Legal Dynamics of Rent Determination Lawsuits

In instances where the parties fail to concur on rent increases, the initiation of a rent determination

lawsuit becomes a viable recourse. The statutory framework governing rent determination under the

Turkish Code of Obligations (the “TCO”) encompasses all leases pertaining to both residential and roofed

commercial properties. Pursuant to the Article 339 of the TCO, the scope of residential and roofed

commercial properties specifically includes agreements involving immovable property not designated

for temporary use, with lease terms extending no less than six months, as well as the ancillary goods

associated with the residence or commercial premises.

Conditions for Initiating a Rent Determination Lawsuit

According to the Article 344 of the TCO, the parties' agreements regarding the rent to be applied in the renewed lease periods shall be valid provided that the increase does not exceed the twelve-month

average change in the Consumer Price Index of the previous lease year. This rule also applies to lease

agreements with a duration exceeding one year. If the parties fail to reach an agreement on this matter,

the rent shall be determined by the court, taking into account the condition of the leased property and

based on principles of equity, provided that the increase does not exceed the twelve-month average

change in the Consumer Price Index of the previous lease year.

Regardless of whether the parties have reached an agreement on this matter, for lease agreements exceeding five years or those renewed after five years—and at the end of every subsequent five-year period—the rent applicable for the new lease year shall be determined by the court in an equitable manner, 

• taking into account the twelve-month average change in the Consumer Price Index,

• the condition of the leased property and,

• comparable rental values.

  
  

The rent determination lawsuit filed after five years may be initiated by either the lessor or the lessee. However, the Article 345/II of the TCO contains a crucial provision that the party seeking to file such a lawsuit must heed. According to this provision, the court-determined rent will be binding on the tenant from the commencement of the new lease period only if the lawsuit is filed no later than thirty days prior to the start of the new term, or if the lessor has provided the tenant with a written notice of rent increase within this timeframe, and the lawsuit is brought before the end of the subsequent lease term.

If the parties have agreed to a rent increase in the contract, whether a specific rate is stated or not, it is deemed sufficient that the tenant is aware of this; in such cases, there is no requirement for filing a lawsuit or providing written notice 30 days in advance and the rent amount determined by the court in a lawsuit filed by the end of the new lease period shall also be effective from the commencement of that new term.

Additionally, as of September 1, 2023, it has become mandatory to seek mediation before filing a rent determination lawsuit.

The Legal Nature of the Rent Determination Lawsuit

The legal nature of the rent determination lawsuit is controversial. In legal doctrine, one view considers this lawsuit as a declaratory lawsuit, while another evaluates it as a performance lawsuit. According to the latter view, since it is a performance lawsuit, the decision given at the end of the rent determination lawsuit can be subject to enforcement proceedings with a writ of execution. However, the Supreme Court considers the decisions rendered in rent determination lawsuits to be constitutive in nature, as they do not merely ascertain an existing legal relationship but instead establish a new rent amount for the upcoming period, thereby producing legal effects directly through the court’s judgment.

Differences Between Rent Determination Lawsuit under the Article 344 and Adaptation Lawsuit under the Article 138 of the TCO:

• Although rent determination lawsuits share significant similarities with general adaptation (hardship) lawsuits, they also have distinguishing features. In adaptation lawsuits, there is no requirement for a minimum time period, and the aim is to address excessive hardship arising from extraordinary events occurring after the conclusion of the contract, to restore the balance of obligations, or—if this is not possible—to allow the debtor to terminate the contract. In this regard, adaptation under the Article 138 may take various forms, unlike the Article 344, which only provides for an increase in the rental amount.

• The ruling in adaptation lawsuits must take effect immediately as of the date the lawsuit is filed. In contrast, in rent determination lawsuits the court's decision becomes effective either for the rental period in which the lawsuit was filed or for subsequent periods, depending on the specific conditions mentioned above.

• The Article 138 of the TCO is a general provision applicable to all types of contracts, provided that the conditions listed in the article are met—namely, when the balance between performances is disrupted, and it would be contrary to equity to expect the debtor to continue to perform.

• Adaptation lawsuits require the occurrence of an unforeseeable event. The Supreme Court generally does not consider rising inflation in Turkey to be an unforeseeable event. However, in rent determination lawsuits, the existence of such an unforeseeable event is not required; the mere expiration of the five-year period is sufficient.

  
  

In conclusion, the Article 138 of the TCO, which regulates the adaptation of contracts in cases of excessive hardship, has caused considerable confusion regarding its applicability to lease agreements, both in doctrine and in court decisions. However, with the decision of the 3rd Civil Chamber of the Supreme Court dated 27 February 2024, this distinction has been clarified, and it has been definitively established that the Article 344 of the TCO constitutes a special provision for adaptation in lease agreements. The Court has thus concluded that the Article 344 must be applied in lease agreements.

For further inquiries or legal assistance about this article, feel free to contact Durukan + Partners team.

Sources:

• Turkish Supreme Court (General Assembly), Case No. 2011/283, Decision No. 2011/333, May 18, 2011;

• 6th Civil Chamber, Case No. 2013/14394, Decision No. 2014/4999, April 15, 2014;

• Kılıç Öztürk, G. (2017). Declaratory Judgment Lawsuit for Rental and the Elements of It. TBB Journal, (129);

• Uysal, H. (2019). Determination of the Rent (Master's thesis, Istanbul University, Institute of Social Sciences, Department of Private Law). Istanbul;

• Başak Baysal. (2020). Contract Adaptation: Adaptation Lawsuit and Rent Determination Lawsuit. On İki Levha Publishing, November;

• Turkish Supreme Court, 3rd Civil Chamber, Case No. 2023/2580, Decision No. 2024/792, February 27, 2024;

• Orkun Tat. (2024). Adjustment of the Rental Price in Residential Lease Agreements Within the Context of the Relationship Between the Article 344/III and the Article 138 of the Turkish Code of Obligations. Justice Journal, 73(2), 823.3(2), 823.