WHAT IS SECURITY DEPOSIT ON RENTAL AGREEMENT IN TURKEY?

In Turkey, the security deposit is an essential part of lease contracts, serving as a financial safeguard for landlords while protecting the condition of the rented real estate. Whether you’re a foreign tenant in Turkey ensuring the return of your deposit or a landlord seeking to manage deposits correctly and secure your commercial activity, it’s important to grasp the key aspects of this financial arrangement. You can benefit from this guide to comprehend what a security deposit is, how it is regulated under the Turkish Code of Obligations, how it should be paid and returned, and the legal specifications of it in Turkey. Contact us today if you have any questions about the deposit and for legal assistance.

What is a Security Deposit?

A security deposit is a payment made by the tenant to the landlord, usually under a lease agreement. This payment is made to compensate the landlord in case the rented property (for example, a house or a workplace) is damaged during the term of the contract or if the tenant fails to pay the rent. At the end of the lease term, the deposit is refunded if the lessee has complied with the contract and there has been no damage to the leased property.

Deposits can also be required as security in various situations other than leasing. For example, a deposit may also be requested by a service provider in cases where the service fee must be paid in advance. However, the first thing that comes to mind when it comes to security deposits is lease agreements. In the rest of the article, the concept of deposit will be evaluated within the scope of the lease agreement.

Determining the Deposit Amount In Turkey

According to Article 342 of the Turkish Code of Obligations, the upper limit for determining the deposit amount in residential and roofed workplace leases is three months’ rent. In other words, the lessor cannot demand a deposit from the lessee exceeding three months’ rent.

If the deposit is agreed above the upper limit, then only the part of the agreed amount up to three months’ rent is considered valid. The part exceeding three months’ rent is considered legally invalid and the tenant may claim this amount back. In such a case, the courts may rule in favour of the tenant and order the return of the overpaid deposit amount.

However, this upper limit is applicable for residential and roofed workplace leases and does not apply to other lease agreements or other agreements. For example, this article does not apply to movable lease agreements (for example, in the case of renting a car or construction equipment). Except for residential and roofed workplace leases, the law does not set a special upper limit for the amount of the deposit in lease agreements; therefore, the parties may freely agree on the amount of the deposit in movable leases.

Payment, Storage and Return of Deposit Under Turkish Law

In practice, the deposit is usually paid during the signing of the contract or just before the start of the lease relationship. However, the provisions of Articles 342/2 and 3 of the TCO have introduced regulations in favour of the lessee in terms of giving, keeping and returning the deposit.

“ARTICLE 342- …

If money or negotiable instruments are agreed to be given as security, the lessee deposits the money in a time deposit account and deposits the negotiable instruments in a bank, so as not to be withdrawn without the lessor’s consent. The bank may only return the security deposits with the consent of both parties or upon the finalization of the enforcement proceedings or on the basis of a finalized court decision.

If the lessor has not notified the bank in writing within three months following the termination of the lease agreement that he has filed a lawsuit against the lessee regarding the lease agreement or that he has initiated proceedings through execution or bankruptcy, the bank is obliged to return the security deposit upon the request of the lessee.”

Accordingly, first of all, if the deposit is agreed to be given in money or negotiable instruments, the money shall be deposited into a time deposit account and the negotiable instruments shall be deposited with the bank. The bank shall not pay these guarantees to the lessee without the lessor’s consent and shall not pay them to the lessor without the lessee’s consent. However, if there is a finalized enforcement proceeding or court decision, the deposit will be returned to the lessee or paid to the lessor.

On the other hand, since the main rule is the return of the deposit to the lessee following the termination of the lease agreement, if the lease agreement has expired and the lessor has not notified the bank that the lessee has filed a lawsuit or initiated enforcement or bankruptcy proceedings within three months from the termination of the lease agreement, the bank will return the deposit to the lessee upon the request of the lessee and without the consent of the lessor.

Does The Security Deposit Count as Rent?

The security deposit is not considered as a part of the rent. The deposit is a security payment given to the landlord for the protection of the leased property and is agreed upon and paid separately from the rent. The rental fee is the amount that must be paid regularly by the lessee on a monthly or periodic basis. A security deposit is an amount given by the lessee to the lessor as a guarantee in case of damage to the leased real estate or non-payment of the rent.

The deposit is not a substitute for the rent and is requested in addition to the rent. The tenant gives the deposit to the lessor as an additional security while continuing to pay the rent. Therefore, the deposit is not considered part of the rental price.

Conclusion

Understanding the security deposit in Turkey is essential for both tenants and landlords. This financial safeguard, typically limited to three months’ rent for residential and workplace rent agreements, ensures protection against potential damages or unpaid rent. While the deposit is an essential part of lease agreements, it is important to note that it does not substitute for rent. Proper handling of the deposit—including its payment, storage, and return—follows specific legal guidelines set forth in the Turkish Code of Obligations.

How We Can Assist You?

At Viridis Legal Partners, located in Istanbul, we are dedicated to providing expert legal support to both local and international clients dealing with lease agreements and security deposits in Turkey. Our team can guide you through the complexities of security deposit regulations, including determining the appropriate amount, ensuring proper payment and storage, and resolving disputes regarding deposit returns. Whether you’re a tenant seeking to understand your rights or a landlord needing assistance with deposit management, we are here to help. Contact us today to schedule a consultation and let us assist you in navigating these legal matters effectively.

Frequently Asked Questions (FAQs)

1. What is a security deposit?
   • A security deposit is a payment made by a tenant to a landlord to cover potential damages or unpaid rent. It is refundable at the end of the lease term if the property is in good condition.
2. What is the maximum amount for a security deposit in Turkey?
   • According to Article 342 of the Turkish Code of Obligations, the maximum deposit for residential and roofed workplace leases is three months’ rent.
3. Can a landlord demand more than three months’ rent as a security deposit in Turkey?
   • No, any amount exceeding three months’ rent is considered legally invalid, and the tenant can claim the excess amount back.
4. How should a security deposit be paid and stored in Turkey?
   • The deposit should be paid into a time deposit account or deposited with a bank where it cannot be withdrawn without the consent of both parties. The bank can only release the deposit following a court decision or enforcement proceedings.
5. When must the security deposit be returned to the tenant in Turkey?
   • The deposit must be returned to the tenant unless the landlord has initiated legal proceedings or enforcement actions within three months of the lease’s termination. If not, the bank is obligated to return the deposit to the tenant upon request.
6. Is the security deposit considered part of the rent in Turkey?
   • No, the security deposit is separate from the rent and is not considered a part of it. It serves as a guarantee against potential damages or non-payment of rent.
7. What happens if the landlord does not claim the deposit within three months in Turkey?
   • If the landlord does not notify the bank of legal proceedings within three months after the lease ends, the bank must return the deposit to the tenant upon request.
8. Can the deposit amount be different for movable leases, such as renting a car or equipment in Turkey?
   • Yes, the upper limit for deposits specified in the Turkish Code of Obligations does not apply to movable leases. The amount can be freely agreed upon by the parties involved.
9. What should tenants in Turkey do if they believe their deposit has been unfairly withheld?
   • Tenants should seek legal advice and possibly initiate legal proceedings to reclaim their deposit if they believe it has been unfairly withheld.
10. Are there any specific regulations for security deposits in Istanbul?
    • While Istanbul follows the national regulations set out in the Turkish Code of Obligations, local administrative policies may provide additional guidance on managing security deposits in the city.