MAKING CHANGES IN THE RENTAL VALUE THAT IS BASED ON FOREIGN CURRENCY

Rental agreement is an agreement which states that the landlord leaves the use of something and taking benefit from it as way of using to the tenant and which states that in return for this the tenant agrees to pay the rental price.  According to the liberty of contract, the parties can determine the rental value based on Turkish Lira and can also agree on the value based on foreign currency.

According to Turkish Code of Obligations no. 6098, although the rental agreements are regulated for a certain period, the agreement is extended one more year with the same conditions unless the tenant has made a notification fifteen days before the agreement ends. In these circumstances, if according to TCO a.347/p.1, the agreement has been extended with the same conditions, the 2th paragraph of the same article regulates the change of the rental value which is the only exception. If the parties have determined the rental value to be applied in the new period of agreement, even though this agreement is applied at a rate that it will not pass the PPI, if there is no agreement between the parties, in this situation the judge will take the situation of the rented into consideration and regulate the rent value equitably, with the condition that it will not excess the PPI. Not to determine the rental value that will be applied during the extended period carries the risk that the raise in the rental value could be less then PPI from the point of the landlord.

 The Specific Condition Of Determining Rental Value Based On Foreign Currency

 All the aspects are relevant for the rental values based on Turkish Lira and according to the explicit provision of TCO, if the rental value has been envisioned as foreign currency, the parties will not be able to make any changes in rental value for five years.  This article has been developed in order to protect the tenant that will already be paying over foreign currency. Also, according to one remark, another aim of this provision is to prevent the rental value from being determined on foreign currency.[1] However in order for this provision to be applied, determining the rental value based on foreign currency is sufficient and it is not obligatory for it to be discharged on foreign currency.[2]

On Turkish Code of Obligations Article:344, the regulation of rental value that has been determined on foreign currency has been determined like this;

 "If on the agreement, the rental value has been determined based on foreign currency, a change in rental value cannot be made before five years. However, the provision of the 138th article of this law, titled “Hardships” is reserved. After five years, in determining the rental value, the third paragraph is applied keeping in mind the changes of value in the foreign currency.”

 According to this mandatory rule, even though the parties have foreseen the increase every year on the rental value in foreign currency, this agreement is declared to be definitely void.[3]

 Making a change in the rental value based on a foreign currency will only be possible in the event of an excessive administration difficulties regulated in the a.138 of TCO. The thing that is worthy of notice here is that this provision does not only include a raise in the rental value but it could also include a deduction in the rental value.

 Hardship Institution is regulated in Turkish Code of Obligations Art. 138 like below:

“During the establishment of the agreement, if an extraordinary situation that has not been foreseen by the parties or it is not expected to be foreseen, arises from a reason not connected to the debtor. If this changes the existing facts during the establishment of the agreement to the detriment of the debtor to the extent that it would be against the rule of honesty to be asked for an administration and if debtor has not administered his debt or holds the right that arises from the hardships, the debtor has the right to request from the judge the regulation of the agreement with new conditions and if this is not possible, holds the right to renege on the contract.  In evectional agreements, as a rule the debtor uses the right to denouncement instead of renege.

 This provision of article is also applied in foreign currency debts.”

Hardship Makes an Exception to the General Rule

The principle of commitment to agreement is a necessity of the rule of the safety of law and honesty. According to this principle which is also well accepted in Turkish Law, every debtor should administer the act foreseen in the agreement in spite of all the hardships that arise after the agreement is settled. However if the conditions that were present while the agreement was established change in an unpredictable way and as a result of this change if the balance in the agreement is destroyed to the detriment of one party to the extent that it cannot be sufferable, to wait for the debt to be performed specifically by applying the principle of commitment to the agreement constitutes a contradiction to fairness and honesty codes.[4] The law has therefore regulated that on the condition that the hardship requirements are met, the parties can request regulation from the court and that in the event that a regulation is not possible, the parties can renege on the contract.

The Period of Former Law

Although in the period of Code of Obligations no 818 there is not an open provision that states the regulation of agreement, Supreme Court and Doctrine mostly accepted the regulation based on the honesty code of Civil Code a.2.

