The effects of the coronavirus (Covid-19) epidemic disease, which has spread rapidly by affecting the whole world, are felt in all aspects in many areas such as daily life, working order, economy, etc. along with the health field in our country.

Within the scope of the measures taken by the government, in order to eliminate the risk of transmission of the disease and to control the epidemic, on March 16, 2020, the Ministry of Interior sent a circular to 81 provincial governorships and temporarily suspended the activities of public places of rest and entertainment such as theaters, cinemas, show centers, concert halls, engagement/wedding halls, coffee houses, SPA and sports centers, tea gardens, all kinds of indoor children's playgrounds, cafeterias, etc. At the current stage, while various measures have been implemented by the government to control the pandemic, it has naturally emerged that it is necessary for public health to take and implement certain measures by other businesses other than those whose activities have been temporarily suspended. In this respect, the measures have manifested themselves in the form of similar practices such as changes in working hours for some commercial enterprises in order to reduce or even eliminate the risk of both their employees and customers contracting the disease, and for others, temporarily stopping their activities completely in line with their own wishes.

The negative effects of the pandemic on daily life and working life were soon reflected in the economic sphere. At this point, within the scope of the measures taken to minimize the negative effects of the pandemic on the economy as much as possible, pursuant to Provisional Article 2 of the Law No. 7226 on the Amendment of Certain Laws published in the Official Gazette dated March 26, 2020 and bis numbered 31080, with the provision of failure to pay the rent for the workplace to be accrued from 1/3/2020 until 30/6/2020 does not constitute a reason for the termination of the lease agreement and eviction, the possibility of termination based on sending two justified notices due to non-payment of the rent, which is recognized under Article 352 of the Turkish Code of Obligations only for workplace lease agreements, and the possibility of termination and eviction stipulated under Article 315 of the TCO have been suspended until 30.06.2020. However, it is important to note that while the aforementioned regulation temporarily suspends the discussions regarding the effect of the coronavirus on the rent payment obligation, the said regulation does not eliminate the obligation to pay rent for the lessee. For this reason, the rent obligation continues, default occurs and default interest is charged.

Therefore, it is an inevitable fact that the Covid-19 pandemic, which makes its effects felt in different ways in all areas of life and has become global, will also affect the lease agreements and the contracting parties will raise their demands from each other in this regard. Because, in terms of the lessor, whether the businesses are open or closed, the lease agreements continue to operate regardless of the situation the business is in. At this point, it should not be forgotten that all legal regulations should be evaluated separately and carefully in terms of each lease agreement due to the existence of details such as the fact that each of the lease agreements signed between the parties with mutual free will, without being subject to any formal conditions, provided that they are not contrary to the mandatory provisions of the law, public order and general moral rules, and that each of the lease agreements is unique with its parties and content, has special conditions of its own nature, etc.

 

Lease Agreements under the TCO No. 6098

 

Some regulations in the Turkish Code of Obligations on lease agreements

- Article 299 of the TCO states that a lease agreement is a contract in which the lessor undertakes to leave the use or benefit of a property to the lessee and the lessee undertakes to pay the agreed rental price in return

- Pursuant to Article 313 of the TCO, payment of the rent is the primary obligation of the lessee. Therefore, it is stated that non-payment of the rental fee will cause the lessee to default upon the fulfillment of the other conditions required by the law.

- Article 315 of the TCO stipulates that if the lessee fails to fulfill the obligation to pay the rent or ancillary expenses, the lessor shall give the lessee a written deadline, and if the lessee fails to fulfill the obligation within this period, the lessor shall terminate the agreement.

- On the other hand, Article 352 of the TCO  states that (....) if the lessee has not paid the rent within the lease period for lease agreements with a term of less than one year, or within one lease year or a period exceeding one lease year for lease agreements with a term of one year or more, and the lessor has caused two justified notices to be given to him in writing, the lessor may terminate the lease agreement through a lawsuit within one month starting from the end of the lease period and the lease year in which the notices were made for leases with a term of more than one year.

