CONSEQUENCES OF PREMATURE TERMINATION OF LEASE AGREEMENTS BETWEEN MERCHANTS

I. SUMMARY

In the lease agreements, the Lessee and the Lessor may decide to terminate the contract early. In the event of premature termination of the lease agreements, a penal clause may be agreed in the contract to prevent the parties from avoiding the performance of their obligations arising from the lease agreement. Excessive amount of the penal clause determined by the lessee and the lessor in some contracts may cause a dispute between the parties. In this article, deferred provisions of the Turkish Code of Obligations No. 6098 regarding the lease agreement which is of great importance for the consequences of premature termination of lease agreements concluded between merchants and penal clause agreed to be applied in case of early termination of the lease will be evaluated within the scope of current decisions of the Supreme Court.

II. EXPLANATIONS

The fact that the parties to the lease agreement are merchants and that the contract in dispute has a commercial nature is extremely important in terms of the consequences of the termination of the lease agreement. In this case, according to Provisional Article 2 of the Law No: 6353 which brings an order about Turkish Code of Obligations No: 6098 (TCO), Article 323, 325, 331, 340, 342, 343, 344 and 354 of TCO can’t be applied to the Lessee who is a person considered as a merchant in the Turkish Commercial Code and to the workplace rents which the lessee is public and private legal entity for 8 years since date 1st of July, 2012. In these cases, the terms of the lease agreement shall be applied in accordance with the freedom of the contract in respect of the issues specified in these articles in the lease agreements. If there is a provision for early termination in the contract, the relevant contract provision shall be applied instead of Article 325 of Turkish Code of Obligations in accordance with the obligation of the parties to comply with the agreements and the principle of freedom of contract.

The 8-year period that is recognized by the Provisional Article 2 of Law No: 6353 will be expired and Article 323, 325, 331, 340, 342, 343, 344 and 354 of Turkish Code of Obligations which can’t be applied to the Lessee who is a person considered as a merchant in the Turkish Commercial Code and to the workplace rents which the lessee is public and private legal entity will be applicable on 1st of July 2020. Before 1st  of July 2020, the parties shall be bounded by the lease agreement in accordance with the principle of freedom of contract within the framework of the provisions of the provisional article 2 that have entered into force.

According to the article 325 of the Turkish Code of Obligations entitled “Return of the leased property before the end of the contract” , “If the Lessee returns the Lessor without complying with the term of the contract or the term of termination, the arrears arising from the lease contract shall continue for a reasonable period in which the Lessor may be granted the lease under similar conditions. If the Lessee finds a new tenant who has the solvency and is ready to take over the lease relationship, the Lessee’s debts arising from the lease agreement are terminated before the expiration of this period. The Lessor is obliged to deduct the expenses he has saved from doing and the benefits he has obtained by using the Lessor in another way or deliberately avoiding obtaining.”

In accordance with this provision, if the Lessee prematurely terminates the lease agreement, the Lessee’s obligations arising from the lease agreement shall continue for a reasonable period of time where the Lessee subject to the contract may be resettled under similar conditions. In the event that the Lessor finds another reasonable tenant within this period, the Lessee’s obligations arising from the lease agreement are terminated.

In case of early termination of the lease agreements, the parties may decide on the penalty condition set out in Article 179 of the Turkish Code of Obligations and its sequel in order to guarantee the performance of the obligations arising from the contract. The Penal requirement should not be contrary to the original debt, the ordering provisions, Public Order, personal rights, morality and one of the situations that cripples the will should not exist. The parties may freely specify the penal clause in accordance with the principle of freedom of contract, but the penal clause to be determined must not be in violation of the rules of integrity and in exorbitant amounts. Otherwise, the parties may request from the court the annulment of an exorbitant Penal requirement or the reduction of an exorbitant amount in accordance with Article 182 of the Turkish Code of Obligations. This will not affect the lease agreement in its entirety and only ensures that provision is cancelled or revised.

When determining whether the penalty condition determined between the parties is exorbitant or not, matters such as the financial situation of the parties, the interest and the degree of defect to be obtained by virtue of the violated provision are taken into account. At this point, we have to point out that, merchants are obliged to continue their business life with the care and attention that can be expected from a prudent Merchant in accordance with article 18/2 of the Turkish commercial code and are obliged to take action in anticipation of the scope and consequences of the obligations they will undertake in their commercial activities. For this reasons an exorbitant punitive reduction cannot be claimed.

To address current Supreme Court decisions on the issue;

According to the decision of Civil Chamber No 6 of the Supreme Court dated  27.01.2019, merit numbered 2015/3646 decree numbered 2016/463, ‘’… In case of early eviction of the Lessee, as a rule, the Lessee is responsible for the rent until the end of the lease term and the Lessor must fulfill his / her obligation to prevent the increase of the damage by making efforts to re-lease the evicted real estate. In this case, the loss of the claimant consists of the rent amount related to the period from the date of eviction to the date when the Lessor can be re-rented with the same conditions. The defendant lessee is responsible for the rent amount until the date of the eviction of the real estate, and for the reasonable amount of time after the eviction period determined by the Article 325 of the Turkish Code of obligations, in the same terms, how soon can be given the lease in the same terms…’’ in the event of an early termination of the lease agreement, the lessor must undertake his / her obligations in order to make efforts to re-lease the place and to prevent the increase of the damage.

According to the decision of Civil Chamber No 6 of the Supreme Court dated 11.03.2014, merit numbered 2013/11397 decree numbered 2014/2875, ‘’Although the parties to the convention are free to determine the amount of the penalty, the amount of the penalty to be decided must also comply with the rules of rights, justice and welfare. On the other hand, it is accepted in practice that although the debtor who has the capacity to be a merchant in accordance with  article 24 of the Turkish Commercial Code cannot ask for the reduction of the Penal clause, the amount of the penalty agreed upon may require a discount if the debtor is to face with economic shake-up or collapse.” the provision was established and clearly arranged that if the penal clause is exorbitant enough to cause the merchant to be financially distraught, the merchant may request the court to decrease the penal clause.

As a result, there are two different approaches for the lessee if the lessor does not apply to the court regarding the dispute between the parties in the event that the lessee terminates the commercial lease agreements with which the penal clause is agreed. The lessee may terminate the contract without paying the penal obligation on the date of expiry of the lease or choose to settle with the lessor by making an effort on finding a new lessee in a reasonable period of time and by paying the rent for this reasonable period of time

About Us

We are aware of legal expectations of corporates and business community in need of sustainable growth, development and stability, when they do business in a complicated and emerging jurisdiction.

Recent Posts

Share on facebook
Share on google
Share on twitter
Share on linkedin