Revenue (Crop) Lease Agreement - Av. Gökhan Akgül

Definition

Lease agreements can be made in two forms: ordinary lease agreements and revenue (crop) lease agreements. A revenue lease involves transferring the right to use a property that yields products and the right to harvest those products to another party for a specified period in exchange for payment.

According to Article 357 of the Turkish Code of Obligations No. 6098:

“A crop lease is a contract in which the lessor undertakes to grant the lessee the right to use an asset or a right that yields products and to harvest the products in exchange for payment.”

What is a Crop-Sharing Lease?

According to Article 357/2 of the Turkish Code of Obligations No. 6098:

“A crop-sharing lease is a type of crop lease in which the rent is determined as a certain percentage of the harvested product.”

In a crop lease, the rent can be agreed upon as a sum of money or a specific percentage of the harvested product. If this percentage is not specified in the contract, it is determined according to local customs.

How Is a Revenue (Crop) Lease Agreement Made?

In the absence of specific provisions regarding crop leases in the Turkish Code of Obligations (TCO), the general provisions of lease agreements shall apply. If the lease agreement also includes tools and equipment, animals, transferred goods, or stored commodities, the parties are obliged to jointly assess their values, record them in a document prepared in two copies, sign it, and provide a copy to each other.

Obligations of the Lessor

In a revenue (crop) lease, the obligations of the lessor are regulated under Articles 360 and 361 of the Turkish Code of Obligations. These obligations include:

Obligation to Deliver
They are essential repairs.

Article 360 – The lessor is obligated to deliver the leased property, including any movable items leased together, to the lessee in a condition suitable for use and operation in accordance with the purpose of the contract, and to maintain it in that condition throughout the duration of the lease.

Article 361 – The lessor is obligated to carry out essential repairs that must be made during the lease term as soon as they are notified by the lessee, at their own expense.

Obligations of the Lessee

In a revenue (crop) lease, the obligations of the lessee are regulated under Articles 362 et seq. of the Turkish Code of Obligations. These obligations are as follows:

Obligation to Pay the Rent and Additional Costs
Obligation to Operate and Transfer the Leased Property
Obligation of Maintenance

Article 362 – The lessee is obligated to pay the rent and additional costs at the end of each rental year and no later than the end of the lease term, unless otherwise stipulated in the contract or local custom.

If the lessee fails to fulfill their payment obligation, Article 362/2 of the Turkish Code of Obligations will apply:

Article 362/2 – If the lessee does not pay the due rent or additional costs after the delivery of the leased property, the lessor may notify the lessee in writing, providing at least a sixty-day notice. If the lessee fails to make the payment within this notice period, the lessor may notify the lessee of the termination of the contract.

Article 364 – The lessee is obligated to operate the leased property in accordance with its intended purpose and in good condition, particularly ensuring that it remains suitable for yielding products.

The lessee may not change the method of operation of the leased property without the lessor’s permission, in a manner that may have an effect after the lease term ends.

Article 365 – The lessee is obligated to properly maintain the leased property.

The lessee must perform minor repairs in accordance with local customs and replace low-value tools and equipment that are damaged or worn out from use with new ones.

Can the Lessee Request a Reduction in the Rent?

The lessee has the right to request a reduction in the rent in exceptional circumstances. This issue is explicitly regulated under the heading “Reduction of Rent in Exceptional Circumstances” in Article 363 of the Turkish Code of Obligations.

Article 363 – If the usual yield of an agricultural property decreases significantly due to extraordinary disasters or natural events, the lessee may request a proportional reduction in the rent.

Waiver of this right at the outset is valid only if the possibility of such circumstances occurring during the determination of the rent was taken into account, or if the resulting loss is covered by insurance.

Prohibition of Sublease and Transfer of Usage Rights

Sublease is the transfer of the right to use the leased property to a third party. The lessee may not lease the property to another person without the lessor’s consent, nor can they transfer the right to use and operate the property to someone else. However, the lessee may lease certain parts of the leased property, provided that such leasing does not require any changes that would cause harm to the lessor.

Termination of the Contract

The reasons for the termination of the contract are listed in the law:

Expiration of the Term
Termination Notice
Extraordinary Termination
Important Reasons

Lessee’s Insolvency
The death of the lessee

1.Expiration of the Term (TCO Article 367)

A fixed-term lease agreement automatically terminates at the end of the term. However, the parties have the option to extend the contract by mutual agreement, even after the term has expired. The parties may also implicitly use this extension option. If the parties tacitly continue the contract, unless otherwise agreed, the lease agreement is considered renewed for one-year terms. The renewed lease agreement can be terminated for the end of each lease year by complying with the legal notice period.

