Key Points in Commercial Lease Agreements

A commercial lease agreement determines not only the rent payable for business premises but also the scope of the business’s activities, its costs, its investment plan and the conditions for leaving the property. For this reason, rather than simply signing a standard-form contract, it is important to conclude a clear agreement drafted according to the characteristics of the leased property and of the business to be carried on there.

The legal and physical condition of the leased property should be examined

Before the agreement is signed, the landlord’s rights over the property and authority to enter into the agreement should be checked. The land registry record (tapu kaydı), the authority of representation, any power of attorney (vekâletname) and, where there is more than one owner, the necessary approvals should be examined. The address of the leased property, the independent unit number (bağımsız bölüm numarası), its annexes and areas of use such as parking or storage should be clearly stated in the agreement.

It should also be investigated whether the planned activity can be carried out at that location in terms of zoning status (imar durumu), the building management plan (yönetim planı), licence (ruhsat) conditions and the relevant administrative rules. The permits required may differ for activities such as a restaurant, clinic, educational institution, shop or production facility. Which party bears the risk that the necessary licence cannot be obtained, and how the agreement can be terminated in that case, should be settled in advance.

The condition at handover and the fixtures should be recorded

The handover date and the condition of the leased property at handover can be established in a written record (tutanak). Meter readings, the number of keys handed over, the condition of the installations, existing damage and the fixtures left with the property can be added to the record. If considered necessary, these records can be supported by photographs.

If renovation work is to be carried out on the leased property, the scope of the project, who will obtain the permits, which party will bear the costs and whether the alterations will be removed at the end of the agreement should be clearly agreed. If the tenant’s investment is to be offset against the rent, or a rent-free period is to be granted, the amount and the duration should not be left uncertain.

Rent and ancillary costs should be kept separate

The amount of rent, the payment date, the bank account and the payment reference should be stated in the agreement. Whether the rent is net or gross, and how value added tax (KDV), withholding tax (stopaj) and other fiscal obligations will be met, should be clarified according to the specific relationship.

Service charges (aidat), common area expenses, electricity, water, heating, insurance, property tax and the costs of major repairs do not all have the same legal nature. Instead of general wording such as “all expenses are borne by the tenant”, the agreement should specify separately which party bears each expense.

Rent increases must comply with statutory limits

In leases of residential and roofed business premises (çatılı işyeri), the rate of increase applied in renewed lease periods is subject to the limits in Article 344 of the Turkish Code of Obligations (TBK). An agreement between the parties on renewed lease periods is valid provided that it does not exceed the rate of change in the twelve-month average of the consumer price index (tüketici fiyat endeksi) for the previous lease year.

In lease relationships lasting longer than five years, or renewed after five years, the condition of the leased property, comparable rents (emsal kira bedelleri) and equity may also be taken into account in determining the rent, in addition to the change in the consumer price index.

If the rent is to be set in a foreign currency, the foreign exchange legislation (kambiyo mevzuatı) on foreign-currency contracts should also be considered separately, in addition to the Code of Obligations.

Security deposit and suretyship provisions

In leases of residential and roofed business premises, where the tenant is required to provide security (güvence), this security may not exceed three months’ rent. If the security is agreed in the form of money or negotiable instruments (kıymetli evrak), Article 342 of the Code of Obligations provides a special method for holding it at a bank.

If a third party is to act as surety (kefil), the type of the surety’s liability, the maximum amount and the duration should be specified. For individual sureties, the elements that must be written in the surety’s own handwriting and, in the cases provided for by law, spousal consent (eş rızası) should not be overlooked. A suretyship (kefalet) clause that does not comply with the formal requirements may not provide the expected legal protection when it is needed.

Permitted use, transfer and subletting

The commercial activity for which the leased property will be used should be clearly stated. Matters such as changing the line of business, the use of signage, the use of common areas, working hours and compliance with the building management plan may directly affect the daily operations of the business.

The possibility of transferring the lease of the business premises to a third party, or of subletting, should also be addressed when the agreement is made. In situations such as the transfer of a business, a company merger or the use of the same property by group companies, the transfer provisions of the agreement become particularly important.

The lease term does not automatically lead to eviction

Stating the start and end dates in a fixed-term lease agreement does not mean that the lease relationship will automatically end on the end date in every case. In leases of residential and roofed business premises, the landlord’s ability to terminate the agreement is restricted by law.

Eviction on grounds of need or reconstruction, non-payment of rent, two justified warnings (iki haklı ihtar) and an undertaking to vacate (tahliye taahhüdü) are each subject to different conditions. Each of these mechanisms should be assessed within its own conditions and time limits.

The date is important in an undertaking to vacate

The validity of an undertaking to vacate, by which the tenant agrees to vacate the property on a specific date, depends on special conditions. The undertaking must be given after the leased property has been handed over, must be in writing, and must state the eviction date in a determinable way.

It is important not to miss the statutory time limits for enforcement proceedings (icra takibi) started, or a lawsuit filed, on the basis of the undertaking. Undertakings obtained at the same time as the lease agreement, or drawn up before handover, may give rise to disputes about their validity.

A system for notices and documents should be set up

Paying rent through a bank with a payment reference, and sending notices about handover, defects, repairs and alterations by methods that can be proven, may reduce disputes that could arise later. The parties’ addresses for service (tebligat adresi) and the method for notifying changes of address should be stated in the agreement.

Mediation in lease disputes

In disputes arising from a lease relationship, applying to a mediator (arabuluculuk) before filing a lawsuit is, as a rule, a precondition for bringing the case (dava şartı), without prejudice to the provisions on the eviction of leased property through enforcement without a court judgment (ilamsız icra).

The existence of the mediation process does not reduce the importance of the statutory time limits linked to steps such as an undertaking to vacate, a warning notice (ihtar) or a notice of termination. To avoid any loss of rights, the type of dispute and the applicable time limits should also be assessed separately in light of the specific case.

Conclusion

The aim of a commercial lease agreement is not to anticipate every possible dispute through lengthy clauses, but to identify correctly the risks that matter for the business and to set out the parties’ rights and obligations in a clear and understandable way.

As the nature of the property, the line of business, the planned investment and the parties’ commercial needs change, the appropriate content of the agreement changes too. Carrying out the legal, technical and financial reviews together before signing helps to reduce disputes that may arise later and unforeseen costs.

Each lease relationship should be assessed separately in light of the provisions of the agreement and the specific circumstances of the case.