When a company leases an office, retail store, warehouse, factory, hotel, or other commercial property, the process involves much more than simply finding a suitable location and agreeing on the rent. The provisions of the lease agreement can directly affect the company's ability to carry out its business activities, its investment costs, rental expenses, and potential legal disputes in the future.

 

Particularly in long-term leases, issues such as the property's unsuitability for the intended business activity, the inability to obtain the necessary permits, improperly determined rent increase terms, or the early termination of the agreement may result in significant financial losses.

 

For this reason, when leasing commercial real estate, companies should consider not only the rental price and the property's physical characteristics but also the legal implications of the lease agreement.

 

So, which provisions should be carefully considered when drafting a commercial real estate lease agreement?

 

1.The Purpose of the Lease and the Conditions of Use Should Be Clearly Defined

 

The first step in commercial real estate leasing is to clearly specify the purpose for which the property will be used. Using a property as an office, restaurant, hotel, retail store, warehouse, or manufacturing facility may give rise to different legal and administrative requirements.

 

Merely stating the property's address in the lease agreement may not be sufficient. The agreement should also specify the commercial activity for which the property is being leased, the areas included in the lease, and the conditions governing the use of common areas.

 

For example, if a company leases a property to operate a restaurant but is not permitted to install a ventilation system, or if the property cannot meet the necessary operational requirements, the company may be prevented from commencing its business activities.

 

Before entering into the lease, the following matters should therefore be assessed:

 

* The property's title deed, zoning status, and existing permitted use.

* Whether there are any legal restrictions preventing the intended business activity from being carried out at the property.

* Whether the necessary permits, particularly a workplace opening and operating licence, can be obtained.

* Whether the electricity, water, natural gas, ventilation, and fire safety infrastructure is adequate.

* Any restrictions concerning renovations, signage, façade alterations, and the use of common areas.

 

**Important:** Specifying in the lease agreement that the property is being rented for a particular commercial activity does not, by itself, guarantee that the relevant licences or permits will be granted. Before entering into the lease, the company should independently assess the property's legal and technical suitability for the intended use.

 

2.The Lease Term, Renewal, and Early Termination Conditions Should Be Regulated

 

The lease term is one of the fundamental factors affecting a company's future business operations. For businesses requiring substantial renovation and installation expenditure, it is particularly important to ensure that the lease term is compatible with the expected investment recovery period.

 

The agreement should clearly specify the commencement date, lease term, handover date, and any specific arrangements concerning renewal.

 

Companies should also consider the possibility that they may wish to vacate the property before the end of the contractual term.

 

For example, early termination provisions may become important if a leased retail store fails to achieve the expected commercial performance, the company relocates to another area, or the company changes its business activities.

 

In this context, the following matters should be considered:

 

* The conditions under which the tenant may terminate the agreement early.

* The notice period and method of service required for termination.

* Potential compensation and other financial obligations arising from early departure.

* The procedures applicable to the handover of the property and the termination of the lease.

* The principal obligations of the parties throughout the lease term.

 

Article 347 of the Turkish Code of Obligations contains specific rules governing the termination of fixed-term residential and roofed workplace leases. A landlord should not be assumed to have the right to terminate the agreement merely by arguing that the agreed contractual term has expired.

 

Companies should therefore consider the applicable statutory provisions when assessing the lease term and the conditions for termination.

 

3.The Rent and Rent Increase Rate Must Be Determined in Compliance with the Law

 

Rent is one of the most significant factors directly affecting a company's budget in commercial real estate leasing. However, determining only the initial rent is insufficient. The method by which future rent increases will be calculated should also be clearly established.

 

Article 344 of the Turkish Code of Obligations sets out rules governing the determination of rent for renewed lease periods in residential and roofed workplace leases.

 

Accordingly, the rent increase rate agreed for renewed lease periods must remain within the applicable statutory limits. Different rules may apply to leases lasting more than five years or renewed after the five-year period.

 

The following matters should be considered when drafting the lease:

 

* Clearly specifying the initial rent and payment periods.

* Determining the rent adjustment date and calculation method.

* Reviewing the legal restrictions applicable to rent denominated in Turkish lira or foreign currency.

