An action brought to have the rent redetermined within the framework of the statutory criteria is known as a rent determination action. The most frequent reasons for such an action in long-running lease relationships are that the rent being paid has fallen appreciably below market value, or that the parties have been unable to reach common ground on an increase.
The criteria by which the rent is to be determined, and the circumstances in which the court may set a new figure, are governed by Article 344 of the Turkish Code of Obligations No. 6098. The rent determination action therefore operates as an instrument serving to restore, by legal means, an economic balance that has been eroded over time.
Below we examine, under their principal headings, the conditions in which the action may be brought, the bearing of the date of filing on the outcome, the data taken as the basis for determining the rent, and the way the proceedings unfold.
What Is a Rent Determination Action?
In residential and roofed workplace leases that have run for more than five years, the rent may be determined by the court in line with current market conditions, whether or not the parties have made any agreement to that effect. An action seeking such a determination is called a rent determination action.
In practice the action arises in two typical situations: where the rent must be readjusted in accordance with the statutory criteria, and where the parties cannot agree on the rent to apply in the new period. In both cases the claim is directed solely at the rent, leaving the existence of the agreement untouched.
Statutory Basis of the Action
The rent determination action has its basis in Article 344 of the Turkish Code of Obligations. The provision reads as follows:
Turkish Code of Obligations Art. 344
“Irrespective of whether the parties have made an agreement on the matter, in lease agreements with a term of more than five years or renewed after five years, and at the end of every five years thereafter, the rent to be applied in the new lease year shall be determined by the judge in a manner consistent with equity, having regard to the rate of change in the twelve-month averages of the consumer price index (CPI), the condition of the leased property and comparable rents.”
The purpose of the provision is to prevent the rent from remaining fixed over many years and thereby distorting the economic balance between the parties. The legislature has allowed the rent to be updated at set intervals and has left it to the parties to seek that update from the court.
Legal Nature of the Action
The rent determination action is a declaratory action of a special nature whose object is to have the court fix the rent to be applied under a continuing lease agreement. The proceedings do not concern the existence or validity of the lease relationship; the only thing determined is the amount of the rent to apply while the agreement remains in force.
The action is not an action for performance in the classic sense; the judgment merely sets out what the rent ought to be. For that reason the collection of rent arrears cannot be sought in the same action; enforcement proceedings must be brought separately for collection.
That said, the rent determination action departs from ordinary declaratory actions in one respect: it does not confine itself to establishing the existing position but also alters the terms on which the agreement will operate going forward.
Its nature may be summarised as follows. The action is a declaratory action; unlike other declaratory actions, however, it carries a constitutive effect. The judgment contains no order for performance, since its subject matter is the determination of the rent rather than its collection. By virtue of that structure, the judgment cannot on its own be made the subject of enforcement based on a court judgment.
In scholarly writing and in judicial practice the rent determination action is accordingly characterised as “a declaratory action with constitutive effect”.
Conditions for Bringing the Action
The court may redetermine the rent only where a series of conditions are met together. Those conditions have taken shape under Art. 344 of the Turkish Code of Obligations and the settled case law of the Court of Cassation.
Existence of a Valid Lease Agreement
First, there must be a legally valid lease relationship between the parties. That relationship need not rest on a written instrument; agreements formed orally are equally capable of founding an action.
The absence of a written document is not in itself a bar. In such a case, however, both the existence of the lease relationship and the amount of rent paid must be established by witness testimony, bank records or other suitable evidence.
The Lease Relationship Must Be Ongoing
The action may be brought only in respect of lease relationships that are still in force. If the agreement has been terminated or the leased property vacated, there is no longer any benefit in redetermining the rent and this route is unavailable.
Accordingly, no action may be brought where the tenant has vacated the property, where the agreement has come to an end, or where the lease relationship has ceased in fact. In short, the rent determination action seeks a determination directed not at the past but at the continuing relationship.
