Rental fees may be increased in line with certain principles during the renewal periods of the contract. At this point, it is important according to which data the increase is determined and how the new rent amount is calculated. So, how is the rent increase rate calculated and what rate is taken into account in the rent increase? You can find the curious details about the rent increase in our content.
What is the Rent Increase Rate?
The rent increase rate expresses the rate at which the current rent can be increased in the new rental period when the contract is renewed. The basic principles regarding the determination of the rental fee in residential and roofed workplace rentals are regulated in Article 344 of the Turkish Code of Obligations. Accordingly, the parties' agreements regarding the increase to be applied in the renewed lease periods are valid as long as it does not exceed the rate of change of the consumer price index (CPI) according to the twelve-month averages in the previous lease year.
For this reason, in rent increases, the CPI change rate based on twelve-month averages is taken into account, not the monthly or annual CPI rate announced by TURKSTAT. If a lower increase rate is agreed in the lease agreement, the rate in the contract may be applied; If the determined rate is above the legal limit, the increase cannot exceed this limit.
Rent increases usually come into play when the lease is renewed. Therefore, it is not possible to make an increase in the same calendar month for every tenant. When determining the new rent, the current rent amount, the renewal date of the contract, the increase clause in the contract and the legal upper limit that can be applied in the relevant period are evaluated together.
How is the Rent Increase Rate Determined?
In determining the rent increase rate, the provisions in the lease agreement and the legal limits in the Turkish Code of Obligations are taken into account. In residential and roofed workplace rents, the parties can determine in advance the increase rate to be applied in case of renewal of the contract. However, the agreed increase cannot exceed the rate of change of the CPI in the previous rental year compared to the twelve-month averages.
For example, if the lease agreement stipulates an annual increase of 20% and the legal upper limit is 30% in the relevant renewal period, the 20% rate in the agreement is taken as basis. If a 40% increase is agreed in the contract, but the legal upper limit is 30%, the rent increase cannot exceed the 30% limit.
If there is no provision regarding the increase rate in the lease agreement, the agreement of the parties is important in determining the new rental price. In case of disagreement, the judge; Taking into account the condition of the leased property and comparable rental prices, it may determine the rental fee in a way that does not exceed the rate of change of the CPI according to twelve-month averages. In lease agreements with a term longer than five years or renewed after five years, different principles may be applied regarding the determination of the rental fee.
How Does CPI Affect the Rent Increase Rate?
While CPI shows the change in the general price level of goods and services, it is one of the basic indicators that helps determine the legal limit on rent increases. Turkish Statistical Institute (TUIK) publishes different data within the scope of CPI, including monthly change, annual change and change according to twelve-month averages.
The important point in terms of rent increase is that these indicators should not be confused with each other. In the calculation, the change rate of CPI according to twelve-month averages is taken as basis. For example, if the annual CPI in the same period is 28% and the change compared to twelve-month averages is 34%, the data of 34%, not 28%, is taken into account when evaluating the rent increase.
Since this data is updated every month by TÜİK, the current rate announced in the period when the lease contract is renewed must be checked. Thus, it can be accurately determined which CPI data will be used in rent increases.
Rent Increase Rate Calculation
When calculating the rent increase rate, the CPI data valid for the period in which the contract will be renewed is first checked. Then, if there is an increase rate specified in the lease agreement, the applicable rate is determined by comparing this rate with the legal upper limit. The new rent is calculated by adding the calculated increase to the existing rent.
The following formula can be used for calculation:
Rent increase amount = Current rental fee × Applicable increase rate / 100
New rental fee = Current rental fee + Rent increase amount
As in residential rents, the principles in Article 344 of the Turkish Code of Obligations are taken into account in roofed workplace rents. Therefore, the change in CPI in workplace rents according to twelve-month averages is the upper limit for the increase that can be decided in the renewed lease period.
The duration of the contract should also be taken into consideration when making the calculation. In determining the new price, especially in lease agreements with a term longer than five years or renewed after five years, the condition of the leased property and comparable rental prices may also be taken into consideration in addition to the CPI. For this reason, the standard annual rent increase and the redetermination of the rental fee in rental relationships exceeding five years should not be considered in the same context.
Rent Increase Rate Calculation Example
Let's consider how the rent increase is calculated based on a monthly rent of 25,000 TL and a 35% increase rate as an example:
Rent increase amount = 25,000 TL × 35 / 100 = 8,750 TL
New rental fee = 25,000 TL + 8,750 TL = 33,750 TL
In this case, the monthly rental fee of 25,000 TL becomes 33,750 TL if a 35% increase is applied. The same calculation method can be used for residential and roofed workplace rents.
For example, let's assume that the increase rate to be applied to a workplace with a monthly rent of 40,000 TL is 30%. The increase amount is calculated as 12,000 TL, and the new monthly rental fee is calculated as 52,000 TL.
The rates used in these examples are given hypothetically to illustrate the calculation method. When calculating an actual rent increase, the data valid at the time the contract is renewed and the provisions in the lease must be taken into account.
In order to calculate the rent increase rate correctly, the renewal date of the contract, the increase provision in the lease agreement and the legal limit valid in the relevant period should be evaluated together. In the calculation, it is important to take into account the rate of change of the CPI based on twelve-month averages rather than the annual or monthly change. However, in rental relationships exceeding five years, different factors may come into play in determining the rental price. Therefore, when increasing the rent, current TUIK data and the conditions of the lease must be checked.
