The detection of Coronavirus (Covid-19) spread in Turkey , which initiated in Wuhan China during the last months of 2019, and spread quickly  throughout the entire world, has influenced all institutions and organizations in the country.  On March 2, 2020, the worldwide risk level for the Coronavirus was raised to “very high” by the World Health Organization and the infection was classified as a “Pandemic”.

Due to the coronavirus (Covid-19) outbreak, many businesses halted their activities and individuals have become unable to generate cash. It is obvious the pandemic, which has affected the entire world, will likewise affect the current tenant agreements. In this article, we will examine the effect of Coronavirus (Covid-19) on lease agreements.

I. THE IMPACT OF  CORONAVIRUS (Covid-19) PANDEMIC ON RESIDENTIAL LEASE AGREEMENTS

I.1. It is obvious that the Coronavirus (Covid-19) epidemic will not have a negative impact on the continuity of the house lease agreements and the use of the residences in the process.  Experts state that the most effective method of preventing the Coronavirus (Covid-19) epidemic is to stay at home unless there is a very urgent need.

I.2. On the other hand, tenants who are parties of the lease agreements may face situations such as not being able to use the rented property due to having to leave the cities where they are in, or  because of the halt in the functioning of the industries, facing incapability to pay the lease which is one of the essential elements of the lease agreement, due to the Coranavirus (Covid-19) outbreak .  In such cases tenants may be able to claim the postponement of the lease payments in the current lease agreement, to modify the agreement to fit the existing conditions or even termination of the agreement if the conditions exist, as stipulated in the articles 136 and 138 of the Turkish Code of Obligations (“TCO”)  based on the impossibility of performance and hardship which we have explained further in detail in the following sections of our article;

I.3. Furthermore, Clause 1/a of the Law No. 7226 on the Amendment of Several Laws which came into force within the framework of measures taken to counter Coronavirus (Covid-19) epidemic directs that no new debt collection or liquidation proceedings can be filed between dates 13.03.2020 – 30.04.2020 dates (except for alimony payments). Consequently, such enforcement proceedings shall not be initiated for the receivables arising from the residential lease agreements between the dates specified in the law enacted.

II.THE IMPACT OF CORONAVIRUS (Covid-19) PANDEMIC ON WORKPLACE LEASE AGREEMENTS

II.1.  With the circular of the Turkish Ministry of Interior dated 16.03.2020, the activities for a number of workplaces (café, cafeteria, country garden, hookah cafe, internet cafe, all kinds of video game arcade, all kinds of indoor child playgrounds , tea garden, association centers, amusement park, swimming pool, Turkish bath, sauna, hot spring, massage parlor, SPA and sports centers, etc.) have been stopped for a certain period, within the framework of measures taken in our country due to the epidemic of Coronavirus (Covid-19),

Even though there is no decision to stop activities of other businesses outside the extent of the said Circular, due to the existing adverse conditions, they too had to minimize their activities to the lowest possible extent. In this context, some legal questions and problems related to lease agreements have emerged. In order to address these problems, the provisions elaborated hereunder must be considered.

II.2. According to Provisional Article No. 2 of the Law No. 7226, which was enacted on 26.03.2020, within the framework measures taken to counter the effects of Coronavirus (Covid-19),;

“Failure to pay the accrued workplace lease fees for the dates from 01.03.2020 until 30.06.2020 will not constitute basis for the termination of the lease agreement and evacuation of the property.”

II.3. Article No. 315, of the Turkish Code of Obligations (“TCO”) titled “Default of the Lessee” regulates the termination of a lease agreement. The first paragraph of this article is as follows:

“If the Lessee does not fulfill the payment of due lease or the sub-expense payment debt after the delivery of the rented property, Lesser may notify the Lessee with a specific period of time to do so and in the event of the Lessee’s failure to perform within the notification period, the Lesser may issue a termination notice”

According to the regulation in the second paragraph of the same article, the reasonable period to be given is a minimum of 30 days for workplace leases.

