COVID-19: Shopping Malls Reopen with Suggested Operating Restrictions

Recent Development

In line with the Ministry of Health’s normalization plan announced last week, shopping malls will reopen on May 11, 2020. The Ministry of Health issued measures that shopping malls must undertake for their reopening and operation, but these measures have not been published in the Official Gazette. At this moment, we consider the announced measures as suggestions.

Shopping malls and their tenants must meet these suggestions for the good of regulatory compliance and public health.
No regulation had passed regarding the closure of shopping malls because of the COVID-19 pandemic, except several units in the shopping malls (i.e., restaurants, theatres, and playgrounds). Shopping mall operators/investors and retailers decided to suspend their activities at their own initiative for the sake of public health and due to some retailers’ tendency for the closure of their stores. Tenants were divided in their opinions; some wanted to open their shops and operate despite the pandemic, while others wanted to exercise caution and close their shops until the situation stabilized.
Shopping malls are important to Turkey’s economy, greatly impacting employment, supply chain and consumption in Turkey. Consequently, shopping malls were prioritized in the normalization plan. It is vital for malls and retailers to follow the ministerial suggestions to ensure public health, but these suggestions will also have an effect on the contracts between malls and retailers. Malls and retailers must continue to fulfill their obligations of “keeping the leased property available for use” or “keep the store open during working hours”. Failure or deficiency in taking the necessary precautions may further lead to loss of reputation.

Compliance with the suggestions comes with a price for the mall operators/investors. One of the legal and economic considerations that must be addressed in the upcoming days is to determine what portion of these costs malls can request from their tenants. The retailer associations’ requests a grace period for lease and common area expenses create additional costs for malls. A full account of the associated costs could help parties review their expenses and settle these matters.

Some tenants may also ask changes to their lease contracts, considering certain measures like the limited number of customers in stores, hygiene measures related to the clothing and cosmetics shops, and the prohibition of tables and chairs in food courts.

Although malls and retailers have a symbiotic relationship and are therefore usually capable of finding solutions to their problems, when things go south, litigation might be inevitable. Litigation could potentially harm the relationship between the parties and often take years. A cost and time effective alternative to litigation is arbitration. Malls and retailers can consider the inclusion of arbitration clauses in their agreements to resolve disputes with the Istanbul Arbitration Center (ISTAC).

In addition to the relationship between malls and shops, contracts related to third party services such as security, cleaning and maintenance should be evaluated in light of the new measures.

What are the suggested measures?

1. Measures for Shopping Malls

(a) Measures related to entrances

(b) Measures related to common spaces

(c) Hygiene Measures in Shopping Malls

(d) Measures Related to Air Conditioning and Ventilation

  1. Measures for Retailers
  1. Measures for Shopping Malls and Retailer Employees

We compiled a table with common legal questions regarding the measures and divided them into their related practice areas.

Matters that must be assessed based on the dynamics of each lease contract
  • Which measures-related costs should the landlord pay? How should the common area expenses be calculated and managed?
  • For shops already facing difficulties in paying rent, how should they terminate their contracts?
  • How can a retailer terminate its store lease contract in the cheapest and easiest way?
  • What measures-related costs might be categorized as common area costs that retailers must pay?
  • Should the fidelity principle be reassessed for café, restaurant, playground and fitness centers lease contracts, considering the announced measures?
  • What are the contractual clauses or legal instruments applicable for shopping malls or retailers refusing to reopen?
  • What claims can be directed to shopping malls or retailers who fail to take the measures? How can the parties conduct an analysis or take actions on failing to take measures?
  • In terms of project financing, how will loan contracts of shopping malls affect negotiations with tenants? Are there any clauses that may affect such evaluation in the financing contracts?
  • Considering the measures, should the contractor system be re-evaluated or the contract modified? Is termination of the contract an alternative?
(Lease Law)
Questions related to labor law:
  • What is the effect of the new shifts and employee number restrictions on the employment relationship?
  • What are the steps that may be taken regarding personnel that do not comply with the measures?
  • Is it possible to change employees’ workplaces due to the restriction on personnel number?
(Labor Law)
Questions related to data privacy law:
  • Is it possible to measure the temperatures of visitors at the entrances of the mall or individual stores? Can the temperature data records be retained? Should explicit consents be collected?
  • Can malls conduct ID checks at the entrance, considering the nationwide stay-at-home curfews for individuals under 25 and above 65 years of age? Can the  copies of the ID check records be obtained?
  • Considering directing the potentially infected persons to the health organizations, should the health data be recorded and processed? Is there any restriction regarding the cross-border transfer of this personal data?
  • How should customers be informed about their rights under the data protection law in relation to what type and how their data is collected when entering malls?
  • Which methods are available to obtain explicit consent from customers?
(Data Protection Law)
Questions related to dispute resolution:
  • What can retailers do to prepare for potential litigation concerning the adoption of the measures? What claims can shopping malls use in litigation? What is the role of parties’ failure to comply with the measures in such processes?
  • What are the advantages of arbitration since courts proceedings are suspended?
(Dispute Resolution)

Conclusion

The public plays the most important role in compliance with the foregoing measures. Both shopping malls and retailers stated that these measures will only work if the public complies with them.

Since the suggested measures were only published by the press and there is no official governmental publication, parties who fail to comply with the measures are not subject to an enforcement action. However, we believe that all parties will follow the measures in order to protect public health.

The authorities tend to take swift actions for matters related to public safety and exercise their discretion power beyond their authorities; thus shopping malls, retailers and individuals may be subject to administrative fines if they fail to comply. Further, if these measures are published in the official city health councils’ orders or the Ministries of Interior or Health’s circulars,  and thus becoming legislation, those that fail to comply with the measures might be subject to administrative fines, license cancellations and similar actions.

For instance, the General Directorate of the Izmir Municipal Police sent letters to malls with the subject matter “Rules that reopened malls must follow” dated May 8, 2020. The letter includes measures similar to those indicated by the Ministry of Health. The letter states that malls that fail to follow the rules and comply with the measures may receive administrative fines pursuant to Article 282 of the Public Health Law No. 1593 for between TRY 289 and 3,180 (approx. USD 40 – USD 450), and Article 32 of the Misdemeanor Law No. 5326 for TRY 392 (approx. USD 30). In addition to the foregoing, the letter states that regarding acts constituting crimes under the Municipality Law No. 5393, the individuals involved may be subject to the criminal charges set forth under Article 195 of the Criminal Law resulting in imprisonment from two months to two years for individuals. Whether the respective administrative bodies have authority to impose the foregoing measures stated in the municipality’s letter is an ongoing contentious issue.

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