Category: Turkiye

In Turkish law, for a representative to be able to enter into a binding arbitration agreement on behalf of a principal, they must be specifically authorized by the principal (Turkish Code of Obligations Article 504/3 and Turkish Civil Procedure Law Article 74). An arbitration agreement made by a specially authorized representative can only become binding with the approval of the principal. For example, the commencement of arbitration proceedings by the principal personally may indicate the granting of this approval.

In the case of a legal entity, there is no need for special authorization for its organ to make an arbitration agreement. However, if a legal entity is represented by a person other than its organ, such as an employee, that person must be granted the authority to enter into an arbitration agreement.

In practice, arbitration agreements signed by unauthorized representatives are encountered frequently. In the past, the Court of Cassation held the view that even if the main contract signed by an unauthorized representative was performed, the arbitration agreement would not be binding. However, the Court of Cassation has changed this precedent. In its recent decisions, the Court of Cassation addresses the argument that an arbitration agreement is invalid because it was signed by an unauthorized representative within the framework of the principle of good faith. For instance, in a dispute that is the subject of a decision, the Court rejected the objection that the arbitration agreement, opened after 9-year performance of a contract dispute between the parties, was invalid because it was signed by an unauthorized representative. The Court ruled on the merits of the dispute. In the appeal case against this decision, it was requested that the decision be annulled on the grounds that an invalid arbitration agreement signed by an unauthorized representative was used to issue the arbitrator’s decision (Turkish International Arbitration Law Article 15). The regional court of appeals, acting as the court of first instance, dismissed the annulment case. The regional court of appeals concluded that the contract had been effectively applied for 9 years until the date the dispute arose, the employer had knowledge of the contract content and had actually approved the contract by performing its obligations and collecting payments until the time of the arbitration application. The Court of Cassation’s 11th Civil Chamber approved the decision. This decision is one of the many decisions by regional courts of appeals and the Court of Cassation that support arbitration proceedings.

By Cemile Demir Gökyayla, Partner, Beyza Sila Sürmeli, Trainee, KP Law

Turkish lawyer Damla Aygun Yararca was appointed to the role of Head of Legal, Ethics, Compliance & Quality by Novo Nordisk. 

Yararca has been with the company since 2020, first joining as the Head of Legal – BAMEAC. Between 2021 and 2022, she also served as the Interim Head of Legal & Compliance for Morocco and Tunisia.

Prior to Novo Nordisk, Yararca worked for BP as a Legal Counsel between 2017 and 2020 and for Huawei Technologies as a Legal Counsel between 2015 and 2017. 

“I am absolutely exhilarated to embark on the next phase of my career as I assume the role of Head of Legal, Ethics, Compliance & Quality within the NERM Cluster,” said Yararca. “My prior experience supporting the cluster in a regional legal capacity has only fueled my excitement to become an integral part of the management team. I am wholeheartedly committed to contributing to the cluster’s ongoing success and maintaining the utmost standards of legal, compliance, and quality excellence as we navigate this dynamic and transformative landscape.”

Originally reported by CEE In-House Matters.

In accordance with the Turkish Code of Obligations No. 6098 (“TCO“), lease relations are categorised under three main headings: (i) general provisions, (ii) residential and roofed workplace leases, and (iii) product leases. Properties to be leased as offices, warehouses, etc. for the purpose of conducting commercial activities will be subject to the provisions of “Residential and Roofed Workplace Leases”.

Due to the prohibition of regulations against the lessee, which is the main principle within the scope of residential and roofed workplace leases, the regulations within the scope of the TCO are mandatory and it is not possible to change such against the detriment of the lessee in the lease agreements. The courts have also adopted the principle of interpretation in favor of lessees.

1. Rate of Increase and Determination of Rent i

According to Article 344 of the TCO, the upper limit for the rent increase rate in roofed workplace leases is the change rate of the 12-month averages of the consumer price index (“CPI”) in the previous lease year, determined by the Turkish Statistical Institute. Provided that it does not exceed this upper limit, if a lower rate is determined in the agreement, the rate determined in the agreement shall be valid.