Legal Interest
The claimant must have a legal interest in taking this course. As in every action, legal interest is here a procedural requirement and is considered by the court of its own motion.
Completion of the Five-Year Period
The most common reason for bringing the action is that the lease relationship has passed its fifth year. Once that threshold is crossed, the determination of the rent is no longer confined to the CPI figure.
From that stage onwards the court arrives at a figure consistent with equity by weighing together the location of the property, its nature, the purpose for which it is used and comparable rents in the area. The expiry of five years therefore constitutes a critical legal turning point in enabling the rent to be brought into line with the market in long-running lease relationships.
Notice and Notification
Serving a formal notice or written notification on the other party is not a prerequisite for bringing the action. It is nevertheless important procedurally, because it directly affects the period from which the rent determined by the court will take effect.
Under Art. 345 of the Turkish Code of Obligations, one of two alternatives must be satisfied for the rent applicable in the new period to be determined: the action must have been brought at least thirty days before the start of the new lease period, or written notification must have been given to the tenant within that same period. Where one of these conditions is met, the rent determined by the court applies from the beginning of the new period. Otherwise the figure determined takes effect not in the current period but only from the following lease period.
Where the Agreement Contains an Increase Clause
If the lease agreement contains a provision for the rent to be increased, there is no need to serve a separate notice before bringing the action. Under the second paragraph of Art. 345 of the Turkish Code of Obligations, where the agreement stipulates that the rent will be increased in the new period, the action may be brought up to the end of the new lease period and the rent determined by the court applies from the beginning of the current period.
Put differently, the presence of an increase clause removes the requirement of prior notification. The landlord may in that case bring the action even after the new period has begun, and the rent determined is treated as effective from the start of that period.
Where the agreement contains no provision at all as to increases, the picture changes: for the action to produce effects in respect of the current period, it must have been brought, or written notification must have been given to the tenant, at least thirty days before the start of the new period.
Meaning and Calculation of the Five-Year Period
If 5 years have elapsed since the beginning of the lease relationship, the rent is not tied to the CPI rate alone; it may be determined within the framework of the principle of equity and fairness, having regard to comparable rents, the characteristics of the property and general market conditions.
Five years is a threshold in terms of the criteria to be applied. Whereas in the first five years of the relationship any increase is as a rule limited to the CPI rate, once that period has run the rent may be readjusted on the basis of comparable data and the standard of equity.
Determining the Commencement Date
The moment taken as the basis for calculating the period is the date on which the lease relationship actually arose. In most cases this corresponds to the commencement date written in the agreement; in some cases the day on which the leased property was in fact handed over may be decisive.
The fact that more than one agreement has been drawn up between the parties, or that the agreement has been renewed or the rent altered, does not mean that a new lease relationship has been formed. The commencement date of the first agreement is therefore taken into account in the calculation.
The point not to be overlooked here is whether the rent agreed in the renewal agreement is consistent with comparable rents and current market values. If the rent in the renewal has remained below comparable rents and market values, the period continues to run from the first agreement. If, on the other hand, the renewal was made solely in order to bring the rent up to the level of comparable rents and market values, the five-year period runs from the date of renewal.
Calculation in Renewed Agreements
In fixed-term lease agreements, if the parties continue the relationship once the term expires, the agreement is deemed extended on the same terms. Such year-on-year extensions do not have the effect of forming a new agreement.
The annual renewal of the agreement or an increase in the rent therefore does not reset the five-year period. The period is calculated without interruption from the date on which the relationship was first formed.
Criteria Applied in Determining the Rent
The rent determined by the court does not rest on a single item of data. Under Art. 344 of the Turkish Code of Obligations, the assessment takes in the terms of the agreement, the statutory ceiling on increases, comparable rents, the physical and legal characteristics of the leased property and the principle of equity and fairness, all together.
Within that framework the court seeks to reach an objective outcome having regard to the particular circumstances of the case; the aim is to find a reasonable middle ground between market realities and the contractual balance between the parties. At this point the comparable lease agreements the parties place on the file carry decisive weight.
