B2B Commercial Rent Increases and Turnover Rent (Turkey)

The determination of rental prices and their annual increases for Shopping Malls (AVMs), office plazas, and industrial warehouses in the Turkish market are governed by the Turkish Code of Obligations No. 6098 (effective 1 July 2012, with full applicability to commercial leases as of 1 July 2020) and are subject to much different and stricter rules than the European market (or America). The biggest distinctions are the "Prohibition of Foreign Currency" and the "Mandatory CPI Ceiling."

1. Statutory Ceiling: "12-Month CPI Average" (For B2B)

Under Article 344 of the Turkish Code of Obligations No. 6098, the rent increase rate for both residential and roofed workplace (commercial) lease agreements, for the first five years, cannot exceed the twelve-month average of the Consumer Price Index (CPI/TÜFE) announced by TurkStat (TÜİK). This rule is mandatory, and any contractual provision for a higher increase is invalid for the exceeding part. This ceiling limit, which was previously not applied to corporate merchants, became fully applicable to commercial tenants as of July 1, 2020.

2. Prohibition of Leases with Foreign Currency (Protection of Turkish Currency)

One of the biggest operational differences in the Turkish market is that it is largely prohibited to index domestic contracts to foreign currency. (Presidential Decree No. 85 - Processes after September 2018).

• Between two firms resident in Turkey (companies established according to TR laws); the price of AVM shops, offices, or rental factories cannot be determined in Foreign Currency (Dollar / Euro, etc.) or Indexed to Foreign Currency (even if in TRY, by adding exchange differences).
• Exceptions: If the tenant company itself is more than 50% foreign-funded, or a company established in Free Zones, "Foreign Currency Commercial Lease" can be made. In all other ordinary B2B leases, only the local currency "Turkish Lira (TRY)" is mandatory.

3. Shopping Mall Culture and the "Turnover Rent" Solution

The Turkish Code of Obligations (TCO) No. 6098 does not specifically regulate turnover-based rents. While widely used in practice, there are differing interpretations regarding the application of the mandatory CPI cap (Article 344 TCO) to turnover-based rent components. The prevailing market view and some legal commentators suggest that the CPI cap primarily applies to any fixed minimum rent component, and its applicability to the variable turnover-based portion is not definitively settled by law or Supreme Court precedent.

4. "5-Year Rent Adjustment (Determination) Lawsuits" in B2B Workplaces

The same protection in residences gets interrupted when the office B2B tenant completes 5 years. If your company tenant has completed 5 full years with extensions in your office, the property owner, against the "Low remaining price" of the contract, now breaks the chains of the legal CPI raise and files a rent determination lawsuit at the Civil Courts of Peace (Sulh Hukuk Mahkemesi).

• Current Market Determination: The Judge at the Civil Court of Peace, considering the new office rents in the region (M2 Square meter rental fee current market research of peer plazas), the inflation situation, and the Corporate trade volume, will determine a brand new free market Court Rent Figure for the B2B shop under Article 344 of the Turkish Code of Obligations.

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