 II.4. Again, according to the article No: 352/2 of The Turkish Code of Obligations (“TCO”);

“If the Lessee caused the issue of two justifiable notices due to non-payment of the lease in the agreement leasing period (for less than one-year duration lease agreements) or in one lease year or longer period (for one year or longer period lease agreements), the Lesser can terminate the lease agreement through litigation after the expiration of the lease period (for less than one-year duration lease agreements) or within one month   of expiration of lease year during with notices were issued (for one year or longer period lease agreements)”

 II.5.  Analysis of the above regulations show,  the Turkish Code Of Obligations (“TCO”) entitles the Lesser to terminate the contract and evict the Lessee in the event of failure to pay lease fees.

However, according to the Provisional Article 2 of the Law No. 7226, if the lease fees are not paid between the dates from 01.03.2020 to 30.06.2020, the Lesser is not able to benefit from above mentioned regulations, and “TCO” terms and is not entitled to terminate the lease agreement and pursue the evacuation of the leased property.

II.6.   When the Provisional Article 2 of the Law on the Amendment of Several Laws No. 7226 is reviewed; it becomes evident that the regulation just covers workplace lease agreements and not residential lease agreements. Therefore, the Provisional Article 2 of the Law on the Amendment of Several Laws No 7226 will have no impact on the eviction and termination of the lease agreement from a “residential lease agreement” perspective. It should be noted that the above provision does not nullify the obligation to pay the lease, but only regulates that failure to such will not constitute a basis for termination and eviction.

III.ASSESSMENT OF LEASE DEBTS IN TERMS OF DEBT COLLECTION PROCEEDINGS

III.1. Review of the Provisional Article 1 / a of Law No. 7226  shows it precludes initiation of new debt collection and liquidation proceedings between dates13.03.2020 – 30.04.2020 dates (except for alimony payments) Therefore, collection proceedings will not be initiated until 30.04.2020 for lease fee receivables as well. Proceedings for uncollected lease fees shall resume after this date.

IV.  ASSESSMENT OF CORONAVIRUS (Covid-19) PANDEMIC IN TERMS OF FORCE MAJEURE

IV.1. In workplace lease cases, the parties may request modification of the existing lease agreement to new terms or suspension of such, based on the agreement and various law provisions. If there are clear provisions in the lease agreement that accommodate force majeure conditions, modification, and impossibility to execute; such provisions should be reviewed and enforced. Furthermore, regardless of whether such provisions exist in the current agreement, the provisions of the law described below should be taken into consideration.

IV.2. According to the 138th article of the Turkish Code of Obligations (“TCO”);

“If an extraordinary situation which is not foreseen by the parties at the time of the agreement and which is not possible  to be anticipated, arises from a reason not due to the debtor and changes the existing facts at the time against the debtor in such a way that expectation to execute the contract by the debtor breaches rules of honesty, If the debtor has not yet fulfilled its obligations or fulfilled such, reserving its rights arising from the excessive difficulty to perform, the debtor shall have the right to request the judge the modification of the agreement to the new conditions and to revoke the agreement where such modification is not possible. As a rule, in contracts of continuing obligations debtor shall terminate the agreement in lieu of revoking. This provision also applies to debts in foreign currencies.”

Based on this provision, the Lesser can request from the court through a lawsuit the modification of the lease agreement due to these new conditions. The court will evaluate and decide per each case, taking into considering independently the conditions of the circumstance.

IV.3. According to the Article 136 of the Turkish Code of Obligations (“TCO”);

“If it is impossible to perform all the obligations under the contract due to reasons that are not attributable to the debtor, the debtor shall be relieved from performing the related obligations…”

Based on this provision, it is argued that in the cases of workplaces that necessarily suspended their activities due to the measures taken by the administration, the Lesser can be relieved the obligation to pay the lease, during the continuation of such administrative suspension.

IV.4. Termination of the lease agreement based on previously mentioned provision, is possible only in the case that, however temporary the situation might be, expectation to continue performing the agreement shall be deemed unjust, and provided that the parties had tolerated the agreement for a certain period of time (agreement tolerance period).

If the Lesser shall use this provision, he must notify the Lessee at the earliest.  For this notice, lease payment due date milestone is not required. As per the same provision, the Lessor must likewise take the fundamental measures to avoid damages to the Lesser.

CONCLUSION

The Coronavirus (Covid-19) pandemic has revealed the obligation to reinterpret agreements signed between the parties in many sectors. It is very important for the parties to know their rights in terms of lease agreements.