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The Cap on Rental Increase Rates for Residential Leases Has Been Extended Until July 2024

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With the provisional article added to the Turkish Code of Obligations No. 6098 ("TCO") by the Law No. 7409 on the “Amendment of the Attorneyship Law and the Turkish Code of Obligations”, which entered into force after being published in the Official Gazette dated June 11, 2022 and numbered 31863, it was regulated that the cap for rent increase rate to be applied to the rent for the lease periods to be renewed between June 11, 2022 and July 1, 2023 shall be 25%, limited only to residential leases.

The maximum rent increase rate has been extended until July 1, 2024 within the scope of the Article 23 of the Law No. 7456 on the Issuance of Additional Motor Vehicles Tax for the Compensation of Economic Losses Caused by the Earthquakes Occurred on February 6, 2023 and Amendments to Certain Laws and Decree Law No. 375 ("Omnibus Bill"), which entered into force upon its publication in the Official Gazette dated July 15, 2023 and numbered 32249.

Scope of the Regulation

According to the provisional article 2 added to the TCO as per Article 23 of the Omnibus Bill, it is stipulated that the agreements regarding the rent to be applied in the rental periods renewed between (and including) July 2, 2023 and July 1, 2024, limited to residential leases, shall be valid, as long as such rental increase rate does not exceed 25% of the rent of the previous lease year.

However, within the same provision, it is stipulated that if the rate of change, based on the average of the last twelve months of the Consumer Price Index ("CPI") of the previous rental year, remains below 25%, this change rate will be applicable. In the case of exceeding this maximum rate, the excess amount shall be deemed invalid in terms of the limitation.

Additionally, in cases where the lessor and the lessee cannot agree on the rate of rent increase, due to the provision of the TCO Article 344/2 (which is the provision for indexing, and the judge can only decide on increasing/indexing the rent amount based on the change rate in the CPI), the aforementioned 25% limitation shall continue to be valid in situations where the rate is determined by the judge within the scope of a rental determination lawsuit. Accordingly, in cases where the lessor and the lessee have not reached an agreement regarding the rental fee increase in the lease contract, the aforementioned 25% upper limit shall be applicable. It should be underlined that this regulation will also be valid for lease agreements with a term longer than one year.

On the other hand, this regulation shall not be applicable in the following cases:

  • In residential lease agreements where the rental price is agreed in foreign currency,

  • Residential leases for a term longer than five years or renewed after five years,

  • Lease agreements for roofed workplace leases,

  • Residential leases renewed outside the period between June 11, 2023 and July 1, 2024.

By Cerensu Cetin Yenigun, Senior Associate, and Dilara Atilgan, Trainee Lawyer, Moral, Kinikoglu, Pamukkale, Kokenek

Turkey Knowledge Partner

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