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Real Estate leases in Turkey

HDN | 10/17/2009 12:00:00 AM | Gary Lachman

Before entering into a lease, the prospective landlord and tenant should both consult with attorneys experienced with Turkish real estate law.

The law governing leases in Turkey is a blend of the well-established legal principle of freedom to contract and the more modern government predilection for protecting the weaker of two parties.

Freedom to contract was recognized in the Turkish Civil Code in 2002 and somewhat expanded in 2007. Meanwhile, providing greater protection to those in a weaker bargaining position has been around as long as there have been politicians (and since there are more renters who are voters than there are landlords, it is not difficult to understand the basis for this concept.) The original Law on the Lease of Real Estate No. 6570 was enacted on May 18, 1955 and has not been substantially modified since.

One interesting aspect of this law is that it has different rules for properties located within and outside municipalities. For example, with respect to real estate located within municipal borders, the rules for termination of a lease are different. Within a municipality, if a tenant does not notify their landlord in writing that he/she wishes to terminate the lease agreement 15 days prior to the expiration date of the lease, the agreement is automatically renewed for one more year with the same conditions. However, this is not the case for rental property outside municipal boundaries.

There are no legal restrictions limiting the maximum term of a private real estate lease (including renewals), but according to Public Procurement Law No. 2886, leases of state-owned real estate (other than tourism facilities) may only be tendered for a maximum period of 10 years. Land rented for tourism projects may be leased for up to 49 years. This makes one wonder as to the fate of some of the magnificent seaside resorts that are located on land leased from the government such as The Cirağan Kempinski Hotel in Istanbul and the Rixos Hotel in Antalya, as well as urban development projects like the Akaretler Sıraevleri Row Houses when their leases expire.

Under Turkish Law, private landlords may only terminate a lease agreement and evict the tenant pursuant to a legitimate cause specified by law. The predominant permissible reasons for eviction include the landlord or his/her family requiring the premises as a residence or a workplace, the need for major renovation and rehabilitation of the building, failure of the tenant to pay rent (subject to the requirement of the landlord serving the tenant with two written demands to pay the rent within one year), and breach of the terms of the lease.

Lease termination by tenants is another matter entirely. As is the case in most of the world, if a tenant terminates the lease prematurely, he/she must continue to pay the rent until the property is re-leased to a new tenant or for a reasonable period during which under normal circumstances a landlord could reasonably be expected to be able to re-lease it. This reasonable period may be determined by a court decision. This grants the court a significant amount of leeway, which indubitably weighs in favor of the tenant, especially if there were extenuating circumstances brought to bear by the landlord such as not making timely repairs, or allowing other tenants to disturb the terminating tenant.

In addition, the law provides that tenants are allowed to terminate a lease agreement by paying reasonable compensation to the landlord and by claiming that the continuation of the lease is unsustainable. If the lease term is for more than one year, compensation cannot be less than six months rent. Unless otherwise stated in the agreement, early termination of the lease agreement by the tenant is not legally permitted unless there are exceptional circumstances such as massive currency devaluation, forced moving to another city, or cancellation/closing of the business that employs the tenant.

There is no restriction on transfer of ownership of real estate that is subject to a lease. According to the Law, if leased property is transferred to a third party, the new landlord may terminate the lease agreement with six months prior notice to be served to the tenant. This prior notice must be delivered to the tenant within one month of the date of transfer. In order for this termination to be valid, the new owner must demonstrate that he/she needs the premises as a residence either for him or herself or for his family and/or for a place of business. If the new landlord fails to serve the notice within a month after the transfer of the property and/or in the absence of causes for eviction specified in the law he/she will be bound by the terms of the lease agreement.

Although there is no formal requirement for having a written lease agreement and verbal lease agreements are valid, for the lease to be enforceable against third parties, an annotation should be recorded at the land registry directorate where the leased property is registered. The importance of this provision in the law cannot be overstated in cases where the value of the lease is substantial to the tenant. This can be for reasons such as location, tenant improvements such as store or restaurant fit out and fixtures, or a trend of significant increases in rents in the neighborhood.

Other than the provision mentioned above allowing landlords to terminate a lease because of their personal needs, there is nothing unusual about Turkish lease law compared with U.S. or Western European practice. There are many other legal provisions that space doesn’t permit to be included in this article, so before entering into a lease, the prospective landlord and tenant should both consult with attorneys experienced with Turkish real estate law.

© Gary S. Lachman 2009

Gary Lachman is an international lawyer formerly with the U.S. Dept. of State, a real estate developer and associate professor at Johns Hopkins University with a consulting practice in Istanbul. He can be contacted at glachman@lachmanyeniaras.com.

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