The Law Amending Tax Codes and Some Laws and Statutory Decrees (No: 7161) has been published in the Official Gazette on 18.01.2019 and has amended Article 344 of Turkish Code of Obligations ("TCO") which is providing rent increase rates for residences and roofed workplaces. These amendments have been made in order to protect lessee since the consumer price index ("CPI") seems more stable and favorable than producer price index ("PPI") in the periods of economic fluctuations as PPI in Turkey has increased unpredictably in 2018.
Previously, Art. 344 of TCO was providing that if parties agreed on an increase rate for the next rental periods then this increase rate cannot be higher than the PPI of preceding rental year. However the amendment has replaced PPI with CPI and specified that an agreement regarding the rent increase rate will be valid if only the agreed rate does not exceed the twelve months average of CPI. Additionally, this rule will be applied for the rental agreement of the indefinite duration as well as the rental agreement of which duration is longer than one year.
If parties could not reach to an agreement on the increase rate, rental fee will be determined by Judge considering current situation and market price of leased property and without exceeding the twelve months average of CPI.
Regardless of parties have made an agreement on increase rate, rental fee of lease agreements which are longer than five years or which will be renewed at the end of five year will be determined by Judge in every five year considering the current situation and market price of leased property and without exceeding the twelve months average of CPI.
Apart from the amendments regarding consumer/producer price index, amendment on the last paragraph of Article 344 makes reference to The Law on the Protection of the Value of Turkish Currency (No. 1567) and its secondary legislations. As it is known, determining rental fee in foreign currencies or indexed foreign currency in regard to residences and roofed workplaces has been absolutely prohibited for 2 years by The Presidential Decree which is amending The Decree Numbered 32 on Protection of the Value of Turkish Currency on 13.09.2018 and following Communiques. Thus, interpreting the last paragraph without taking notice of the prohibition of foreign currencies would be mistake. In this respect, for the rental agreements of residential and roofed workplace that the rental fee was determined in a foreign currency- thus would not be subject to any increase for a period of five years -which were executed before the effective date of the Presidential Decree prohibiting the determination of rental fee in foreign currency, the rental fee, shall be converted to Turkish Lira and shall be increased by considering the average of CPI in the previous year.
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