Precedent-setting ruling from the Court of Cassation on rent determination lawsuits

The 3rd Civil Chamber of the Court of Cassation has made an important assessment in cases filed on the grounds that the rent amount remains below market rates and precedents. The Chamber decided that even if the lease agreement was renewed recently, it must be investigated whether the amount determined in the renewed agreement reflects the current market rate.

In the case subject to the ruling, it was claimed that the monthly rent of 22 thousand liras paid in 2021 for a workplace in Istanbul, which had been rented since 2005, remained below market precedents. The property owner filed a rent determination lawsuit with the request that the amount be increased to 39 thousand liras, drawing attention to the increase in market rents.

The court of first instance concluded that a determination based on "equity and fairness" could not be made, stating that the last lease agreement between the parties was renewed in 2018 and that 5 years had not passed since this agreement as of the date of the lawsuit. The court ruled that the calculation should be made according to the increase clause in the agreement. The plaintiff's appeal was also rejected by the 35th Civil Chamber of the Istanbul Regional Court of Justice.

COURT OF CASSATION CITES INCOMPLETE INVESTIGATION

The 3rd Civil Chamber of the Court of Cassation, which reviewed the file on appeal, found the local court's decision to be contrary to the law and overturned it. The Chamber reminded that the Turkish Code of Obligations stipulates that a lawsuit regarding the determination of the rent amount can be filed at any time.

The ruling stated that the agreements of the parties regarding the rent amount to be applied in renewed rental periods are valid, provided that they do not exceed the change rate according to the 12-month averages in the consumer price index in the previous rental year. It was emphasized that in contracts longer than five years or renewed after five years, the rent amount can be determined in accordance with equity, taking into account the index rate, the condition of the leased property, and precedent rent amounts.

The Court of Cassation noted that in the concrete case, evaluating the 2018 agreement as the start of the rental relationship was not sufficient. The ruling stated that the rental relationship between the parties began in 2005, and the 2018 agreement was allegedly drawn up to formalize the existing relationship rather than to update the rent amount.

According to the Chamber, the court needed to investigate the uncertainty regarding the date of the lease agreement and whether the determined rent amount was in accordance with precedents and market rates. The ruling stated that if it is understood that the rent amount determined in the renewed agreement does not comply with the market rate, the rent amount can be determined according to equity and fairness, taking into account the start of the initial agreement, even if 5 years have not passed since the signing of the agreement, provided that the conditions are met.

It should not be ignored that even if 5 years have not passed since the signing of the renewed agreement, the rent amount must be determined according to equity and fairness, if conditions are met, by considering the periods elapsed since the start of the initial agreement.

In the reversal decision, it was stated that it should be investigated by obtaining an additional report from an expert panel whether the rent amount determined in the agreement starting in 2018 reflected the market rate at that time. It was stated that if compliance with the market rate is determined, an increase should be made by applying the index for the requested period; otherwise, the rent amount should be determined according to equity and fairness.

News Source: 12punto