The 25% limitation imposed by the government on rent increases applies only to residential leases, and for roofed workplace leases, the rent increase rate can be determined freely provided that the above-mentioned upper limit is complied with.

a. The Inability to Determine Rent and Other Payment Obligations in Foreign Currency

In property lease agreements to be signed by residents of Turkey, Article 8 of the Communiqué on Decree No. 32 on the Protection of the Value of the Turkish Currency (Communiqué No: 2008-32/34) prohibits the determination of the rent and other payment obligations in foreign currency or indexed to foreign currency.

There are certain exceptions to this prohibition, and in lease agreements made within the scope of these exceptions where the rent is determined in foreign currency, without prejudice to the provisions of Law No. 1567 on the Protection of the Value of Turkish Currency, the rent cannot be changed unless 5 years have passed since the agreement date. After 5 years, considering the change rate based on the 12-month average of the CPI, the condition of the leased property, comparable rental amounts, and changes in the value of foreign currency, the rent may be requested to be determined by the competent authority. The parties have the right to request the adaptation of the lease agreement to new conditions due to excessive difficulty of performance, without any time limit.

b. Rent Determination Lawsuit

According to Article 345 of the TCO, the lawsuit for the determination of the rent can be filed at any time following the expiration of the 5 (five) year lease period. Therefore, this lawsuit can also be filed within the renewed lease period. For lease agreements that have not yet expired 5 (five) years, this lawsuit can only be filed to determine the new rent within the CPI rate limitation.
In the event that a lawsuit is filed at the latest 30 days before the beginning of the new lease period or a written notification is made by the lessor to the lessee regarding the increase of the rent within this period, if the lawsuit is filed until the end of the following new lease period, the rent determined by the court will be binding the lessee as of the beginning of the new lease period.

2. Lessee’s Guarantee (Deposit)

Article 342 of the TCO limits the amount of security deposit that the lessee should pay up to the sum of three months’ rent. This security deposit can be provided in cash or as negotiable instruments. Although the TCO stipulates that the security deposit must be transferred or paid to a savings account that cannot be withdrawn without the consent of both the lessee and the lessor or can only be withdrawn based on a finalized enforcement proceeding/court decision, in practice, it is frequently encountered that the security deposits are given in cash, handed to the lessor or deposited in the lessor’s bank account.

3. Invalidity of Maturity and Penalty Clauses

According to Article 346 of the TCO, in residential and roofed workplace leases, it is prohibited to impose any payment obligation on the lessee, other than the payment of the rent and ancillary expenses (related to common area heating, lighting, cleaning, security expenses, etc.). In this context, any provisions that stipulate the payment of a penalty clause by the lessee in case the rent is not paid on time and that the rent for coming months will become due and payable are invalid.

4. Transfer of Lease Agreement

According to Article 323 of the TCO, even if the transfer of the lease relationship is prohibited, in the case of workplace leases, the lessor cannot refrain from giving consent to this transfer without a justified reason. However, in terms of workplace leases, in case of the transfer of the lease relationship, the responsibility of the transferor lessee continues with the transferee lessee for a maximum period of 2 years.

5. Annotation to Land Registry

In property leases, it is possible to annotate the lease relationship to the land registry. In the event that the lease agreement is drawn up before a notary public, it is possible for the lessee to annotate the lease agreement to the land registry with a unilateral application. If the lease agreement is not drawn up before a notary public (ordinary written lease agreement is concluded), both the lessee and the lessor must apply to the land registry office together in order to annotate the lease agreement to the land registry.

6. Workplace Opening and Operation License (Business License) for Roofed Workplace Leases

In accordance with Article 24 of the Condominium Ownership Law, if the property to be leased for use as a roofed workplace is a recorded as a “residential property” with the land registry, this proposed activity of such workplace must be permitted with unanimous decision of the board of condominium owners.