* Assessing taxes and other financial obligations payable in addition to rent.

* Anticipating how rent will be determined in subsequent years under long-term leases.

 

If the parties intend to agree on rent in a foreign currency, the relevant legislation on the protection of the value of the Turkish currency should also be examined. The fact that the parties have agreed on a rent increase rate does not necessarily mean that the provision will be legally valid in every circumstance.

 

4.Security Deposit and Other Security Provisions Should Protect the Company's Interests

 

Landlords may request security against risks such as unpaid rent or damage to the property. However, the type and amount of security, as well as the conditions under which it will be returned, should be clearly regulated in the lease agreement.

 

Under Article 342 of the Turkish Code of Obligations, security agreed upon in residential and roofed workplace leases may not exceed three months' rent. Where the security is provided in cash or negotiable instruments, the specific statutory requirements must also be observed.

 

The following issues are particularly important for companies:

 

* The amount and type of security.

* The validity period and claim conditions of a bank guarantee, if one is used.

* The obligations secured by the deposit or other security.

* The conditions for returning the security upon termination of the lease.

* The procedure for documenting the property's condition at handover.

 

Documenting the property's condition through photographs, videos, and a handover report can help prevent future disputes concerning damage and the return of the security deposit.

 

The legal nature and applicable rules governing different forms of security, such as bank guarantee letters, should be assessed separately. It should not be assumed that every form of security is subject to the same legal regime.

 

5.Renovation, Fit-Out, and Investment Costs Should Be Agreed in Advance

 

Adapting commercial property to the needs of a business may involve substantial expenditure. Renovation costs can be particularly high for hotels, restaurants, retail stores, and manufacturing facilities.

 

The lease agreement should therefore specify which alterations the tenant may make to the property and the conditions under which such works may be carried out.

 

For example, a company may wish to install a specialised ventilation system, production line, or customer area in the leased premises. Obtaining the necessary approvals, determining which party will bear the costs, and clarifying what will happen to these improvements when the lease ends are all important considerations.

 

The agreement should address the following matters:

 

* Renovation and fit-out works that the tenant is permitted to undertake.

* Circumstances in which the landlord's written consent is required.

* The parties' responsibilities for obtaining licences and technical approvals.

* Ownership of fixed installations and fixtures.

* Reimbursement or set-off of renovation and improvement costs.

* The condition in which the property must be returned at the end of the lease.

 

In leases involving substantial investment, the treatment of the tenant's expenditure should be expressly addressed, particularly if the agreement ends prematurely. Otherwise, significant disputes concerning compensation and outstanding claims may arise between the parties.

 

6.Responsibility for Maintenance, Repairs, and Common Expenses Should Be Clearly Allocated

 

In commercial real estate leases, expenses incurred during the use of the property, in addition to rent, can significantly affect a company's financial burden.

 

The agreement should clearly identify which party is responsible for maintenance and repair costs, management expenses, and common-area charges.

 

It is advisable to address the following matters specifically:

 

* Routine maintenance and ordinary usage expenses.

* Costs arising from major repairs and structural defects.

* Common-area expenses and building management charges.

* Maintenance and replacement costs for technical systems.

* The method of reporting faults and the applicable response times.

 

For example, if the existing electrical infrastructure in a leased warehouse is insufficient for the tenant's operational requirements, responsibility for the cost of upgrading that infrastructure may become a significant source of dispute.

 

Rather than relying on general or ambiguous wording, the parties should prefer provisions that clearly identify the relevant expenses and allocate responsibility for them.

 

7.Subleasing, Assignment of Use, and Changes in the Company's Corporate Structure Should Be Considered

 

Companies may restructure their operations over time, establish subsidiaries, merge with other entities, or wish to share the use of their premises with another business.

 

In such circumstances, the lease provisions concerning subleasing, the transfer of the right to use the property, and the assignment of the lease become particularly important.

 

Article 322 of the Turkish Code of Obligations establishes rules concerning the subletting of leased premises and the transfer of the right to use them, including the requirement for the landlord's written consent in residential and roofed workplace leases. Article 323 separately regulates the assignment of the lease relationship.

