For owners who let residential or commercial premises, the dispute that arises most frequently is the failure to pay the rent on time. In such a situation it is of great importance that the creditor be able to reach a result without embarking on lengthy and costly litigation. Article 269 of the Enforcement and Bankruptcy Act No. 2004 answers precisely that need; it allows rent claims to be collected directly through the enforcement offices.
Below we examine, stage by stage, the process of collecting rent arrears through enforcement, the conditions on which the proceedings rest, the forms of application and the rights of both the lessor and the tenant during the process.
The Statutory Basis of the Proceedings
Article 269 of the Enforcement and Bankruptcy Act No. 2004 affords the lessor the opportunity to collect the rent debt by applying directly to the enforcement office without first obtaining a judgment. The thinking behind the provision is that claims which are regular and continuing in nature, such as rent, should be recoverable at low cost, swiftly and effectively.
The scope of the provision is not confined to leases of dwellings and roofed workplaces; ancillary claims arising from the operation of the immovable may also be assessed within this framework. Service charge or common expense debts arising in connection with the lease relationship can in most cases be made the subject of the same proceedings. In this way the lessor’s rights are secured while a payment order can be served on the tenant through the enforcement office without proceeding to the litigation stage.
Avenues Available for the Collection of Rent
Two separate methods exist for the collection of rent:
- Enforcement without judgment (Enforcement and Bankruptcy Act No. 2004, Art. 269): This is the avenue most often preferred in practice and the one that produces the fastest result. The lessor produces the lease agreement to the enforcement office and requests that a payment order be issued against the tenant. If the tenant does not object within seven days, or if the objection is found to be procedurally defective, the proceedings become final and the attachment stage is reached.
- Action for payment: Under Article 315 of the Turkish Code of Obligations No. 6098, the lessor may allow the tenant a period of at least 30 days and notify the tenant that the agreement will be terminated if payment is not made, and may bring an action for the recovery of the claim. If the action succeeds, the judgment obtained forms the basis for enforcement proceedings on a judgment. Because it requires litigation, however, this method takes longer and gives rise to higher costs than enforcement without judgment.
The Conditions Required and the Documents to Be Submitted
In order to resort to enforcement without judgment, a number of conditions laid down by the legislation, foremost among them Article 269 of the Enforcement and Bankruptcy Act No. 2004, must be satisfied. A defect may lead to the request being refused or, where the tenant objects, to the creditor losing the action.
The Existence of a Lease Agreement
It is important that a written lease agreement exist, both as the basis for the proceedings and in order to facilitate proof. Proceedings may nevertheless be commenced on the basis of an oral lease relationship. If the tenant does not expressly contest the lease notified in the request for enforcement, the lease relationship is deemed to have been accepted; in that event the avenue of setting aside the objection or of annulment of the objection may be taken in order to recover the claim.
- Notarised agreement: Preferred because it facilitates proof and eliminates the possibility of a denial of signature.
- Simple written agreement: Texts signed by the parties between themselves also produce legal effect.
- Oral agreement: Unless the tenant expressly and unequivocally denies the lease relationship in the objection, the agreement is deemed to have been accepted.
A reminder: cases are encountered in which tenants attempt to prolong the process by denying the signature. Agreements certified before a notary remove that possibility from the outset.
The Debt Must Have Fallen Due
The time for payment of the rent pursued in the proceedings must have passed. Proceedings cannot be commenced for claims that have not yet fallen due.
- As regards monthly rent, the due date stipulated in the agreement must have expired. If no due date is provided for in the agreement, the month in question must have come to an end.
Signature and Stamp Duty
Every lease agreement drawn up in writing is subject to stamp duty under the Stamp Duty Act.
- Payment of the duty lends the agreement an official character.
- The great majority of enforcement offices do not accept agreements on which stamp duty has not been paid, and allow the creditor a period in which to remedy the defect.
How Do the Proceedings Progress?
The collection of rent through enforcement begins with the lessor’s application to the enforcement office and passes through the following stages.
Drawing Up the Payment Order
The process opens with the lessor’s application to the enforcement office. The written lease agreement, if any, is submitted together with the other documents, and it is stated which periods the unpaid rent relates to. Upon that request the enforcement office prepares a payment order in the tenant’s name.
The payment order sets out in detail the rent debt for which the tenant is liable together with any default interest. In practice the rent for each month is written on separate lines period by period, so that the tenant can see clearly for which months the debt is owed, how much must be paid and what the total sum is. The order also states that a seven-day period for payment is allowed and warns that, if payment is not made within that period, attachment will be resorted to.