The CPI Rate and the Statutory Ceiling
In the first five-year segment of the agreement the basic criterion is the rate of change in the twelve-month averages of the consumer price index. That rate at the same time forms the statutory ceiling on any increase.
Even where the parties have agreed a rate of increase in the agreement, that rate may not exceed the CPI rate to the tenant’s detriment. Accordingly, in determination actions heard within the first five years the court is as a rule bound by the CPI rate when fixing the rent.
The provision in question is mandatory in character and is intended to protect the economic balance of the lease relationship and, in particular, the tenant against excessive increases. The increase provisions capped at 25% that remained in force between 2022 and 2024 are also reserved.
Investigation of Comparable Rents
One of the weightiest criteria in determining the rent is the investigation of comparables. Through a court-appointed expert, the court examines the rents of properties located in the same area, bearing similar characteristics and let at around the same time, and takes that data as the basis of its assessment.
In identifying comparables, regard is had together to the area in which the property is situated, whether it is used as a residence or as a workplace, its floor area and physical characteristics, and the date on which it was let together with the terms of that agreement. This examination plays a decisive role in ensuring that the rent is determined objectively and in line with market realities.
Location, Physical Features and Use of the Leased Property
The assessment is not confined to the area alone; the specific characteristics of the property and the way it is used are also taken into account. The court and the court-appointed expert weigh together all the factors bearing on the economic value of the leased property.
The matters that stand out in this context include the location of the property and the characteristics of its surroundings, transport links and commercial activity in the area, the floor area, usable space and physical condition of the leased property, the age of the building together with its standard of maintenance and its technical characteristics, and finally the purpose to which the property is dedicated, such as residence, workplace or warehouse.
These factors are assessed together with the comparable data in an effort to arrive at the true economic value of the leased property.
The Principle of Equity and Fairness
The final and decisive criterion in determining the rent is the principle of equity and fairness. Under Art. 344 of the Turkish Code of Obligations, particularly where the five-year period has been exceeded, the court is not bound by purely numerical data; it is obliged to reach an outcome consistent with equity, having regard to all the features of the case.
The function of the principle is to strike a fair balance between the parties. Rather than simply equating the existing rent with comparable rents, the court fixes an appropriate figure taking into account the tenant’s use of the property, the duration of the agreement and the continuity of the lease relationship.
In practice the principle most often takes concrete form as follows: a reduction of a certain proportion ( 5% – 20% ) is applied to the figure arrived at on the basis of comparables, having regard to the tenant’s existing use and in particular to how many years the tenant has occupied the property.
Procedure and the Course of the Proceedings
The rent determination action is in the nature of a declaratory and monetary dispute arising from a lease agreement and is subject to particular rules of procedure. The process comprises the stages of a mandatory application to mediation before the action, the determination of subject-matter and territorial jurisdiction, the taking of evidence and the expert examination.
Mandatory Mediation
Recourse to mediation before the action is brought is a procedural requirement under the Act on Mediation in Civil Disputes No. 6325 and the related legislation. If the court is approached directly without completing this stage, the action is dismissed on procedural grounds.
In the mediation process the parties may settle on increasing or redetermining the rent. If no settlement is reached, a final record is drawn up; that record is the mandatory document required for the action to be brought.
Subject-Matter and Territorial Jurisdiction
As the dispute arises from a lease agreement, subject-matter jurisdiction lies with the Civil Court of Peace. Since jurisdiction is a matter of public policy, it is considered by the court of its own motion at every stage of the proceedings.
As to territorial jurisdiction, a choice may be made between the court of the place where the leased property is situated and the court of the respondent’s domicile. In practice the court of the place where the property is situated is usually preferred, in order to forestall any argument that might arise later.
Evidence and Expert Examination
Because determining the rent calls for a technical assessment, recourse to a court-appointed expert has become the rule in practice in these actions.
