When high inflation, a currency shock or an unforeseen crisis upsets the balance of a lease, can the rent be changed? Turkish law answers with “adaptation” of the contract, an idea rooted in Article 17 of the Ottoman Civil Code (Mecelle, or Majalla): “Hardship begets facility.” This article sets out the Turkish position, compares it with English law, and looks at examples from international arbitration.
Majalla Article 17: hardship begets facility
Article 17 of the Majalla states that hardship calls for facilitation. Article 18 completes the thought: “when a matter becomes narrow, it widens.” Together they express the idea that a rule should not be applied rigidly where extraordinary circumstances impose an unbearable burden on a party. For a detailed analysis of the maxim, see our article on Article 17 of the Mecelle.
Its modern counterpart is the exception to pacta sunt servanda known in Turkish law as excessive difficulty of performance and adaptation of the contract.
Changing the rent under Turkish law: three routes
- Contractual increase clause: for residential and roofed commercial premises, an increase clause for a renewed lease year is valid provided it does not exceed the twelve-month average change in the consumer price index (CPI) for the previous lease year (Turkish Code of Obligations, TCO Art. 344/1).
- Rent determination action: for leases longer than five years, or renewed after five years, the court sets the rent for the new lease year on an equitable basis, taking into account CPI, the condition of the premises and comparable rents (TCO Art. 344/3).
- Adaptation action: where an extraordinary event, unforeseeable at the time of contracting and not caused by the debtor, makes performance so onerous that requiring it would be contrary to good faith, the debtor may ask the court to adapt the contract to the new circumstances or, if that is not possible, to withdraw from it (or terminate a continuing contract) (TCO Art. 138).
The rent determination action depends on the five-year period and the criteria of Art. 344. Adaptation is not tied to a period, but its conditions are stricter: an extraordinary and unforeseeable change, absence of fault on the debtor’s side and a severe imbalance between the parties’ obligations must all be present. In practice, the 2001 and 2018 currency crises and commercial leases during Covid-19 were the main waves of adaptation claims.
Whether high inflation alone justifies adaptation is debated. One view is that inflation is generally foreseeable, while sudden increases far beyond expectations may amount to an extraordinary change. The outcome depends on the contract date, its term, any increase clause and the economic conditions of the period.
The English law perspective: no adaptation, narrow frustration
English law has no general doctrine of hardship equivalent to TCO Art. 138. The courts will not rewrite a bargain; rent changes only through a rent review or indexation clause agreed by the parties. The only general response to supervening events is frustration, which ends the contract rather than adjusting it, and the threshold is high:
- Davis Contractors Ltd v Fareham UDC [1956] AC 696: a building contract expected to take eight months took twenty-two because of labour and material shortages and became far more expensive. The House of Lords held that greater burden or cost is not enough; performance must become “radically different” from what was undertaken.
- National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675: the only access road to a leased warehouse was closed for about twenty months. The House of Lords accepted that a lease can in principle be frustrated, but held that the closure did not frustrate a ten-year lease.
- Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 335 (Ch): the EMA argued that Brexit frustrated its 25-year lease in London. The High Court held that Brexit did not frustrate the lease and that the tenant remained bound to pay the rent.
The comparison is instructive. Turkish law, carrying the spirit of Majalla Article 17, empowers the judge to restore the balance; English law leaves the risk where the contract puts it and expects parties to allocate it in advance. For long-term leases and supply contracts governed by English law, carefully drafted indexation, rent review and hardship clauses are therefore essential.
Examples from international arbitration
In international commercial contracts, tribunals often refer to the UNIDROIT Principles of International Commercial Contracts (Arts. 6.2.1–6.2.3). They provide for renegotiation in cases of hardship and, failing agreement, allow the court or tribunal to terminate the contract or adapt it to restore its equilibrium.
- ICC Case No. 8873 (1997): a contractor sought renegotiation under the UNIDROIT hardship provisions. The tribunal declined, considering that those provisions did not, at that time, reflect current practice in international trade.
- ICC Case No. 16369 (2011): the sole arbitrator found hardship. Reading the contract’s price formula as showing that the parties intended to share the risk of heavy market fluctuations, and in the absence of agreement, the arbitrator held that adapting the purchase price, rather than terminating the contract, was the reasonable and fair remedy (UNIDROIT Art. 6.2.3).
The contrast between the two awards shows how the idea of hardship has gained ground in arbitration over time, a modern echo of the Majalla’s maxim in international trade.
Frequently asked questions
Is a rent determination action the same as an adaptation action? No. Rent determination rests on TCO Art. 344 and is mainly available once a lease has run for five years. Adaptation rests on TCO Art. 138 and requires an extraordinary change that upsets the balance of the contract.
Can a tenant also seek adaptation? Yes. Art. 138 gives the right to the debtor of the burdened obligation; a tenant whose business is halted by an extraordinary event may seek a reduction. Such claims were common during Covid-19.
General information only; not legal advice. Adaptation and rent determination claims depend on the terms of the contract and the facts of each case. Sources: Majalla Arts. 17–18; Turkish Code of Obligations Arts. 138, 344; Davis Contractors Ltd v Fareham UDC [1956] AC 696; National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675; Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 335 (Ch); ICC Case Nos. 8873 (1997) and 16369 (2011), as summarised in Unilex; UNIDROIT Principles Arts. 6.2.1–6.2.3.