Service of the Payment Order
The payment order that has been prepared must be delivered to the tenant in due form. The provisions of the Notification Act apply at this stage. Service is most often effected through the postal administration (PTT); if the tenant has a registered electronic service address on the UETS system, the order is sent directly to that address.
Service is directed first to the address notified by the tenant in the lease agreement. If the tenant has left that address, the residence address recorded in the MERNİS registry may be used; if the tenant is a legal person, service may be effected at the head office address recorded in the trade registry.
The address to which, and the manner in which, service is effected are decisive for the sound progress of the proceedings. This is because the tenant’s right of objection and the period for payment begin to run from the date of service. Where service has been irregular, the tenant may subsequently resort to a complaint and secure the annulment of the proceedings.
The Tenant’s Right to Object
From the moment the payment order is served, the tenant is allowed a period of seven (7) days in which to object. Within that period the tenant may apply to the enforcement office and object to the proceedings for enforcement without judgment.
The objection need not be reasoned in detail; even a declaration in the form “I object” suffices to stay the proceedings. In practice, however, objections generally fall under the following heads:
- Objection to jurisdiction: It is asserted that the proceedings were brought before an enforcement office lacking jurisdiction.
- Objection to the debt: It is argued that the debt never arose, that it has been paid or that it has been calculated incorrectly.
- Objection to the interest or the amount: Opposition is expressed to the sum claimed or to the calculation of interest.
- Objection to the lease and the signature: The existence of the lease relationship or the signature on the agreement is denied.
If no objection at all arrives within seven days, the proceedings become final and the creditor may request attachment. Conversely, the moment an objection is made the proceedings are stayed automatically. At that point, in order to take the process forward, the lessor must apply to the courts, that is, resort to setting aside the objection or to annulment of the objection.
As will be seen, this stage determines the fate of the proceedings: where no objection is made the process moves rapidly towards attachment, whereas where an objection is made the dispute is turned into a matter for litigation.
The Process Where an Objection Is Made and Where It Is Not
Where the tenant does not object, the proceedings become final within a short time. If the debt is paid the file is closed; if neither payment nor objection is forthcoming, the proceedings are deemed to have become final. At that stage the lessor may ask the enforcement office to levy attachment on the debtor’s assets, and the process moves into the phase of attachment and conversion into money.
Where the tenant objects within seven days, on the other hand, the proceedings are stayed automatically. In order to proceed, the lessor must follow a course that will dispose of the objection. Two methods may be used for that purpose:
- Action for setting aside the objection: This is heard before the enforcement court. The lessor seeks to establish the existence of the debt on the basis of conclusive evidence such as a written lease agreement. It is generally the avenue that produces a result more quickly.
- Action for annulment of the objection: Where the creditor cannot resort to setting aside the objection, or does not hold sufficient written documents, this action may be brought before the general courts — the Civil Court of Peace. The litigation process is, however, longer.
Attachment and Conversion into Money
Once the proceedings have become final, the creditor may apply to the enforcement office and request that attachment be levied on the debtor’s assets. This is the most decisive stage as regards the actual recovery of the claim.
Assets That May Be Attached
- Bank accounts: The tenant’s deposit accounts or accounts receiving regular income may be made the subject of attachment.
- Attachment of salary: Attachment may be levied on one quarter of the tenant’s salary. Where there is more than one salary or source of income, a deduction at the same rate may be made.
- Movable property: Vehicles, valuables or assets belonging to a commercial undertaking may be attached by the enforcement officer.
- Rights and claims: The tenant’s rights and claims against third parties also fall within the scope of attachment.
- Immovable property: Immovables such as a dwelling, land or business premises may be placed under attachment with a view to meeting the debt.
Following attachment, the assets are sold by the enforcement office at public auction. The costs of enforcement are met first out of the sale proceeds, and the balance is paid to the creditor.
Assets and Rights Kept Outside Attachment
In order that the debtor may sustain a life consistent with human dignity and that the basic needs of the debtor’s family may be protected, certain assets and rights have been placed outside the scope of attachment. These exceptions appear in the provisions concerning Article 82 of the Enforcement and Bankruptcy Act No. 2004.
The principal assets and rights that may not be attached:
- Household goods: Household goods appropriate to the debtor’s standard of living — such as an armchair, a bed or kitchen equipment — may not be attached.
- Essential personal effects: Clothing, bedding and articles of daily use belonging to the debtor and the debtor’s family fall within this scope.
- Tools of a trade or occupation: The tools and equipment necessary for the debtor to carry on an occupation; a physician’s stethoscope, a lawyer’s computer or a taxi driver’s vehicle may be given as examples. Goods of high luxury value or used otherwise than for their principal function may not benefit from this protection.