The matters investigated through the court-appointed expert include comparable rents in the area, the physical and economic characteristics of the property, the purpose for which it is used and the general picture of the local rental market.
The parties, for their part, may place on the file the lease agreement, any comparable agreements in their possession, land registry records, records of on-site examination and any other evidence capable of shedding light on the dispute.
Court Fees and Litigation Costs
Certain fees and costs must be met when the action is brought and as the proceedings continue. Since the action is a declaratory action aimed at determining the rent, the fee regime differs from that of ordinary actions for performance.
The fee is calculated not on the whole of the rent in dispute but on the difference between the rent at the date of the action and the rent claimed. On the other hand, because an expert examination and an on-site examination are usually unavoidable, litigation costs may run higher than in many other types of action.
How the Fee Is Calculated
The fee payable is a proportional fee and is calculated on the value in dispute. The value in dispute is the annual equivalent of the difference between the existing rent and the rent claimed.
The following data are taken as the basis of the calculation, in order: the monthly rent currently paid, the monthly rent claimed, the difference between those two figures, and the twelve-month total of that difference. Setting out the relief sought clearly in the statement of claim is also essential if the fee is to be calculated correctly; a claim left indeterminate causes difficulty both as to the fee and as a matter of procedure.
Consequences of a Rent Determination Judgment
The judgment does not bring the agreement to an end; it is in the nature of a declaratory judgment setting out the rent to be applied in the continuing relationship. The judgment alters only the rent element of the agreement, and the lease relationship continues on its other terms.
The date from which the rent determined takes effect, the finality of the judgment, the collection of the resulting difference and whether interest may be claimed on that difference constitute the most important legal consequences of the judgment.
Effect of the New Rent and Continuation of the Agreement
The court fixes the new rent having regard together to comparable rents in the area, the characteristics of the property and the principle of equity and fairness. The figure fixed represents the rent to be applied while the agreement between the parties continues.
The judgment neither brings the agreement to an end nor forms a new lease agreement. Only the amount of the rent is determined, and the relationship continues to operate on that new figure.
Finality of the Judgment
If an appeal is lodged, the judgment cannot be enforced before it becomes final. The judgment must therefore become final before the difference arising from the rent determined can be collected.
The parties may pursue an appeal and an appeal on points of law against the judgment. Once those stages are complete, the judgment becomes final and the new rent becomes legally binding.
Claiming the Rent Difference
Where a difference has arisen between the rent determined by the court and the amount actually paid by the tenant, a separate claim must be made in order to collect that difference.
Since the action is a declaratory action, the judgment contains no order for the collection of the difference. Two routes are therefore open for recovering the sum: bringing a separate action for the debt or commencing enforcement proceedings based on the judgment directly. In practice the preference is usually to proceed by way of enforcement based on the judgment once it has become final.
Interest on the Difference
Where a difference has arisen between the rent determined and the rent paid, that sum may be collected. However, since the judgment is in the nature of a declaratory judgment, the claim for the difference falls due only when the judgment becomes final.
Accordingly, interest as a rule begins to run from the date on which the judgment became final.
Put differently, even if the court has ruled that the new rent is to apply from an earlier date, default and interest in respect of the claim for the difference do not arise before the judgment becomes final. For interest to be claimed, the judgment must first become final and the debt must then have gone unpaid.
Frequently Asked Questions
Below we give brief answers to the questions most often raised in practice about the rent determination action. Most of these topics are dealt with in detail in the sections above; only the conclusions are summarised here.
From which period does the rent determined apply?
If the action was brought at least 30 days before the start of the new lease period, if written notification was given to the tenant within that period, or if the agreement contains an increase clause, the rent determined by the court applies from the beginning of the current period. If those conditions are not met, a claim may be made only in respect of the period about to begin.
May a rent determination action be brought as a partial action?
The claimant is obliged to set out the claim clearly and specifically. What is sought in this action is the determination by the court of a particular rent. It is therefore not possible to bring the action in the form of a partial action.