The Conditions of Hardship

1. The Existence of an Extraordinary Situation that has Arises After the Establishment of the Agreement and that have not been able to Foreseen or is not expected to be Foreseen: 

In fact, this condition harbors many elements, therefore it is beneficial to examine it in subheadings.

a. An extraordinary situation must arise:  This situation cannot only be perceived as a force major or a social disaster. Although it is not for everyone, an extraordinary situation that has arisen for either party can  also be accepted. The existence of a situation that can make way to the collapse of the basis of transaction  with regard to “the opinions of business life and honesty code” is sufficient.[5]

b. The extraordinary situation must arise after the agreement is established; otherwise it is certain that the parties would have foreseen it.

c. The extraordinary situation should be one that has not been foreseen by the parties or it is not expected to be foreseen. When we examine this condition together with the Supreme Court decision, two important  provisions appear in front of us:

 i. Supreme Court states that the person who gets into debt with foreign currency must be able to foresee that there are often economic crisis in the country.[6]

 ii. In the event that the pursuer is a tradesman, because of the obligation to “act like a prudent businessman” the criteria of prediction is increased, however the thing to be noticed is that this does not prevent the tradesman from requesting a regulation.[7]

2. The Collapse of the Basis of Transaction must be Originated from the Debtor who has Requested a Regulation: 

Because it is not obligatory for the debtor to possess a fault in the article that should be taken into consideration, a situation in which the debtor undertakes a risk is evaluated in this context, in other words “being attributable” would be sufficient.[8]

3. The Collapse of the Balance between the Obligations Undertaken by the Parties in a Noncompliant  and Excessive Way: 

The situation that arises later and that makes way to changes in the conditions of the         agreement must have destroyed the equality and balance between the acts and must have caused a heavy imbalance between the acts objectively.[9]

4. The Non performance of the Act or the Performance of the Act by Holding the Rights that Arise from the Hardship of Performance: 

The Supreme Court have rejected the regulation case that was claimed two years after the repayment date of credit in that the petitioner has adopted the agreement.[10]

The Result of the Hardship:

If all these conditions are present, there are two basic rights. A regulation can be requested from the court and also if a regulation is not possible, a renege on a contract is possible. The Judge will try to sustain the agreement taking into consideration all these conditions. The rental value that will be regulated equitably by the judge according to

        •The rate of increase in Producer Price Index

        •The situation of the rental property

        •The imputed rental value

        •The changes in the value of the foreign currency.

After the Regulation is the Rent going to be Paid in Foreign Currency or Turkish Lira?

Although there are various opinions in the Doctrine, the execution of the Supreme Court is that the rent should be paid in Turkish Lira as long as both parties do not have the will to continue the rent agreement in foreign currency.

Postponement Provision as an Exception

However the provision in question is within proviso whose application has been delayed within the scope of law for the businesses.  Therefore when it comes to workplace rents, while the raise in rent value is regulated, the articles of agreement will be taken into consideration and the rule that states that there will be no change in rent value for five years will no longer be applicable.  

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[1] Haluk Burcuoğlu, 6098 sayılı TBK’na göre Konut ve Çatılı İşyeri Kiralarına İlişkin Hükümlerin Değerlendirilmesi, Symposium of the Evaluation of Turkish Code of Obligations, a gift to Prof. Dr. Cevdet Yavuz 3-4 June 2011 Symposium no:III

[2] Gümüş, Mustafa Alper: “Yeni” 6098 Sayılı Türk Borçlar Kanununa Göre Kira Sözleşmesi, 2.print, Istanbul, Vedat Books, p.76

[3] İnceoğlu Murat, Baş Ece: Türk Borçlar Kanunu Uyarınca Kira Parasının Belirlenmesi, A gift to Prof. Dr. Şener Akyol, Istanbul, Filiz Bookstore, p.537

[4] Develioğlu Murat, Sözleşmelerin Değişen Koşullara Uyarlanması, Erdem&Erdem Publishing, August 2013, http://www.erdem-erdem.com/articles/sozlesmelerin-degisen-kosullara-uyarlanmasi/

[5] Yılmaz, Süleyman ; “Dövize Endeksli Tüketici Kredilerinde Uyarlama Sorunu Ve Yargıtay’ın Bakışı”, Ankara University Department of Law Magazine, Ankara 2010, 59 (1), p.139

[6] Supreme Court 13. C. D . 09.06.2005 dated, 2005/1874 E. 2005/9749 K

[7] Supreme Court 11. C. D.. 17/11/2003 dated, 2003/3979 E., 2003/10988 K.

[8] Baysal Başak, Aşırı İfa Güçlüğü, Turkish Code of Obligations Symposium, Articles, p.130

[9] Doğan Gülmelahat, Aşırı İfa Güçlüğü Nedeniyle Sözleşmenin Değişen Koşullara Uyarlanması, http://tbbdergisi.barobirlik.org.tr/m2014-111-1358

[10] Supreme Court 13. Civil Department 26/09/2012 Dated, 2012/3259 E, 2012/21304 K.