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  • Burcu Üçok Kenaroğlu, LL.M.

A brief summary regarding whether Serviced Office Agreements can be considered as Lease Agreements under current Court Practices and the Turkish Law

The economic downturn in our country has led to a dramatic increase in the number of landlord-tenant disputes and the number of lawsuits pending before the Civil Courts of Peace.

 

For these and other reasons, during the negotiation process of the rent increase period office users, who signed Serviced Office Agreements (“SOA”) instead of classical lease agreements and acted with the belief that SOAs are also lease agreements, are faced with the claim that a SOA cannot be qualified as a lease agreement. In this article, we will share our legal opinions on the legal nature of SOAs in consideration of recent decisions by district courts and circuit courts of appeal.

 

In the determination of the legal nature of the SOAs; the essential elements offered by the contract will be taken into account. For as much as the main type of service in SOAs is the allocation of office space to the office user. Clearly, this service is an essential element of the relevant contracts. On the other hand, there should be an assessment as to whether other services which are the subject of the contract between the parties are also essential elements. As a matter of fact, it is frequently seen in SOAs that office users are offered services such as cafeteria, secretariat and reception in addition to office space.  Then, can it be said that these services are ancillary performance obligations and that the SOAs are, in fact, lease agreements for work space? Recent decisions of the courts of first instance have answered this question in the affirmative.

 

In the case subject to the decision of the Istanbul Anatolian 13th Commercial Court of First Instance in February 2021, the Plaintiff stated that there was a service contract (SOA) signed between the parties and that although she fulfilled all the obligations as a service provider, she had to initiate enforcement proceedings due to the office user's failure to fulfill the payment obligation; and that an action for annulment of objection was filed against the Defendant who objected to the proceedings. On the other hand, the Defendant argued that the place was rented with the aforementioned service contract, that this place was rented by the Plaintiff to a third party after the evacuation and the handing over of the keys, and that the Plaintiff could not claim a rental fee for the period of non-use. As a result of the examination, the District Court decided that although the dispute between the parties in the case in question is expressed as a service contract, the provisions regarding the lease agreement should be applied to the case due to the nature of the contract between the parties and the nature of the dispute subject to the lawsuit.

 

Similarly, in the case subject to the decision of the Istanbul 18th Commercial Court of First Instance in June 2019, the Plaintiff claimed that the Defendant was a virtual office user according to the lease agreement signed by parties, and upon the Defendant's objection to the enforcement proceeding initiated by the Plaintiff to collect the unpaid rent, the Plaintiff filed an action for annulment of objection. The Defendant claimed that the contract signed between the parties was a SOA and that the payments were made in return for all the services provided by the Plaintiff and requested the dismissal of the lawsuit.  The district court ruled that the dispute between the parties arose out of the lease agreement.

 

In our opinion, the primary purpose of the office user's intent to enter into SAO is the acquisition of a workplace. Services such as secretariat, cafeteria, reception, etc. offered in addition to the acquisition of a workplace are considered to be ancillary acts for many users.  In this respect, although it is considered a mixed-type contract, we believe that SOAs should generally be considered as lease agreements when evaluated on the basis of the predominant element.

 

However, it has been observed that the circuit courts of appeal’s evaluation of the issue has changed over time.

 

In the judgment of the 17th Civil Chamber of the Istanbul Regional Court of Appeals dated February 2023, the Circuit Court of Appeal stated that the office provider undertook to provide the office user with a serviced office, the use of electronic devices such as secretariat, tea, coffee, printer, fax and photocopy, electricity, water, natural gas, internet subscription and services in return for the price determined in accordance with the contract established between the parties; and in this context, the court ruled that there was no tenant-lessor relationship between the parties according to the provisions of the contract.

 

Similarly, in another judgment of the 17th Civil Chamber of the Istanbul Regional Court of Appeals dated February 2023, it has been decided that the SOA is not a lease agreement, but a service agreement.

 

As it is stated in the doctrine as well, we would like to reiterate our view that the provision of certain services to office users in addition to the rental element in SOAs does not exclude these agreements from being office leases. Because the main purpose of the person renting a serviced office is to have a working office. Secretarial services, answering the phone, cleaning the office and similar services are ancillary acts of the lease relationship. In other words, in SOAs, the rental element is more fundamental and predominant than the service element. Unless it becomes an established case-law, in practice the general trend may develop in accordance with the decisions of the circuit courts of appeals and SOAs may not be considered as lease agreements. 12.03.2024

 

Kind Regards,

Kenaroğlu | Legal

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