2.Termination Notice (TCO Article 368)

In an indefinite-term contract, if the termination notice period is not specified by the contract or local custom, either party may terminate the contract, provided that at least a six-month notice period is observed. Unless otherwise agreed, for crop leases related to agricultural real estate, the termination notice is applicable for the spring or autumn seasons according to local custom; for other crop leases, a termination notice can be made at any time. According to Article 378 of the Turkish Code of Obligations:

“Unless otherwise agreed or specified by local custom, either party may terminate a contract made for an indefinite term at any time.

However, the termination cannot be made in bad faith or at an inappropriate time.”

3.Extraordinary Termination

a. Important Reasons (TCO Article 369)

If one of the parties faces significant reasons that make the continuation of the lease relationship unbearable for them, they may terminate the contract at any time, in compliance with the legal termination notice period.

These significant reasons are related to the personal and material conditions that the parties accepted as the basis of the contract when it was formed. These reasons may arise either at the beginning of the contract or during its continuation. The law does not specify what constitutes significant reasons. However, significant reasons are generally defined as “reasons that can be accepted under the principles of good faith, making the continuation of the contract unbearable for the party raising them.” For example, situations such as the emergence of animosity between the lessee and the lessor or the lessee leaving the leased property due to a job transfer may be considered significant reasons. However, in order for a party to base such a claim on the law, the situation and conditions must be unforeseen at the time the contract was established, and the party must not be at fault in the occurrence of these reasons. In other words, if these reasons could have been foreseen in advance or if the party raising the reason is at fault in the emergence of the reason, termination cannot be requested based on Article 286 of the Code of Obligations. This is because no one can claim a right based on their own fault. The determination of whether the alleged reasons make the relationship unbearable will be assessed within the framework of good faith principles, considering the scope, purpose of the contract, and the parties’ situation.

The judge, taking into account the circumstances and conditions, will decide on the financial consequences of the extraordinary termination notice.

b. Lessee’s Bankruptcy (TCO Article 370)

In the event of the lessee’s bankruptcy, the contract automatically terminates at the moment the bankruptcy is declared. However, if sufficient security is provided for the ongoing rent and the items listed in the inventory, the lessor is obligated to continue the contract until the end of the rental year.

c. Lessee’s Death (TCO Article 371)

In the event of the lessee’s death, their heirs and the lessor may terminate the contract, provided that they comply with the six-month legal termination notice period.

Consequences of the Termination of the Harvest (Product) Lease Agreement (TCO Article 372)

The most important consequence of termination is the lessee’s obligation to return the product. In this case, the lessee is required to return the leased property along with all items listed in the inventory. If the items listed in the inventory have been valued when the leased property was handed over, the lessee is obligated, upon the termination of the lease agreement, to return these items in the same type and value or compensate for any shortages in value. The lessee may be exempt from returning the items or paying compensation by proving the lessor’s fault or the existence of force majeure. If the product could have gained more value if the lessee had operated it better, the lessee is obligated to compensate for the missing value. However, the lessee cannot claim compensation for the value increase resulting from the care they were required to exercise on the leased property. The lessee can, however, claim compensation for the value increase resulting from their own expenses or labor.

Relevant Court of Cassation Rulings

The case was filed with a request for the termination of the agricultural product lease agreement, which started on 30.03.2006 and had a duration of 3 years.

The defendant argued for the rejection of the case.

The court ruled to reject the case on the grounds that it was not proven.

The plaintiff appealed the decision.

The agricultural product lease agreement dated 30.03.2006, whose content is undisputed between the parties, imposes mutual rights and obligations on the parties. By its nature, lease agreements are continuous performance contracts. Mutual goodwill and trust are important factors in maintaining the lease relationship.

Indeed, according to Article 272 of the Turkish Code of Obligations (BK), the lessor is obligated to keep the leased property in a condition suitable for its intended purpose during the period of use or operation. If this obligation is not fulfilled by the lessor in violation of the principles of good faith, the tenant may terminate the contract based on Article 250 of the BK due to the reference made to the general lease provisions in Article 272, or if the execution of the contract has become intolerable, the tenant has the right to terminate the contract based on the final provision of Article 274 of the BK.

After these general explanations, turning to the specific case; it is understood from the information and documents in the case file that the plaintiff is facing criminal prosecution based on various actions related to five separate crimes committed by the defendant lessor. Even though a decision of non-prosecution was made by the authority conducting the criminal prosecution, the existence of this fact demonstrates that the contract has become unbearable for both parties. In other words, it is not reasonable to expect the parties to continue the contract at this point. Furthermore, some of the witnesses stated the existence of a dispute between the parties.

