Lease protection

In Korea, two types of lease are protected specifically by law. One is housing lease under the Housing Lease Protection Act (주택임대차보호법/住宅賃貸借保護法) and another is commercial building lease under the Commercial Building Lease Protection Act (상가건물임대차보호법/商街建物賃貸借保護法).

Under the Civil Act, a lessee is in a fragile position compared to a lessor. For example, the right and interest of a lessee are regarded as just a claim. So the lessee cannot stand agaist other preferential creditors with mortgage, etc. As a result, the lessee could be deprived of the deposit, which usually amounts to half of the price of leased property.

So the above-mentioned special acts afford a kind of security interest like mortgage to the lessee under a certain condition.

Key words
lease, housing lease, commmercial building lease, fixed date-time stamp, preferential creditor

Housing Lease Protection Act
This Act (주택임대차보호법) was enacted in 1981 (Law No.3379) with respect to the lease of residential buildings as a special act of the Civil Act.

Its purpose is to secure stability in the residential life of national citizens, by providing for special cases to the Civil Act, with respect to the lease of buildings for residence (Article 1). It applies to lease of the whole or part of buildings for residence (usually referred to a "house"). This provision also applies in cases where a part of a leased house is used for any purpose other than residence. Article 2.

Even though it is not registered [it means no preferential status in terms of law], if the lessee has completed delivery of a house and the resident registration, the lease shall take effect against the third person from the following day thereof. In such cases, the resident registration shall be considered to have been made at the time of the moving-in report [it means a fixed date-time stamp in relation to competing creditors]. Article 3(1).

Commercial Building Lease Protection Act
This Act (상가건물임대차보호법) was enacted in 2001 and came into force on January 1, 2003. It was legislated to protect economically fragile merchants in view of the effective enforcement of the Housing Lease Protection Act.

The legal framework and main points of both acts are very similar except one thing that the tax office with relevant jurisdiction functions to give the fixed date-time stamp.

Latest Amendment to the Act
The recent amendment to the Act ensuring the tenants to do business regardless of the deposit amount, previously 300 million won in Seoul area, for five years came into force on August 13, 2013.
 * 대통령령으로 정하는 보증금액을 초과하는 임대차에 대하여도 계약갱신요구권을 인정하고, 그 계약갱신 시 상가건물에 관한 조세, 공과금, 주변 상가건물의 차임 및 보증금, 그 밖의 부담이나 경제사정을 고려하여 차임과 보증금 증감을 청구할 수 있도록 함. Articles 2(3), 10-2.
 * 임차인의 보증금반환채권을 양수한 금융기관 등이 우선변제권을 승계하도록 함. Article 5(7),(8),(9).
 * 임차인의 계약갱신 요구를 거절할 수 있는 철거 또는 재건축의 사유를 사전에 철거 또는 재건축할 계획을 고지하거나, 건물이 노후ㆍ훼손 또는 일부 멸실 등 안전사고의 우려가 있는 경우 또는 다른 법령에 따라 철거 또는 재건축이 이루어지는 경우로 한정함. Article 10(1) vii.
 * 보증금의 전부 또는 일부를 월 단위의 차임으로 전환하는 경우에는 은행에서 적용하는 대출금리와 해당 지역의 경제 여건 등을 고려하여 대통령령으로 정하는 비율과 한국은행에서 공시한 기준금리에 대통령령을 정하는 배수를 곱한 비율 중 낮은 비율을 곱한 월차임의 범위를 초과할 수 없도록 함. Article 12.
 * 소액임차인의 최우선변제금액 상한을 임대건물가액의 2분의 1 범위에서 대통령령으로 정하도록 함. Article 14(3).

Legal Issues regarding Lease Protection
The Housing Lease Protection Act saw various theories and precedents developed to attain its purpose. However, the Commercial Building Lease Protection Act has some legal problems to be solved owing to differences from housing lease.