SOUTH KOREA Law and Practice Contributed by: Junghwan Lee, Dong Seok Woo, Jun Woo Cho and Jee In Kim, Lee & Ko
2.4 Real Estate Due Diligence Buyers typically conduct legal due diligence by reviewing publicly available records, including the real estate registry, the building ledger and the land use plan confirmation. The primary focus is to verify ownership records, identify any encumbrances such as mortgages or provisional attachments, and confirm compliance with zoning and building regulations, as well as potential environmental issues. In commercial transactions, due diligence typically includes a review of key lease agreements, ongoing or potential litigation, tax liabilities and existing property management arrangements. 2.5 Typical Representations and Warranties In Korean commercial real estate transactions, sell - ers typically provide the following representations and warranties:
of administrative permits, and early verification of timelines is important to avoid closing delays. Foreign investors must generally comply with the Foreign Exchange Transactions Act (FETA), includ - ing reporting through a designated foreign exchange bank. Depending on the structure, registration under the Foreign Investment Promotion Act (FIPA) may also be made to qualify as foreign direct investment and facilitate remittance of proceeds. 2.7 Soil Pollution or Environmental Contamination Under the Soil Environment Conservation Act, a cur - rent owner may be held liable for the remediation of soil contamination, even if they did not cause the pol - lution. However, an owner may be exempt from liabil - ity if it can demonstrate that it acquired the property without knowledge of the contamination and without negligence. To mitigate this risk, investors typically conduct environmental site assessments during due diligence and include specific indemnity provisions in sale agreements. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law A buyer can verify permitted uses and development restrictions through a Land Use Planning Certificate, which sets out zoning classifications (eg, residential, commercial, industrial) under the National Land Plan - ning and Utilization Act. For more detailed controls, particularly in urban areas, District Unit Plans provide parameters such as floor area ratio, building cover - age and height limits. The building ledger may also be reviewed for information on existing structures. In addition to statutory zoning, certain developments may be enabled through public contribution arrange - ments, where developers negotiate with authorities for relaxed planning parameters in exchange for providing public infrastructure or facilities. These arrangements, though administrative in nature, can be significant in large-scale projects. 2.9 Condemnation, Expropriation or Compulsory Purchase The government or designated entities may expropri - ate real estate for public projects under the relevant
• authority and capacity; • title and encumbrances; • leases and possession; • compliance and permits; and • litigation and insolvency.
Under the Civil Code, sellers bear statutory warran - ty liability for defects in title or property. If the buyer was unaware of a defect at the time of sale, they may rescind the contract or claim damages, provided this is exercised within six months of discovering the defect. In practice, commercial real estate transactions are primarily governed by contract. Buyers typically rely on termination rights for material breach and claims for breaches of representations and warranties. Where sellers are SPVs intended for post-closing liquidation, claim survival periods are often short (around one to three months), and liability is usually capped at 5–10% of the purchase price. W&I insurance is uncommon but may be used in certain cases. 2.6 Important Areas of Law for Investors Investors should confirm whether a property is sub - ject to prior approvals or permits (eg, land transac - tion permit zones or cultural heritage areas). Com - mercial deals may also require transfer or reissuance
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