May it be brought as an action for an indeterminate debt?
No. The claimant must state the rent sought clearly and specifically in the statement of claim, since the action is directed at determining the rent rather than at collecting a debt.
May it be brought together with an eviction action?
There is no legal impediment to pursuing a rent determination action and an eviction action at the same time, or to bringing one while the other is pending. If the conditions of a ground for eviction are made out, the eviction claim may be raised together with the determination action or as an independent action.
How long does the action take?
No definite period can be predicted. In practice these actions are observed to conclude for the most part in between 1 year and 1.5 years. The period may vary according to the court’s caseload, the expert examination, the need for an on-site examination and the parties’ procedural steps.
What does the judge take into account in fixing the rent?
The judge is bound by the principle of equity and fairness. Within that framework, comparable rents, the characteristics of the property, the manner of its use, the duration of the lease relationship and the tenant’s existing use are assessed together. The principle denotes the striking of a reasonable balance between the comparable data and the continuing lease relationship.
Is a reduction applied for a long-standing tenant?
According to the practice of the Court of Cassation, a reduction of a certain proportion may be applied to the figure arrived at under the principle of equity and fairness where the tenant has been using the same property for a long time. This approach is intended to preserve the continuity of the lease relationship and to have regard to the tenant’s existing use.
May the judgment be enforced directly?
Since the judgment is in the nature of a declaratory decision determining the rent, it cannot be made the subject of enforcement proceedings directly. In order to collect the difference arising from the rent determined, the judgment must be allowed to become final and enforcement must then be pursued.
How are attorney fees determined?
Attorney fees are determined on the basis of the Minimum Attorney Fee Tariff published each year by the Union of Turkish Bar Associations. The fee agreed between the parties may not fall below the minimum figure in the tariff.
Who bears the litigation costs?
As a general rule, costs and attorney fees are borne by the party who loses the action. Where the claim is granted in part and dismissed in part, they are apportioned having regard to that proportion.
May an action be brought in respect of past periods?
A rent determination action cannot be brought retrospectively in respect of past lease periods. The action is directed solely at determining the rent to be applied in the continuing lease relationship.
That said, the time at which the action is brought and the notifications given to the tenant affect the period from which the rent determined takes effect. If the statutory time and notification conditions have been satisfied, the rent determined may be applied from the beginning of the current period.
How is rent paid while the action is pending?
While the proceedings continue, the tenant must go on paying the rent payable under the agreement in force. The bringing of the action neither extinguishes nor suspends the obligation to pay. Once the court has fixed the new rent, that figure applies from the date on which the judgment takes effect and the tenant becomes obliged to make payments accordingly.
Independent Legal Assessment
Two axes determine the outcome in rent determination actions. The first is timing: the date on which the action is brought, or on which notification is given, dictates whether the rent obtained takes effect a year earlier or a year later. The second is the strength of the comparables file; the data that will find its way into the expert report is shaped largely by the comparable agreements the parties bring to the file.
A mistake frequently encountered in practice is the expectation that the difference can be collected before the judgment becomes final. Given the nature of the judgment, finality must be awaited for the purposes of both enforcement and interest; this calls for collection planning to be set up correctly from the outset.
In a specific case we recommend that the following points be clarified in advance:
- Starting the five-year period from the correct date, having regard to the relationship between renewal agreements and the level of comparable rents and market values
- Considering the written notification option immediately where fewer than thirty days remain before the start of the new period
- Checking whether the agreement contains an increase clause before setting the timetable for bringing the action
- Collecting comparable lease agreements before the action is brought and ensuring that they are genuinely comparable in terms of area, characteristics and date
- Factoring in from the outset the likely effect of the equity and fairness reduction on the sum claimed
- Completing the mandatory mediation stage in due form and ensuring the final record is drawn up in full
Independent Legal advises on and conducts disputes concerning the redetermination of rent throughout the process, from the mediation stage to the enforcement of the judgment.