Recent Development
The Ministry of Treasury and Economy (“Ministry”) Communiqué No. 2008-32/34 on the Decree No. 32 Regarding Protection of the Value of the Turkish Currency (“Communiqué”) with regard to the Decree No. 32 Regarding the Protection of the Value of the Turkish Currency introduced a ban on FX payment (“Decree No. 32”) was published in the Official Gazette on October 6, 2018.
1. Are there any exemptions to resident and roofed workplaces?
No, the Communiqué does not provide exemptions to resident and roofed workplaces.
According to the Communiqué, Turkish residents cannot determine the purchase price and rent amount and other payment obligations arising from the purchase and leasing of real property, including resident and roofed workplaces lease agreements regarding real properties located in Turkey, including free zones, in foreign currency or that are foreign currency indexed.
2. What is the conversion from foreign currencies into TRY for resident and roofed workplaces agreements?
The parties are expected to negotiate and to determine the new amounts within the framework of the freedom of contract within the 30-day period given for the conversion to TRY (i.e., until the end of October 13, 2018).
3. How will the rent amount be converted to TRY, if the parties fail to agree?
If the parties cannot agree on conversion into TRY, the rent amount will be calculated based on the indicative selling rates of the Central Bank of the Republic of Turkey on January 2, 2018.
The rent amount will be determined by adjusting the converted amount based on the monthly consumer price index rates (“CPI”) changes determined by the Turkish Statistical Institute (“TSI”) for the period from January 2, 2018 to the restatement date, October 13, 2018 which is the end of the 30-day period (“Restatement Date”).
4. For how long will calculated amount be applicable?
The adjusted amount will be applicable until the end of the lease year determined in the agreement.
Please see the example under question 8 for details.
5. How will the rent amount be determined at the end of the lease year?
At the end of the lease year in which the restatement is made, the rent amount will be determined according to the increase in the CPI monthly rate changes from the Restatement Date until the end of the lease year in which the restatement is made. This price is applicable until the end of the relevant lease year.
6. How will the rent amount be determined in the next lease year?
The rent amount will be determined by the increase of the rent amount in previous lease year in the CPI monthly rate changes.
7. What will happen, if the rent amounts have been collected or delayed?
The rent amount and other payment obligations such as deposit amount will not be converted into TRY, if they have been collected or delayed.
8. Sample Calculation
If, for example, the parties have an agreement with a starting date of April 1, 2016 and amounting to USD 10,000 on October 1, 2018, and the parties cannot agree on the conversion of the rent amount for a workplace lease agreement:
a. The rent amount will be converted into TRY based on the 3.7776 exchange rate, which is the indicative selling rate of the Central Bank of the Republic of Turkey for USD on January 2, 2018.
USD 10,000 x 3.7776 = TRY 37,776
b. The TSI has not yet published the CPI rates for October, which corresponds to the Restatement Date of October 13, 2018. Therefore, the CPI rate changes between January 2018 and September 2018 (the latest CPI rate the TSI published) corresponding to 17.99% (cumulative total of CPI monthly change rates) was used. In this example, the rent amount will be calculated over the increase of 17.99% and be paid as follows until April 1, 2019 which is the end of the lease year:
Rent Amount:
TRY 37,776 x 1.1799 = TRY 44,571.90
c. From April 1, 2019, which is the end of the lease year, until April 1, 2020, the rent amount will be determined by the increase in the CPI monthly rate changes from October 13, 2018 until April 1, 2019. Since this rate has not yet been published, we will utilize “15%” in this example. Following the increase:
Rent Amount for Renewal Term:
TRY 44,571.90 x 1.15 = TRY 51,257.68
d. After April 1, 2020, the rent amount will be determined by the increase in the CPI monthly rate changes from April 1, 2019 until April 1, 2020. Since this rate has not yet been published, we will utilize “13%” in this example. For the second renewal term, the rent amount will be calculated as follows:
Rent Amount for Second Renewal Term:
TRY 51,257.68 x 1.13 = TRY 57,921.17
e. In accordance with the Communiqué, the amounts calculated as above will be applicable until October 2020. The Communiqué does not elucidate how the calculation will be made after October 2020.
