New Amendment on The Increase Limit of The Residential Rental Contracts: The Increase Rate Cannot Exceed 25%

Introduction

As per the article 344/1 of the Turkish Code of Obligation numbered 6098 (“Law No. 6098”), within the scope of the rental contracts of residentials and roofed workplaces, the parties can agree on the increase rate of the rental fee under the condition which is not to exceed the rate of change according to the twelve-month averages in the consumer price index in the previous rental year.

A major change has been made by article 4 of The Law Amending the Attorneyship Act Numbered 1136 and Turkish Law of Obligation numbered 7409 (“Law No.7409”) only for the residential rental contracts. With said regulation, a temporary article with the article number “Temporary Article-1” has been added to Law No.6098. The agreements on the increase rate are valid unless the increase rate does not exceed %25 of the previous year’s rental fee between the dates of 11.06.2022 – 01.07.2023. It is also regulated that in case the rate of change according to the 12 months averages in the consumer price index in the previous rental year is lower than 25%, the rate of change according to the twelve-month averages in the consumer price index in the previous rental year will be valid as the upper limit.

Former Circumstance

Before the amendment, the parties to the residential rental contract could freely determine the rate of increase of the rental price in the contract, provided that it does not exceed the limit set in Article 344 of Law No. 6098. The limit was calculated upon the rate of change according to the twelve-month averages in the consumer price index in the previous rental year. This limit was valid for both residential and roofed workplace rental contracts. In cases where the rate of increase in the rental fee was not specified in the rental contract, the increase rate of the rental fee was decided by the court, provided that the same limit was adhered to.

Recent Circumstance

After the amendment, between 11.06.2022 – 01.07.2023, a two-pronged situation occurred in terms of the limit of rent increase rates of residential rental contracts.  In the first scenario, if the change rate in the consumer price index of the previous rental year is above 25% compared to the twelve-month averages, the maximum rental increase rate that the parties can agree on will be 25%.

For the same period, in the second scenario, if the change rate in the consumer price index of the previous rental year is below 25% compared to the twelve-month averages, this rate will be applied as the rent fee increases upper limit.

This change will not be applied to the rental contracts of the roofed workplaces, and under Article 344 of Law No. 6098, the annual increase limit for roofed workplace rents will continue to be applied to the rate of change according to the twelve-month averages in the consumer price index in the previous rental year.

As a result of this amendment, between 11.06.2022 - 01.07.2023, rental price increases that will be made above the increase limit to be determined as stated above in residential rental contracts will be deemed invalid.

Accordingly, the excess rent increase fees collected by the landlords will constitute unjust enrichment. For this reason, for the landlords, there is a risk of facing lawsuits demanding to repay the overpaid amount with its legal interest within two years.

Conclusion

Based on the new amendment, between 11.06.2022 and 01.07.2023, the increase rate for the residential rental contracts cannot exceed to %25. But it should be noted that in case the rate of change in the consumer price index of the previous rental year compared to the twelve-month averages is under %25, this rate of change will be taken as the upper limit of the rental fee increase rate.

This amendment will not be implemented in terms of roofed workplace rental contracts, and article 344 of Law No. 6098 will continue to be applied in terms of roofed workplace rental contracts.

This amendment creates a risk of refunding the over-collected amount per the provisions of unjust enrichment, in case the rent fee increase is realized above the limit brought by the amendment for the landlords.