- Two months’ food and fuel: Food and fuel in a quantity sufficient to meet the two-month needs of the debtor and the debtor’s family are outside attachment.
- Farmers’ means of production: Tractors, animals and equipment essential for agricultural activity to be carried on are protected from attachment to the extent needed for the debtor’s livelihood.
- The portion of salary outside attachment: Only one quarter of a salary may be attached; the remainder is left for the debtor’s livelihood. Different exceptions apply in respect of maintenance claims.
- Payments in the nature of social assistance: Disability allowances, widow’s and orphan’s allowances, student grants and social assistance provided by the State may not be made the subject of attachment.
An important reminder: this protection is limited by the principle of “proportionality”. Its purpose is to secure the debtor’s livelihood; goods in the nature of luxuries do not fall within its scope. If, for example, a dwelling contains a second refrigerator of a luxury character alongside one meeting basic needs, the second may be attached.
Proceedings to Be Pursued Against the Guarantor
One of the principal ways in which a creditor secures its position in lease agreements is by including a guarantor in the agreement. In practice lessors ask the tenant to provide a guarantor against the possibility that the rent may not be paid. In this way, if the debt is not paid, the creditor may turn directly to the guarantor.
The Formal Conditions of the Guarantee
The Turkish Code of Obligations lays down a number of formal requirements for a guarantee to be regarded as valid:
- The amount of the debt and the scope of the guarantee must be shown clearly.
- The guarantor must write the word “guarantor” on the agreement in his or her own handwriting and sign it.
- If the guarantor is married, the guarantee may be regarded as invalid unless the written consent of the spouse has been obtained.
The Scope and Duration of the Guarantor’s Liability
The guarantor’s obligation is limited to the term provided for in the lease agreement.
- Under a lease agreement drawn up for one year, the guarantor is held liable only for the rent debts arising within that one year.
- Where the agreement is tacitly extended under the Turkish Code of Obligations No. 6098, the guarantee is not accepted as continuing automatically. The guarantor may not be pursued for rent claims relating to the extended periods.
- If the parties have expressly agreed that the guarantee is to cover the extended periods as well, liability may continue.
Commencing Enforcement Proceedings Against the Guarantor
Where the tenant fails to pay the debt, the creditor may produce the lease agreement to the enforcement office and commence proceedings against both the tenant and the guarantor.
- The payment order is served on both debtors, that is, on the tenant and on the guarantor.
- Since the guarantor is jointly and severally liable together with the tenant, the creditor may claim the whole of the debt from the guarantor.
- The guarantor, like the tenant, may raise an objection to the debt, to the lease or to jurisdiction within 7 days.
Points to be observed in practice
- Where the formal requirements have not been complied with, the guarantor may be released from liability.
- Agreements drawn up before a notary forestall disputes as to validity that may arise later.
- The creditor should be aware that no recovery can be made from the guarantor where the agreement has been extended. For that reason the duration and scope of the guarantee must always be set out clearly when the lease agreement is concluded.
In short, the guarantor is liable for the tenant’s debt throughout the term agreed in the agreement. Where the agreement is extended, that liability does not continue automatically in the absence of an express provision to the contrary. Although a guarantee constitutes strong security from the lessor’s point of view, its duration and scope must be determined with care.
Independent Legal Assessment
In proceedings for rent arrears, the factor determining the outcome is most often not the existence of the claim but the preparation of the file at the outset. An agreement on which stamp duty has not been paid, periods shown incompletely, or service issued to the wrong address may cause a creditor who is essentially in the right to be held up for months. Drawing up the request for enforcement so as to show the rent for each month separately also strengthens the basis for a request to set aside the objection at later stages.
From the tenant’s point of view, it is decisive that the objection be made within the seven-day period and under the correct head. In particular, a failure to raise objections concerning jurisdiction and the lease against the payment order may result in those defences not being entertained at later stages.
In a particular file, priority should be given to the following matters:
- Completing the stamp duty obligation on the agreement before the proceedings are commenced
- Showing the rent periods, the interest accrued and any ancillary claims separately in the request for enforcement
- Verifying the address for service in advance against the agreement, the MERNİS records and the trade registry records
- Where the agreement contains a guarantee, examining at the outset the duration of the guarantee and the provision relating to extended periods
- Assessing, against the possibility of an objection, whether the documents held are suitable for the avenue of setting aside the objection
- Selecting the type of proceedings accordingly where a claim for eviction may also arise
Independent Legal provides advisory and litigation services in disputes of enforcement law, in particular the pursuit of claims arising from lease relationships, the conduct of objection proceedings and the assessment of liability based on a guarantee.