Points to note when renting a commercial building for foreign residents doing business in Korea

As the number of foreign residents living in Korea increases, the number of foreigners doing business with them is also increasing significantly. Foreign residents who are running stores have no choice but to rent a store and operate it. In Korea, there is a separate lease protection law for commercial buildings.

We have compiled a summary of how the Commercial Building Lease Protection Act, which is different from general housing, protects tenants and what foreign residents should be aware of.

① Resistance: When a lessee who rents a store or office signs a lease contract, moves into the office and applies for business registration, it becomes effective against a third party from the next day. After the occurrence of counterforce, even if the leased building is sold, you can claim the new buyer to use the commercial building as part of the existing lease agreement.

② Guaranteed duration of lease: The lessee may conduct business in the same building for up to 10 years, including the initial lease period. You can request a contract renewal within the scope of the lease period not exceeding 10 years. The reason for this rule is that if a certain tenant comes in and works hard and the business goes well, the owner of the commercial building might often let the tenant out and then he or someone else may start the business.

The lessee who wants to renew the contract must request the renewal of the contract between 6 months and 1 month before the expiration of the lease period(It is recommended to record or text the content).

If the lessee is overdue for rent more than 3 times, the lessor may refuse to renew the contract.

③ Restriction on increase in rent, etc. at the time of contract renewal: When the lease contract is renewed, the lessor may request an increase in rent, etc., in this case, only within 5% of the rent or deposit at the time.

④ Priority recognition of right of repayment: Just as it is important for general housing to receive a fixed date, it is recommended that commercial buildings receive a fixed date by going to the tax office. That way, if the building goes to auction, you can receive the deposit in preference to other creditors. Naturally, when you first move into a building, you need to make sure that the landlord doesn't take out a lot of loans with the building as collateral.

⑤ Protection of the opportunity to collect the right money: If the business of the commercial building is successful and there is a lot of profit, a right money is created when you buy and sell it again. The entitlement is converted into money for the advantages of business facilities, customers, and sales know-how. The lessor must not interfere with the payment of the right payment from six months before the end of the lease period until the end of the tenancy. In case of non-compliance, the lessor is liable for damages. The reason for this rule is because even a lessor must give a premium to send out the lessee. Therefore, if the lessor himself intends to do business, it may prevent the lessor's shop from accruing the right money.

Meanwhile, this Act applies to commercial buildings subject to business registration that are less than the guaranteed amount set by region (eg, 540 million won in Ansan, Yongin, Hwaseong, Gimpo, etc.).

The most common form of dispute in practice is the notification of contract termination due to ‘the lessee’s breach of contract’, and a claim for delivery of the building due to this. The lessee’s breach of contract is typically ‘non-payment of rent three or more times’ and ‘subletting the leased building to another person without obtaining the consent of the lessor’.

If the lessee violates the contract, he/she will not be able to exercise his/her rights under the above law, so the lessee should make sure that there are no violations, and it will be a great help to prevent disputes by making a habit of getting advice from legal experts. .

Legal Consultation for Foreign Residents Now, at the ‘Papaya Story Living Legal Visa Support Center’ or ‘Law Firm (Lieutenant) Min’.

Papaya Story Korean 031-8001-0211 /  'Migration Legal Support Team' 02-3477-5550