Therefore, with the regulation of Provisional Article 2 of Law No. 7226, the lessor is not granted the right to terminate the lease agreement and evict limited to the period between March 1, 2020 and June 30, 2020. However, it should not be forgotten that, in case of non-payment of the rental fees in this process, there is no obstacle to demand both the rental fee and default interest after this date.

Legal Status of Lease Agreements for Businesses Operating in Shopping Malls

Article 301 of the TCO states that the lessor's primary obligation is to deliver the leased property to the lessee in a fit-for-use condition and to keep it in a fit-for-use condition for the duration of the contract, and Article 313 of the TCO states that the lessee's primary obligation is to pay the rent.

Pursuant to Article 324 of the TCO, the lessee is obliged to pay the rent even if the leased property is not used or is used to a limited extent due to reasons arising from the lessee itself, as long as it is kept available for use. In this case, the expenses that the lessor is relieved from incurring are deducted from the rent.

It is clear that the primary performance obligations brought by the lease agreement to both parties are in the form of a continuous debt relationship that extends over a certain period of time. At this point, in terms of the lessor's and lessee's obligation to fulfill their primary obligations, the businesses within the shopping centers may temporarily cease their activities as a result of the stage they have reached due to the current situation and in line with the decisions taken by their own management. Therefore, it should be noted that it is impossible to make an assessment that the publication of the circular and the closure of the shopping centers with their own management decisions create a permanent impossibility of performance for the parties within the scope of Article 136 of the TCO and that the contract may be terminated at this stage. However, if the closure decision exceeds a reasonable period of time, it may be possible to talk about the impossibility of continuous performance for these businesses. Reasonable time can be expressed as the end of the limit of tolerance, where it is no longer possible for the parties to be bound by the lease agreement in accordance with the good faith, and where it is no longer possible for both parties to continue the agreement. In this case, temporary impossibility of performance may be mentioned in terms of workplaces closed due to the Covid-19 pandemic.

Evaluation of Lease Agreements within the Scope of Excessive Difficulty of Performance and Adaptation Cases

The basis of contract law is the pacta sunt servanda. Pacta sunt servanda refers to being bound by the matters agreed upon within the framework of freedom of contract. Pursuant to the aforementioned principle, the parties are expected to fulfill their obligations in order to ensure the continuity of the contract. However, it would be contrary to equity and good faith to expect the parties to strictly adhere to the terms of the contract as a result of certain unexpected and extraordinary changes.

As one of the types of contracts, the general rule is to perform the lease agreement in accordance with the conditions under which it was first concluded, and as an exception, the legislation allows for adaptation. Adaptation lawsuits constitute an exception to the pacta sunt servanda. At this point, if we evaluate the lease agreements of the enterprises adversely affected by the pandemic within the scope of Art. 138 within the scope of 'Excessive difficulty of performance' the provision of 'If an extraordinary situation, which was not foreseen and not expected to be foreseen by the parties at the time of the conclusion of the contract, arises for a reason not caused by the debtor and changes the facts existing at the time of the conclusion of the contract to the detriment of the debtor to the extent that it would be contrary to the rules of good faith to demand performance from him, and the debtor has not yet fulfilled his obligation or has fulfilled his obligation by reserving his rights arising from the excessive difficulty of performance, the debtor has the right to ask the judge to adapt the contract to the new conditions, and if this is not possible, to rescind. In continuous performance contracts, the debtor, as a rule, uses the right of termination instead of the right of rescission.' is important.

Because, Article 138 of the Turkish Code of Obligations No. 6098, which includes the regulation on 'Excessive difficulty of performance', states that if the conditions that existed at the time of the conclusion of the contract change unpredictably and the balance in the contract deteriorates to an unbearable extent for one party as a result of this change, the principle of strict adherence to the contract cannot be expected from the party in question. The provision of the law aims to restore the balance that has deteriorated as a result of changing conditions, and in this direction, the parties to the contract are entitled to request the judge to adapt the contract to the new conditions, and if adaptation is not possible, the right to rescind the contract. Since the lease agreement is a contract with continuous performance, as a rule, the right of termination is used instead of the right of revocation. 

