Overview of retail lease agreements in Turkiye

Leases are regulated under the Turkish Code of Obligation numbered 6098 (TCO).    

There is no minimum or maximum duration. Leases can therefore be granted for a limited or an unlimited period of time. In practice, most retail leases are usually concluded for a period of five to ten years and mostly contain extension options.

For indefinite term lease agreements, the landlord may terminate the lease agreement at the end of any six- month rent period, with three months’ prior notice.

In addition to that, whether the lease agreement is concluded for a definite or an indefinite term, the landlord may terminate the lease agreement at any time due to significant circumstances (i.e. just cause), which make the continuance of the rental relationship unbearable for the landlord. The termination may only be valid if it is made in writing. The judge shall consider the financial results of the termination and grant a penalty accordingly.

For indefinite term lease agreements, the tenant is entitled to terminate the lease agreement at the end of any six-month rent period, with  three months’ prior notice.

The tenant may terminate the lease agreement at any time due to significant circumstances (i.e. just cause), which make the continuance of the rental relationship unbearable for the tenant. The termination may only be valid if it is made in writing. The judge shall consider the financial results of the termination and grant a penalty accordingly.

In the absence of such a just cause, , as per the TCO and the precedents of the Turkish Supreme Court, a reasonable penalty shall be served against tenants who terminate a definite term lease agreement early. This penalty shall be determined in accordance with certain circumstances, such as the required time period for the re-lease of the property and the reasonable efforts of the landlord in order to re-lease the property. However, generally the penalty is determined as three (3) months rent.

There is a right of renewal by the tenant for a ten-year extension period. According to the Article 347 of the TCO, unless the tenant makes a notification for termination at least fifteen days before the expiration date, the lease contract will automatically be prolonged for one year under the same terms and conditions, for up to ten years.

The landlord may not rely on the expiration date of the contract to bring the contract to an end. However, after ten years of prolongation, the landlord may terminate the contract by giving the tenant three months without the need for a just cause.

In addition, according to Article 355 of the TCO, once the landlord succeeds in evacuating the tenant from the property for any given reason, the landlord may not lease the property in question to anyone other than the same tenant for three years. If the landlord fails to comply with these provisions, he becomes liable to pay the former tenant an indemnity not less than an amount equal to the total rent for the preceding year.

According to the Article 344 of the TCO, parties can agree on a rent revision provided that the average consumer price index change rate of the previous year is not exceeded. 

If the parties have not agreed on the matter, the rent is determined by the judge on the same condition mentioned above, taking into consideration the situation of the premises.

There are no mandatory provisions regarding fitting-out works. With the written consent of the landlord, the tenant can execute, at its own expense, all improvements that are useful for the proper functioning of the premises. Unless otherwise agreed, the tenant cannot ask for the value increase caused by the improvements executed with the consent of the landlord. The  tenant’s right to claim compensation or a reduction of the rent for a period of time due the improvement works is reserved by the TCO.

At the end of the lease agreement, the tenant is obliged to return the premises either in the condition agreed with the landlord, or in their original condition. In addition, the landlord may require the removal of any unconsented alteration or, if it is a consented alteration and there is a written agreement on returning the premises with it’s old condition . Otherwise, the tenant may have to compensate the landlord.

The tenant is obliged to maintain the premises in the condition they were at the beginning of the lease agreement. However, the tenant cannot be held liable for deterioration of the state of the retail premises, devices and the equipment resulting from their regular use.

Upon termination of the lease agreement, the tenant is obliged to reinstate the premises to the condition in which they were handed over by the landlord, meaning that the tenant has to remove all alterations, unless otherwise agreed by the parties.

The tenant is entitled to take away any fixtures that have been installed / built in the premises as long as doing so would not damage the retail premises and if such installations were not previously taken into account by the landlord in reducing the rent.

The tenant shall not sublease or transfer the lease to another third party without obtaining the written consent of the landlord. However, upon obtaining such consent, the tenant may lease the property partly or as a whole provided that this does not require any alterations that would cause damage to the landlord.

If the landlord sells the premises, the person who acquires the leased property may terminate the lease agreement via a lawsuit filed within six months following the acquisition of the property; only if, however, such property is needed by the new owner, her/his spouse, close relatives or any other legal dependents for housing or workplace purposes.

Provided that the above mentioned requirements are met, the tenant shall be notified thereof within a month from the date of acquisition.

The tenant has no pre-emption right in the case of the sale of the premises unless otherwise agreed in the lease agreement.

There are no mandatory rules regarding the form and/or duration of a rental guarantee. However, rental guarantee cannot exceed the three months’ rent fee. Usually, the landlord requires a security for the payment of rent fee in the form of a security deposit or a bank guarantee. In practice, a security deposit e equivalent to two or three months is required by the landlord; however, it depends on the duration of the lease agreement.

The landlord is obliged to do everything required to keep the leased property in a usable condition and must bear the responsibility of resolving any defects or preventing damages.

As long as the landlord is a legal entity, 18% VAT shall be applicable.

Although not mandatory, it is standard practice that agreements are concluded in writing.

Certain articles under the TCO were started to be implemented in 2020. One of the significant amendments is that annual revision of the rent shall not exceed the consumer price index (TÜFE).