However, some documents to be provided by the owner/lessor of the property in order to be submitted under all circumstances for obtaining a business license are; (I) copy of the title deed, (ii) certificate of occupancy, (iii) numbering certificate/certified numbering sketch, (iv) subscription notification form, (v) environmental cleaning tax debt-free letter and (vi) fire brigade report that must be obtained from the owner and submitted to the relevant municipality.

In practice, the roofed workplace lease agreements, regulations that impose an obligation on the lessor to provide these documents are added and obtaining a “business license” is regulated as a prerequisite for the continuity of the lease agreement. In the event that these documents are not provided at all or in due time, the lessee’s right to indemnify the damages and the right to terminate the agreement is regulated, and the lessee is entitled to terminate the lease agreement with immediate effect in case of failure to obtain a license to open and operate a workplace. However, this issue is entirely subject to the agreement of the lessee and the lessor and there does not exist any regulation in this scope in the TCO.

Since the information and documents required to obtain a business license may vary depending on many factors such as the nature of the activity to be carried out and the location and nature of the relevant property, information should be obtained from the municipality that will issue the license for each application.

7. Termination of Roofed Workplace Lease Agreements

Pursuant to the TCO, the lessor does not have the right to terminate the lease agreement on the grounds that its term has expired. The cases where the lessor may terminate the lease agreement by filing a lawsuit or initiating enforcement proceedings are limited in the TCC and are as follows; (i) in case of necessity for personal use of the lessor or the new owner, (ii) the leased property requires reconstruction and cannot be used in this process, (iii) the lessee has made an eviction commitment, and (iv) the lessor has issued 2 justified notices to the lessee due to the lessee’s failure to duly pay the rent twice within 1 lease year.

The parties’ right of termination by notice varies depending on whether the lease agreement is for a definite or indefinite term. In this context, according to Article 347 of the TCO;

1. For lease agreements with definite-term
   1. Unless the lessee gives notice of termination at least 15 days before the end of the lease term, the agreement is deemed to be extended for a 1 year term with the same conditions.
   2. The lessor may terminate the agreement without giving any reason only at the end of the 10-year extension period, provided that the lessor gives notice at least 3 months before the end of each extension year following this period.
2. For lease agreements with indefinite term,
   1. The lessee may terminate the lease agreement for the of the 6-month lease period by complying with the 3-month termination notice period.
   2. The lessor may terminate the lease agreement for the end of the 6-month lease period by complying with the 3-month termination notice period. However, the lessor has the right to exercise this right after 10 years from the beginning of the lease agreement.

The lessor’s right of termination after a lease period of 10 years is valid at the end of the 10-year extension period in addition to the initial agreement period determined in the lease agreement. For example, after a lease agreement with a term of 1 year is automatically extended for 10 years, the lessor’s right to terminate by notice arises at the end of the 10th year of extension, which is 12 years after the execution date of the agreement.

Apart from these, some special circumstances such as the lessee’s bankruptcy, death and the lease relationship becoming unbearable are accepted as extraordinary grounds for termination in the TCO.

If the lessee evacuates and returns the leased property by terminating the agreement before the expiry of the term of the agreement -without complying with the termination notice periods- the obligations arising from the lease agreement may continue for a reasonable period of time during which the leased property can be rented under similar conditions. In practice, this period is determined by the courts as 3-4 months and the lessee is required to pay the rent for such 3-4 months.

By Asli Pamukkale, Senior Partner, Aybike Gurcan Arslan and Cerensu Cetin Yenigun, Senior Associates, and Gokce Aksoy, Trainee Lawyer, Moral, Kinikoglu, Pamukkale, Kokenek

The ongoing search for alternative accommodation in Turkey’s tourism sector is transforming the short-term rental of secondary residences into a new branch of trade. This growing practice has prompted Turkey’s Ministry of Culture and Tourism (the “Ministry of Tourism”) to take concrete steps to determine the criteria for the rental of residences to both real and legal persons for tourism purposes.

