the rent receivable by the lessor, and therefore an eviction lawsuit cannot be filed due to default, is also presented below.

Supreme Court of Appeals 12th Civil Chamber, Decision No. 2024/1119 E., No. 2024/4149 K., Date: 30.04.2024

"Again, the fact that a specific obligation (expense) is stipulated in the lease agreement as being the tenant's responsibility does not necessitate that obligation be considered a part of the rent obligation. Even if the tenant undertakes to pay ancillary expenses such as fuel, security guard fees, doorman fees, cleaning fees, water fees, electricity fees, garbage disposal fees, administrative expenses, telephone fees, etc., in the lease agreement, these obligations are not the principal rent obligation but are merely an addendum to the principal rent obligation. Therefore, failure to fulfill these obligations is not grounds for eviction due to default, which falls within the jurisdiction of the enforcement court."

II. The Duty to Use with Care and Respect for Neighbors

The tenant is obliged to use the rented property with care in accordance with the contract and to show due respect to the people living in the property where the rented property is located and to the neighbors.

If the tenant violates this obligation, the landlord must give written notice, in the case of residential and commercial leases, at least thirty days to rectify the violation, or to terminate the contract. In other leases, the landlord may terminate the contract immediately, without prior notice, by giving written notice to the tenant.

In residential and commercial leases, if the tenant intentionally causes serious damage to the leased property, if it is understood that the period granted to the tenant will be useless, or if the tenant's behavior contrary to this obligation is intolerable for the lessor, the persons living in the same property, or the neighbors, the lessor may terminate the contract immediately with a written notice. (Tbk Art. 316)

The law clearly defines the obligation to use with care and respect for neighbors, and the consequences for the tenant are clear. To illustrate this point with an example:

-If a tenant rents a house, it will be a problem if they engage in behaviors that are not appropriate inside the house. For example, breaking and reshaping walls at their own discretion, engaging in dangerous behavior that could cause a fire, or engaging in immoral behavior.

- Examples of the duty to respect neighbors include actions such as listening to loud music or behaving unpleasantly towards neighbors.

These examples illustrate that for residential and roofed workplaces, the tenant will be given a 30-day notice to correct the violation, and if the violation is not corrected, the contract will be terminated. As stated in the law, for leases other than residential and roofed workplaces, the contract can be terminated immediately with written notice, without being subject to this period.

Another important point is that although the 30-day period requirement has been regulated by the legislator for residential and roofed workplace leases, there is an exception as explained below.

The second paragraph of Article 316 stipulates that a 30-day notice must be given even if the duty of care and respect is breached in residential and commercial leases. However, the third paragraph of the same article provides an exception to this requirement. In residential and commercial leases, if the tenant intentionally causes serious damage to the leased property, if it becomes clear that the time granted to the tenant would be futile, or if the tenant's violation of this obligation is intolerable to the lessor, the tenant, or the residents of the property, or the neighbors, the tenant may terminate the contract immediately with written notice, without being subject to the 30-day period. Examples include: the tenant organizing prostitution in the leased property, engaging in constant fights with neighbors, deliberately starting fires in the building, or gathering friends and consuming drugs in the rented property.

III. Obligation to Pay Cleaning and Maintenance Expenses

The tenant is obligated to pay the cleaning and maintenance expenses necessary for the normal use of the leased property. Local customs are also taken into account in this matter. (Tbk Article 317)

Normal problems or deficiencies that arise during the tenant's use of the property are covered by the tenant's payment obligation. For example, minor and ordinary defects such as door hinge noises or clogged sinks will be the tenant's responsibility.

IV. Obligation to Notify the Lessor of Defects

The tenant is obliged to notify the lessor without delay of any defects that he is not obliged to remedy; otherwise, he is liable for the damages arising from these defects. (Tbk Art. 318)

In this provision, unlike the previous article, the tenant is required to immediately report any defects that they are not obligated to fix. Otherwise, they may be obligated to repair the resulting damage. For example, a tenant who ignores and fails to report water leaking from the ceiling at the time of check-in will not be able to subsequently claim compensation from the landlord for damage to their electronic devices caused by the leak.

V. Obligation to Bear the Remedy of Defects and Demonstration of the Leased Property

The tenant is obliged to undertake efforts to eliminate defects in the leased property or to prevent damage.

The tenant is obliged to allow the lessor and the third party designated by the lessor to visit and inspect the rented property to the extent that it is necessary for maintenance, sale or subsequent rental.

The lessor is obliged to inform the tenant in advance of the works and the tours of the rented property and to take into consideration the benefits of the tenant during these works.

The tenant's rights regarding the reduction of the rent and compensation for damages are reserved. (Tbk Art. 319)

We've stated that the landlord has an obligation to deliver the property in a usable condition, and that this usable condition must be maintained throughout the lease term. Therefore, certain activities may be necessary for the tenant during the lease term. These activities may cause disruption to the tenant. However, both parties have an obligation to tolerate this. Of course, the landlord must act with care and sensitivity, carrying out necessary repairs or renovations while minimizing disruption to the tenant.

Another common situation is that as the lease term nears its end, new tenants are asked to tour the property so it can be re-rented. This should be agreed upon with the existing tenant and a timeframe that works for both parties.

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