Legal Reflections of the Exorbitant Rent Increases in Turkey
First, it is certain that the current economic fluctuation and unpredictable inflation rates in Turkey affected the prices. In other words, inflation, increasing construction costs and the imbalance between supply and demand are all playing major roles in the said slowdown. Moreover, with the easing of the process of obtaining citizenship through the purchase of real estate, Turkish citizenship has become attractive for many foreigner, especially for people from Gulf Region according to the relevant statistics. Likewise, especially with rise of Russian-Ukrainian conflict, the purchase and rental of real estate by Russian and Ukrainian citizens, with the thought of residing in Turkey, have augmented. The skyrocketing of the sale prices and rental fees are now visible in the biggest cities of Turkey including Istanbul, Ankara, Izmir and Antalya.
In order to prevent steady increase in rental fees, "The Law Amending the Attorneyship Law and the Turkish Code of Obligations" ("Law") has entered into force upon its publication in the Official Gazette dated 11 June 2022, numbered 31863. The Law has added Provisional Article 1 to Turkish Code of Obligations ("TCO") and thereby temporarily capped rent increase rates at 25% in residential units which were previously capped by the Consumer Price Index (“CPI”). As regulated, the increase in the rental fees determined under the lease agreements, which are renewed for a new lease period starting from 11 June 2022 to 1 July 2023, shall not exceed 25%. On the other hand, the cap regulated under TCO is still applicable and therefore, in the event that the annual average of CPI is lower than 25%, then the lower CPI rate will apply.
However, this regulation could not find an area of application for workplace leases. In terms of workplace leases, the general provision of Article 344 of TCO will continue to be applied and the rent increases will be valid provided that they do not exceed the annual average of CPI.
It is important to highlight that this Provisional Article could not restrain the applicability of the Article 344/3 of TCO regulating the landlord’s right to apply to the court for the re-determination of the rental fee within the scope of the lease agreements exceeding 5 years. In other words, for the lease agreement exceeding 5 years, the landlord will be able to request that the rental fee be re-determined according to the equivalent rental fees, without being affected by the cap of 25%.
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The procedures and principles regarding the leasing of residential properties for tourism purposes to real and legal persons are regulated under the Law on the Leasing of Properties for Tourism Purposes and Amendments to Certain Laws Numbered 7464 ("the Law") which was published in the Official Gazette on 2 November 2023. The Law has entered into force on 1 January 2024.
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Tax and Fee Exemptions Introduced by Law No. 6306 and VAT Advantages
Although a large part of Türkiye is under the risk of natural disasters, especially earthquakes, most of the existing buildings are not resistant against possible disasters, thus socio-economic problems are experienced and State is faced with financial burdens unexpectedly that are difficult to overcome.
Although Turkish government aimed to prevent exorbitant rent increases by enacting this new regulation, the density of lawsuits in the courts and the disputes between tenants, trying to stabilize their financial situation, and landlords, who believe that the cap is unfair, are still observed.
Consequently, it seems that the Turkish government may come up with further regulations in order to achieve the targeted positive effect in the Turkish real estate market.