Thus, on 10 October 2023, with the aim of developing a comprehensive strategy, the Ministry of Tourism submitted its “Legislative Proposal on the Rental of Residences for Tourism Purposes and Amendments to Other Laws” (the “Legislative Proposal”) to Turkey’s parliament. The Legislative Proposal includes regulations on the activities, limitations and sanctions to be carried out in the secondary residence rental sector and aims to protect the peace and order of other condominium owners in residential areas and to prevent possible conflicts between them. In addition, it is also aimed to prevent buildings that cannot be converted into “accommodation facilities” from being used for that function and consequently deteriorating the general texture of the surrounding residential area.

The Legislative Proposal, which also includes amendments to the Tourism Encouragement Law No. 2634 (the “Tourism Encouragement Law”), is expected to be enacted into law in the coming months.

We provide highlights of the Legislative Proposal below.

Regulations Regarding the Rental of Residences for Tourism Purposes

The Legislative Proposal primarily defines the procedures and principles related to the rental of residential properties. Within this framework, it specifies the issuance of permits, administrative sanctions, and legal provisions applicable to residences rented for touristic purposes.

• Rentals of Less than 100 Days are Included in the Scope of the Legislative Proposal

Within the scope of the Legislative Proposal, rentals for tourism purposes are defined as the rental of residences for a maximum period of 100 days and for any purpose.

In Turkey, as employees who work in some sectors usually reside in the places where they work for more than three months, leases for more than 100 days are excluded from the scope.

The legislator has tried to prevent the circumvention of the “100-day” threshold and the obligations to be subject to the Legislative Proposal by stipulating among the sanctions an administrative fine of TRY 1,000,000 (approx. EUR 33,780) on “those who rent out the same residence more than four times within one year as of the date of the first agreement, although they enter into a rental agreement for more than 100 days each time”.

• Permit Certificate Must be Obtained

For those renting before the Legislative Proposal enters into force: Pursuant to Provisional Article 1, those currently renting residences for tourism purposes are required to apply to the Ministry of Tourism to obtain a permit certificate by the end of February 2024. Those that fail to comply with this obligation will be subject to the sanctions listed below.

For those renting after the Legislative Proposal enters into force: Landlords will be obliged to obtain a permit certificate from the Ministry of Tourism, the fee for which will be determined by the Ministry of Tourism, prior to the signing of the relevant rental agreement.

The main rules regarding the permit certificate is expected to be as follows:

• The Ministry of Tourism may also exercise its authority to issue a permit through the provincial governorship.
• It is a requirement that the plaque prepared by the Ministry of Tourism be displayed at the entrance of the relevant residence in parallel with the practice of hotels.
• In permit applications, it is mandatory to present a decision, unanimously adopted by all condominium owners in the building where the relevant independent unit is located, indicating that the rental activity for tourism is deemed appropriate by the condominium owners. In residential complexes consisting of multiple independent units, this requirement will only apply to the building where the residence subject to rental for tourism purposes is located, and a copy of the permit will also be submitted to the site’s management.
• In buildings with more than three independent units, a maximum of 25 percent of the independent units can be issued for one person. For example, in a complex with 40 independent units, if a landlord owns 14 residences, they will be able to obtain a permit for a maximum of 10 residences.
• Permit certificate issuance procedures will be finalised within three months from the date of the application.
• Those whose applications are not accepted will not be able to operate. However, the rights of users will continue until the expiration of the rental agreement.
• The obligation to obtain a permit certificate belongs to the landlord, though it will be possible to benefit from the intermediary services of travel agencies certified in accordance with the law in the execution of activities related to rentals for tourism purposes. 
• The person who rents the residence from the permit certificate holder is prohibited from renting the residence to third parties.

If the Same Landlord Owns More Than Five Independent Units in the Same Building

If the number of independent units subject to the issuance of a permit certificate exceeds five in the same building in the name of the same landlord, the Legislative Proposal requires the landlord to obtain a business license. In this context, the following must be submitted in the application for a permit certificate:

• the business license; and
• if the residence subject to the application is located in a building with more than one independent unit, the decision taken unanimously by all condominium owners.

