Court has ruled: A new era in rent determination reports... Artificial intelligence will be used in report preparation
In Istanbul, a landlord filed a lawsuit against their tenant due to a low rent amount. The current rental value was determined through an expert report, but both parties objected to the decision. Taking a notable step, the court decided that a new rent determination report should be prepared, utilizing artificial intelligence technology as well.
12punto
Due to rapidly rising rents, the prices paid by long-term tenants have remained low, leading to a record increase in 'rent determination lawsuits'.
According to a report in Hürriyet newspaper, an interesting decision was encountered in a case filed by a landlord in Istanbul for the same reason. Upon the parties' objection to the expert report prepared for the new rent, it was ruled that: "A new report should be prepared by also utilizing artificial intelligence."
Mahmut Tarhan, the lawyer and mediator representing the landlord in the case in question, described the process as follows:
“The tenant was paying 4 thousand liras in rent for the house located in the center of Üsküdar. The regional market rate today is over 20 thousand liras. When the parties could not reach an agreement, we filed a rent determination lawsuit. The expert witness set a value of 7 thousand 500 liras. Without taking into account the precedent rental agreements we submitted and the examples from official institutions, an assessment was made based solely on the examples provided by the tenant. Since a fair decision could not be reached with this report, we objected to the report.
In an interim decision issued on September 16 by the Istanbul Anatolian 10th Civil Court of Peace, it was stated that "the rental agreements submitted by the plaintiff's attorney have been examined, and it has been decided that the parties' objections to the report will be evaluated with an additional report, also utilizing artificial intelligence."
“I have seen a reference to artificial intelligence in a court for the first time. I believe that as this situation becomes more widespread, court costs for both parties will decrease and litigation processes will shorten.”
Reminding that judges consult expert witnesses on matters they cannot resolve with their legal knowledge, real estate law expert lawyer Hikmet Güngör spoke as follows:
"For example, when determining the existence and amount of a receivable, financial advisors or accountant experts are utilized. Or, if it is necessary to determine the value or rental income of a property, real estate appraisal experts are consulted. The appraiser makes a comparison by looking at listings and comparable contracts submitted by the parties and prepares the report. In the case in question, the expert determined a figure, but the parties objected.
Upon this, the court requested a new report and, in doing so, instructed the experts to utilize artificial intelligence. From this point on, experts will no longer prepare reports based solely on a few comparable contracts or listings; they will determine the rental value of the property in question by utilizing artificial intelligence."
This decision will guide other courts and will become widespread in a short time. Artificial intelligence will perform much better research than experts can do manually, and in a shorter time. Since dozens, perhaps even hundreds, of comparisons will be made in the assessment conducted using artificial intelligence, the figure closest to the truth will be found,” he said.
Stating that this decision will set a precedent for other cases, Güngör added, “I believe that artificial intelligence will be used in cases other than rent determination cases very soon.”
HOW IS RENT DETERMINATION CONDUCTED?
Landlords can file a 'rent determination' lawsuit against tenants whose lease has exceeded 5 years. Through this method, the landlord states, 'My rent has remained far below market value; it should be redetermined.' According to the latest regulation, it is mandatory to go to a mediator before filing a lawsuit. If no agreement is reached there, the litigation process begins.
During this process, precedent rental agreements submitted to the court by the parties are examined. Additionally, the appointed expert visits the property in question to conduct an inspection, researches current rental values, and consults with real estate agents in the area. Based on the report prepared at the end of all these steps, the judge determines the new rental price.
The figure in the expert report is often not the new rental value. To protect the existing tenant as well, a 10-20 percent equity discount is applied.
WHAT WILL ARTIFICIAL INTELLIGENCE DO?
So, how does artificial intelligence determine the benchmark rental value? Görkem Öğüt, General Manager and Co-Founder of Endeksa, which performs real estate valuation using artificial intelligence technology, provided the following answer to this question:
“The process works by taking into account many variables such as location, property type, area, environmental factors, past precedents, and market trends. Artificial intelligence algorithms process this information, compare it with the values of similar properties, and create statistical models. Thanks to constantly updated data, the most current rental or sales value can be determined according to the market conditions of that day.”