Due to the coronavirus epidemic, the activities of businesses such as barbers, beauty salons, cafes, gyms, etc., whose activities have been temporarily suspended within the scope of the circular issued by the Ministry of Interior due to the coronavirus epidemic, and businesses such as restaurants, patisseries, etc., whose activities have not been suspended but continue their activities by providing partial capacity service without allowing customers to sit in a takeaway, come-and-go manner. On the other hand, as a result of the current conditions, the working capacities of other businesses that tried to continue their activities at the current stage, but whose business was affected by the epidemic, decreased due to the current market conditions, and their activities were partially reduced.

Therefore, due to Covid-19, which has become an epidemic disease, the unpredictable change in the initial conditions of some businesses while concluding their lease agreements has caused the negative effects of the changing conditions that have caused the balance to be disrupted in terms of the actions of both the lessor and the lessee. In the current situation, the lessee is not in a position to know the risk of Covid-19 disease when concluding a lease agreement, and this risk does not originate from the lessee. Despite these conditions, it would be unfair to oblige the lessee to pay rent for the leased premises where the lessee's business does not operate or partially operates. In this case, the lessee may file an adaptation lawsuit based on Article 138 of the TCO, without performing the rent or by performing the rent with reservation. However, since non-payment of the rent brings the risk of eviction, it would be a more appropriate solution for the lessee to pay the rent with reservation and file an adaptation lawsuit at the same time in order to avoid any loss of rights.

Conditions for adaptation of the contract to changing conditions pursuant to Article 138 of the TCO are specified as follows:

• The emergence of an extraordinary situation that was not foreseen by the parties at the time the contract was concluded and was not expected to be foreseen;

• This extraordinary situation was not caused by the debtor;

• The fact that this extraordinary situation has changed the existing facts at the time of the conclusion of the contract to the detriment of the debtor to the extent that it would be contrary to the rules of good faith to demand performance from the debtor;

• The debtor has not yet fulfilled his obligation or has fulfilled it by reserving his rights arising from the excessive difficulty of performance.

In the adaptation case, it may be requested from the judge not to pay the rent and common expenses related to the actual use due to the closure of the workplace or serious loss of turnover, or if this request is not accepted, it may be requested to reduce these costs, to suspend the provisions of the contract completely for a temporary period, and in any case, in the event that the workplace is kept closed, it may be requested to decide not to operate the termination and penal clause provisions against it. Due to excessive difficulty of performance, an adaptation request can be made on the rental price and in terms of time. Along with the adaptation case, there is also the possibility for the parties to terminate the lease agreement if there is no possibility of obtaining the expected benefit from the lease agreement.

In addition, it should not be forgotten that each of the lease agreements may have different conditions in itself and for this reason, the special provisions written in the contract should be interpreted carefully. Because, only in this way, as a result of the difficulties arising due to the changing conditions, it can be discussed whether it is possible to adapt the contract to the new conditions in accordance with the principle of collapse or shaking of the basis of the transaction, taking into account the rules of correctness and honesty. In addition, it is not possible to file an adaptation case for short-term lease agreements (1 year) and within 1 year before the expiration of the lease agreement.

As a result, in cases where it is not possible to resolve the negative effects of the Covid-19 pandemic on the lease agreements by agreeing within the framework of the mutual goodwill of the parties, the filing of an adaptation lawsuit by evaluating the current conditions for the continuation of commercial life is an auxiliary solution that can be utilized in terms of producing results in a way that will ensure the performative balance for both parties.

The articles are for information purposes and do not constitute legal opinions or advice.

 

Att. Çiğdem TOPAÇ, April 15, 2020