Based on this determination, the court’s rejection of the case due to an error in the assessment of the evidence, instead of issuing a judgment on the request, should be overturned.” (Court of Cassation 14th Civil Chamber, 2009/8138 E., 2009/10717 K., 12.10.2009)

The plaintiff stated that a partnership agreement was made between the plaintiff and the deceased Abdullah Şen, the decedent of the defendants, concerning the entire 169/768 share of the orange orchard owned by the defendants, on 09/10/1989 at the 5th Notary, with the document numbered 52046. The agreement was for a period of 15 years, and Article 2 of the agreement stated that if the partners did not notify each other with a notice or warning one month before the expiration of the contract, the contract would continue under the same terms. It was further stated that after the 15 years, if the contract was not terminated by the parties, it would remain in effect indefinitely. According to the agreement, all maintenance, repair, irrigation, and fertilization of the orchard would be carried out by the partner named …, and the costs incurred would be deducted from the annual yield, with the net profit to be divided equally among the partners. However, since 2011, the defendants had attempted to terminate the contract without fulfilling the plaintiff’s rights arising from the agreement, and attempted to evict the plaintiff from the orchard. The plaintiff requested the court to determine that the contract was practically terminated due to its inability to be enforced, and that the contract had been unlawfully terminated by the defendants. The plaintiff further requested the identification of the ownership and value of the trees in the orchard under Article 6 of the contract and that the defendants be ordered to pay for these tree values. If the payment was not made within the time specified by the court, the plaintiff would have the right to either cut or uproot the trees. The plaintiff also requested the determination of the income from the crops harvested in 2013 and 2014 and the portion of this income due to the plaintiff, as well as the reimbursement of the expenses the plaintiff had made in 2013 for the orchard, along with legal interest, to be jointly and severally collected from the defendants. Additionally, the plaintiff requested a judgment for 20,000 TL in moral compensation for the emotional damages suffered, with legal interest to be collected from the defendants jointly and severally.

The defendants argued that there was no simple partnership agreement between the plaintiff and the deceased, but rather a revenue lease agreement, and that the trees in the orchard belonged to the defendants. They defended the case by requesting its dismissal.

The court, due to lack of jurisdiction, decided to send the case to the competent … On-duty Commercial Court of First Instance, and this decision was appealed by the plaintiff’s attorney.

1-) According to Article 141 of the Constitution, judicial decisions must be written with reasoning. This requirement is also stipulated in Article 297 of the Code of Civil Procedure No. 6100. Article 297 of the Code of Civil Procedure No. 6100 elaborates in detail the elements that the judgment should contain. According to the aforementioned constitutional and legal regulations, the judge is obligated to indicate in the decision the summary of the parties’ claims and defenses, the points on which they agreed or disagreed, the evidence collected regarding the disputed facts, the discussion and evaluation of the evidence, the facts found to be established, and the conclusions and legal reasons drawn from these facts. The legal connection between the factual findings and the judgment can only be established in this manner, and through this reasoning containing legal elements, the correctness of the decisions can be reviewed. The reasoning of the decision should not contradict the judgment.

In the concrete case; although the court stated in the reasoning section of the judgment that the dispute arose from a product lease agreement and, in accordance with Article 4/1-a of the Code of Civil Procedure (HMK), the Civil Court of Peace was the competent court, the court created a contradiction between the reasoning and the judgment by issuing a decision of lack of jurisdiction in the judgment and sending the case to the competent … On-Duty Commercial Court of First Instance.

Therefore, the contradiction between the reasoning and the judgment section is contrary to procedural law and statute, and this issue requires the judgment to be overturned.

Furthermore, since the dispute between the parties arose from a product lease agreement, the competent court to hear the case is the Civil Court of Peace, and it was incorrect to issue a lack of jurisdiction decision in favor of the Commercial Court of First Instance.

CONCLUSION: For the reasons outlined in the first and second paragraphs above, and considering the provisions of Article 3 added by Law No. 6217 to the Code of Civil Procedure No. 6100, the judgment is overturned in favor of the plaintiff, in accordance with Article 428 of the Code of Civil Procedure (HUMK), and the advance appeal fee will be refunded to the appellant upon request. As per the reference to the transitional article 3 of the Code of Civil Procedure No. 6100, and in accordance with Article 440 of the old Code of Civil Procedure No. 1086, the path of rectification of the judgment is closed. The decision was unanimously made on 14.03.2018.” (Court of Cassation 3rd Civil Chamber, 2017/3925 E., 2018/2425 K., 14.03.2018)

[1] AYDIN, Gülşah Sinem, 6098 Sayılı Türk Borçlar Kanunu İle Karşılaştırmalı Olarak Hasılat (Ürün) Kirasının Sona Ermesi, Marmara Üniversitesi Hukuk Fakültesi Hukuk Araştırmaları Dergisi, Yıl 2012 Cilt: 18 Sayı: 1, s.441.