Commercial Security Deposits and Bank Guarantees (Turkey B2B)

Plazas, Shopping Mall (AVM) investors, or owners of Logistics warehouses leasing commercial (roofed workplace) real estate in Turkey must comply with the security deposit limits under the Turkish Code of Obligations (TCO) No. 6098. Since July 1, 2020, the 3-month rent cap under Article 342 applies to all commercial tenancies, including those where the tenant is a merchant or a legal entity, following the expiration of the postponement period set by Law No. 6217.

1. The Conflict of the Legal "3 Months' Rent Limit" (B2B Cash Deposit)

Turkish Code of Obligations Article 342 states that "If the tenant's giving security has been agreed upon, this security cannot exceed three months' rental fee." This limitation applies to all residential and roofed workplace (commercial) leases as of July 1, 2020. Therefore, a Shopping Mall fund leasing a shop to a corporate tenant cannot legally exceed a 3-month rent deposit; the parties are not free to determine a higher amount in their B2B contract.

If the company tenant (Merchant) is providing a cash "Security Deposit," the requirement to deposit funds in a joint "Deposit Account" is mandatory under Article 342 and cannot be waived or modified by the parties. Cash must be deposited into a time-deposit savings account in a bank, and negotiable instruments must be deposited with a bank. The bank may only return the security with the consent of both parties, a finalized execution proceeding, or a final court decision.

2. Solution in the Market: "Bank Letters of Guarantee"

Seeing the cash devaluation risk, corporate investors (Property owners) and foreign tenant companies often use Bank Letters of Guarantee. However, under TCO Article 342, security provided in the form of negotiable instruments is also subject to the 3-month rent limit and must be deposited with a bank.

• How Does It Work?: The Tenant Company goes to its bank and gets a "Definite and Indefinite Bank Letter of Guarantee" from its bank in favor of the property owner (Lessor AVM) over its own credibility or collateral (block). (E.g.: "If my tenant does not pay their debt, withholding tax or damage, the bank branch will give that invoice and rent to me upfront in cash from the desk without asking On First Demand").
• Legal Limits: Because Bank Letters of Guarantee are considered security under Article 342, they are subject to the 3-month rent limit. While they are strongly used as security in B2B transactions, they must be deposited with a bank and cannot be held directly by the landlord.

3. Suretyship and the Personal Suretyship of the Company Manager (Joint and Several Surety)

Corporate "Limited Liability Company" (Ltd. Şti) commercial enterprises, which are usually not gigantic in Turkey, are risky because they have limited company capital behind them. Because if the company goes bankrupt and is closed, damages that the Property Owner will incur beyond the 3-month deposit cannot be salvaged. In leasing from enterprises that are not Joint Stock Companies (A.Ş.), this standard is stipulated as a condition in the Turkish commercial market:

"Joint and Several Suretyship (Personal Surety)": Under the signing of the legal entity company (tenant firm), the owner of the enterprise, to the Limited or corporate contract as "Tenant: XYZ Company"; it is obligatorily requested that the shareholder or the general manager of the company "sign with the title of Joint and Several Surety" personally with their own name-surname + TC ID number.

Under TCO Article 584/3, the consent of the spouse is not required for sureties granted in relation to an enterprise or a company by the owners of the enterprises registered with the trade registry or by the shareholder or director of the company.

Furthermore; in order for this suretyship not to be invalid (void) before the TCO, the Surety must state by writing personally with their handwriting under the contract: (a) the maximum amount for which they are liable, (b) the date of the suretyship, and (c) the indication that they are a "joint and several" (müteselsil) surety (TCO Article 583). If there is no handwriting, the suretyship is invalid.

Proceed to the next document: Commercial Eviction ProcessesPreview unavailable.