Most of the commercial real estate especially the shopping centers, hotels, and business centers had been closed between mid of March and mid of May 2020. The hotels and the shopping centers are recently started their operations or they’re in preparation to start. However, it seems that it will take time for the owners to reach the profit ratios of the earlier days. Legislative measures defined the COVID-19 as a pandemic and limited the legal rights of lessors to exercise legal procedures against the tenants for collection of receivable and evacuation due to the default in payments for the period between roughly March until June 30, 2020. At the top of COVID-19 iceberg, commercial real estate investors are seriously affected by the legislative measures in favor of tenants.
On the other side, the contractors of the turnkey construction projects are dealing with the consequences of the delays as well as the increased costs of material and labor costs. Such increased cost and delay in delivery time may create serious legal conflicts between the landowners and the contractors since construction against co-ownership inland is a widely exercised method to renew the housing stock of İstanbul with its population of nearly 20 million.
Thus, it is obvious that the legal claims for the adjustment of the obligations of the parties and the consequences of termination due to force major will occupy a significant place in Turkish jurisdiction for years from now on.
A very important fact to be considered is that there is not a clear definition of “force major” in Turkish Law and most of the contracts in force lacking such definition and the consequences agreed between the parties. Hence the definition and the legal consequences of the force major will be provided by the jurisprudence based on articles 136-137-138 and 363 of Code of Obligation. Therefore, it is envisaged that a highly accumulated number of legal files for either adjustment or termination of the contracts due to just reasons will last for years and only the ones finding ways to reach an amicable solution will be the winners.
On the bottom of the iceberg, there is a whole new world alarming the commercial real estate investors as a result of successful home-office practices which the conservative management world in Turkey never considered before March 2020 and dramatically increased online shopping habits. Therefore, for the commercial real estate investors, the term repercussions might go beyond 2021 and it seems they need to strive for taking immediate measures rather than looking for legal solutions to survive.
Att. at Law & Mediator Gül Özdinç
Note: First published on CEE Legal website, 2.7.2020, https://ceelegalmatters.com/analysis/13954-checking-in-real-estate-and-covid-19
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