1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of corona?
  2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of corona?
  3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of corona?
  4. What kind of security is generally provided by a lessee in connection with a lease, a bank guarantee, a deposit or otherwise?
  5. Could a lessee consider other legal options, such as a lease termination, not paying rent at all or other options as a result of COVID-19?

jurisdiction

Turkey
Updated on 27.03.2020.

1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of corona?

Generally, the parties are obliged to perform their obligations arising from the lease agreement as per the general principles of Turkish law (i.e. pacta sunt servanda). Hence, in principal, a lessee may not reduce the rent by itself.

However, as per Article 138 of the TCO, which regulates the event of hardship (excessive difficulty of performance / aşırı ifa güçlüğü) the debtor who has not yet fulfilled its obligations arising from the agreement or who has fulfilled its obligations by reserving its rights arising from the excessive difficulty of the performance shall have the right to request from the court (i) the adaption of the contract to the new conditions; or (ii) to revoke the contract, if the adaption is not possible.

However, to initiate such claim, an extraordinary situation which is neither foreseen nor expected by the parties at the time of the execution of the contract shall exist, where such situation shall arise due to a reason that is not attributable to the debtor.

2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of corona?

No, in principle not.

3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of corona?

Please refer to our answer to Question 1. 

On the other hand, as per the applicable provisions of the Turkish Code of Obligations, such circumstance might entitle the lessee to terminate the lease agreement  - however it should be kept in mind that each lease agreement shall be evaluated on a case-by-case basis. 

4. What kind of security is generally provided by a lessee in connection with a lease, a bank guarantee, a deposit or otherwise?

In practice, deposits are generally preferred for residential lease agreements, while bank guarantees are more preferred for office/hotel/store lease agreements.

For more comprehensive lease agreements, tenants provide the landlord also with a parent company guarantee.

The parties of a lease agreement could agree on a specific force majeure clause and regulate the terms of termination under such agreement.

On the other hand, provided that pandemic circumstance is not foreseen as a ground for termination and/or reduction of the rent under the lease agreement, as per Article 138 of the TCO, in case of hardship (excessive difficulty of performance / aşırı ifa güçlüğü) the debtor who has not yet fulfilled its obligations arising from the agreement or who has fulfilled its obligations by reserving its rights arising from the excessive difficulty of the performance shall have the right to request from the court (i) the adaption of the contract to the new conditions (i.e. reduction of the rent fee); or (ii) to terminate the lease, if the adaption is not possible. However it should be kept in mind that the specifics of each lease agreement shall be evaluated carefully on a case-by-case basis as such Covid-19 shall not lead all the lessees to same level of hardship and there are not any available precedents of the Turkish Court of Appeals as to a pandemic condition.