 

• Identity Notification Obligation

The provisions of the Identity Notification Law will apply to residences for which a permit is issued for rental activities for tourism purposes. For this reason, the permit certificate holder will be deemed to be the responsible person for the notification obligation. Accordingly, the permit certificate holder will be obliged to notify the relevant law enforcement authorities, such as the gendarmerie or police, of the identity information of the occupants of the rental unit through the Identity Notification System.

• Sanctions Stipulated under the Legislative Proposal

The Legislative Proposal includes a detailed sanctions clause for each activity. The regulations regarding the main sanctions are summarised as follows:

• A person renting out a residential unit without a permit certificate shall be sanctioned with an administrative fine of TRY 100,000 (approx. EUR 3,370[2]) for each residence and shall be given 15 days to obtain a permit certificate.
• The person carrying out activities without obtaining a permit certificate within this 15-day period shall be sanctioned with an administrative fine of TRY 500,000 (approx. EUR 16,890) and shall be given another 15 days to obtain a permit certificate to carry out their activities.
• An administrative fine of TRY 1,000,000 (approx. EUR 33,780) shall be imposed on those who continue their activities without a permit certificate, despite the application of these two subparagraphs.
• If the plaque issued by the Ministry of Tourism is not displayed at the entrance of the residence, an administrative fine of TRY 100,000 (approx. EUR 3,370) shall be imposed and a period of 15 days shall be given for the plaque to be displayed.
• If the plaque is not displayed within 15 days, an administrative fine of TRY 500,000 (approx. EUR 16,890) shall be imposed.
• If a person who rented out the residence (with tourism purposes) from the permit holder rents the same residence to third parties on their own behalf and account shall be sanctioned with an administrative fine of TRY 100,000 (approx. EUR 3,370) for each agreement.
• If a person who rented out the residence from the permit holder to use as a housing/residence on its own behalf rents out the same residence to third parties with tourism purposes and as to be on its own behalf shall be sanctioned with an administrative fine of TRY 100,000 (approx. EUR 3,370) for each agreement.
• Intermediary service providers that enable electronic commerce and promotional activities in connection with the rental of a residence for tourism purposes without a permit certificate shall be sanctioned with an administrative fine of TRY 100,000 (approx. EUR 3,370) for each residence.

Articles Amending Other Laws

In addition to activities relating to the renting of a residence for tourism purposes, the Legislative Proposal also amends certain other laws in Turkey, such as the Law on the Cappadocia Area, the Law on the Turkish Tourism Promotion and Development Agency, and the Law on Revolving Funds of the Ministry of Culture.

• The most important of these is Article 13 of the Legislative Proposal, which amends the deadline to obtain a tourism operating license regulated by the Tourism Encouragement Law. The “one year” period stipulated in the relevant article has been shortened to “six months”.

“Accommodation facilities that have been granted a business license by the authorised administration in accordance with the Tourism Encouragement Law are obliged to obtain a tourism operating license from the Ministry of Tourism within six months from the date of obtaining this license.”

In addition, a provisional article has been added to the relevant law. Accordingly, on the date of entry into force of the article, for facilities that have previously obtained a business license but have not yet received a tourism operating license from the Ministry of Tourism, certification will be provided within six months, provided that an application is made within three months. Otherwise, these facilities will not be able to carry out accommodation activities, and their licenses will be cancelled by the authorised administration within one month upon notification by the Ministry of Tourism.

• Another amendment concerns the payment of a “tourism share”: The relevant article regulates that a “tourism share” will be collected from the residences rented for tourism purposes, to be used in the financing of the Tourism Promotion and Development Agency. Accordingly, the landlord is obliged to pay the tourism share as %0.05 of the total rental income during the payment period.

 

By Omer Erdogan, Partner, Gizem Esen, Senior Associate, Berke Yalcın, Associate, and Bahar Bozdemir, Legal Trainee, Kinstellar

Dentons Turkish affiliate Balcioglu Selcuk Ardiyok Keki has advised Iffco Singapore on its acquisition of Felda Iffco Food Industry and Trade in Turkiye.

