The Ministry of Treasury and Finance (“Ministry”) published on its website an Announcement on Contract Amounts in Foreign Exchange (“Announcement”) on October 13, 2020. The Announcement concerns foreign currency lease agreements that were converted into Turkish lira according to the Presidential Decree No. 85 published on September 13, 2018 (“Decree”).
What Does the Announcement Say?
The Ministry’s Communiqué No. 2008-32/34 on the Decree No. 32 Regarding the Protection of the Value of the Turkish Currency (“Communiqué”) set forth the principles for converting the rents of residential and workplace leases in foreign exchange into Turkish lira. In addition, it addressed the adjustment of these rents during the two-year transition period of October 13, 2018 to October 13, 2020 for parties that could not reach an agreement. The Communiqué did not elucidate how the adjustment would be made after October 13, 2020.
With this Announcement, the Ministry reiterates that the foreign exchange prohibition for the residential and workplace lease agreements continues after the two-year transition period; and provides clarification that the rents of residential and workplace lease agreements converted into Turkish lira will be adjusted pursuant to Article 344 of the Turkish Code of Obligations, which will be determined in line with the twelve-month average of the CPI.
The Presidential Decree No. 32 Regarding the Protection of the Value of the Turkish Currency remains in effect for residential and workplace lease agreements. Therefore, parties should continue to determine their rents in Turkish lira from October 13, 2020 onwards, while continuing to respect the upper limit determined by the Turkish Code of Obligations for rent adjustment.