 

Companies should therefore consider the following matters when negotiating a lease:

 

* Whether part of the leased premises may be used by another business.

* Whether affiliated companies or other entities within the same corporate group may use the premises.

* Whether the lease may be assigned to another company.

* The provisions applicable in the event of a merger, demerger, or corporate restructuring.

* Transactions requiring the landlord's written consent.

 

Particularly where multiple companies operate from the same premises, insufficiently clear provisions governing the right of use may lead to allegations of breach of contract and disputes concerning eviction.

 

For this reason, a company's potential future organisational structure should also be taken into account when drafting the lease agreement.

 

8.The Consequences of Failing to Obtain Licences and Permits Should Be Addressed

 

The fact that commercial premises are physically usable does not necessarily mean that every type of business activity can lawfully be conducted there. Depending on the nature of the business, various licences and permits may be required.

 

Administrative permits and technical requirements can be particularly significant for hotels, restaurants, healthcare businesses, and manufacturing facilities.

 

The lease agreement should address the rights and obligations of the parties if the permits required for the intended business activity cannot be obtained.

 

The following matters should be considered:

 

* Assessing the property's suitability for the intended activity before entering into the lease.

* Defining the documents and cooperation that the landlord must provide.

* Clarifying the tenant's responsibilities concerning applications and operating licences.

* Regulating, in accordance with applicable law, the consequences of failing to obtain the necessary permits, including termination, handover, and the reimbursement of expenses.

 

These provisions are particularly important where the business must make a substantial investment before commencing operations.

 

9.The Termination and Evacuation Process Should Be Clearly Regulated

 

In commercial lease agreements, the evacuation and return of the premises require as much attention as the conclusion of the agreement itself.

 

The agreement should specify, as clearly as possible, the condition in which the property must be returned, how the handover of keys will be documented, what will happen to fixtures and equipment, and how existing damage will be assessed.

 

The following matters are particularly important for companies:

 

* A handover and return report for the property.

* An inventory of fixtures and fixed installations.

* Whether alterations made by the tenant must be retained or removed.

* The calculation of outstanding rent and ancillary charges.

* The return of security deposits and other forms of security.

* The parties' notification addresses and methods of communication.

 

When drafting provisions concerning the termination of the lease, the mandatory provisions of the Turkish Code of Obligations must also be taken into account. Not every eviction or termination condition included in a contract will automatically be legally enforceable.

 

10.The Appropriate Legal Procedures for Resolving Disputes Should Be Considered in Advance

 

Commercial real estate lease agreements may give rise to disputes for various reasons, including rent, breach of contract, repair expenses, eviction, or the return of security deposits.

 

For this reason, notification procedures, the parties' contact details, and any applicable provisions concerning dispute resolution should be carefully reviewed.

 

In disputes arising from lease relationships, mediation may be a mandatory precondition to filing a lawsuit, subject to statutory exceptions. Accordingly, when a dispute arises, companies must consider not only the contractual provisions but also the applicable procedural rules.

 

Furthermore, including a jurisdiction clause in the agreement does not necessarily guarantee that the chosen court will have jurisdiction in every case. The validity of jurisdiction agreements must be assessed in light of the parties' status and the nature of the dispute.

 

Conclusion: Why Is Legal Review Important in Commercial Real Estate Leasing?

 

Commercial real estate leases involve long-term financial commitments and, in many cases, substantial investment expenditure. Assessing a lease agreement solely in terms of rent and duration may therefore expose a company to unforeseen risks in the future.

 

Clearly defining the intended use of the property, ensuring that rent adjustment provisions comply with the law, reviewing security arrangements, allocating renovation costs, and clarifying the conditions for termination can strengthen a company's legal position.

 

A legal review conducted before signing the lease can help prevent future disputes and financial losses. This is particularly important for commercial leases involving high rental values, long contractual terms, or substantial investment requirements. The agreement should be structured to reflect the company's business activities and commercial objectives.

 

At Uzunpınar Tüfek Law Firm, our aim is to provide legal consultancy to companies throughout the commercial real estate leasing process, including the drafting and review of lease agreements, the assessment of legal risks, and legal support in relation to disputes arising from lease relationships.