Felda Iffco Turkiye produces vegetable oils and margarine.

The BASEAK team included Partner Galip Selcuk, Counsel Ali Can Goren, Senior Associate Mert Buberoglu, and Associates Derin Aydin and Orkun Usta.

BASEAK did not respond to our inquiry on the matter.

Turkish lawyer Emre Botan Kumet has joined Copyright Capital as its Head of Legal & Business Affairs in London.

Copyright Capital is a Swiss company that offers a diverse range of licensing solutions to the creator industry, with an estimated market size of approximately USD 100 billion in 2023.

Prior to his move, Kumet was the TV/OTT Content and Platform Director with Turk Telekom, which he joined in 2020. Before that, he worked for Digiturk as its CEO Office Director between 2017 and 2019 and as its Sports Media Rights Director between 2018 and 2019.

Before moving in-house, Kumet was an Associate with Aksu Caliskan Beygo Attorney Partnership and with YukselKarkin.

“After my previous roles at major players in the Turkish pay-TV industry, such as Digiturk and Tivibu, I am exceptionally enthusiastic about embarking on this new journey,” commented Kumet. “I am eager to leverage my legal background and extensive experience in the media sector to provide the best solutions for the creator industry on a global scale through Copyright Capital. As the Head of Legal & Business Affairs, I will be dealing with all legal operations of the company, and contributing to the business development and operations of the company.”

Originally reported by CEE In-House Matters.

Dentons Turkish affiliate Balcioglu Selcuk Ardiyok Keki has advised Hedef Filo on its acquisition of Letgo Mobil. The Amsterdam office of Allen & Overy reportedly advised OLX Autos on the sale.

Hedef Filo is a fleet leasing company.

Letgo focuses on the sale of second-hand vehicles under its Otoplus business and the sale of second-hand goods under its classifieds business and its fully-owned subsidiary Letgo Services.

The BASEAK team included Partners Selahattin Kaya and Sahin Ardiyok, Senior Associate Armanc Canbeyli, and Associates Bener Kadir Mizrak and Furkan Kaya.

Turunc has advised Bogazici Ventures on its investment in Cerebrum Tech.

Cerebrum Tech is a provider of digital transformation solutions with a focus on artificial intelligence, finance, industry, e-commerce, and Web3.

Bogazici Ventures is a Turkish capital markets board-regulated venture capital fund focused primarily on fintech, health tech, retail tech, and gaming.

The Turunc team included Managing Partner Kerem Turunc, Partners Esin Camlibel and Yasemin Erden, and Associates Beste Yildizili Ergul, Naz Esen, Ovgu Kopal, Canberk Taze, and Baran Ezeli.

Turkish firm Erdem & Erdem has announced a new office in the Netherlands has opened for business on October 9, 2023.

The Amsterdam office is the firm’s third, after the inaugural office in Izmir opened in 1986, and the firm’s second office, in Istanbul, opened in 2001.

The new office’s point of contact seems to be Senior Associate Tilbe Birengel. She focuses on arbitration and litigation and has been with the firm since 2016. Earlier, she was a Legal Intern with Gun + Partners, for two years. She has an LLM degree from Leiden University.

“We are expanding our global network with the opening of our new office in Amsterdam, at the World Trade Center,” Erdem & Erdem announced. “We aim to provide more effective legal solutions to our European clients and Turkish clients who want to expand their activities in Europe.”

The Aksan law firm has advised APY Ventures on its investment in Istanbul-based children-focused computer games company Gamester Kids.

Gamester Kids describes itself as a company dedicated to the next generation of innovators, creators, and thinkers. Their most popular title, Tiny Minies, “incorporates simple learning activities that engage and inspire kids to learn through play with everyday cognitive development activities created with educators and child development experts.”

Aksan has already advised APY Ventures on a handful of other investments in 2023 (as reported by CEE Legal Matters on August 31, 2023). 

The Aksan team was led by Partner Alper Onar and included Associate Oguz Madran.

Aksan did not respond to our inquiry on the matter.