SOUTH KOREA Law and Practice Contributed by: Junghwan Lee, Dong Seok Woo, Jun Woo Cho and Jee In Kim, Lee & Ko
6.14 Tenant’s Ability to Alter and Improve Real Estate The tenant is permitted to alter or improve the leased property as stipulated in the lease agreement, typically only with the landlord’s prior consent. Such consent is usually subject to the condition that, upon expiration or termination of the lease term, the tenant restores the property to its original condition at its own expense. 6.15 Specific Regulations The Housing Lease Protection Act, applicable to resi - dential leases, and the Commercial Building Lease Protection Act, applicable to commercial leases, are in force to protect the rights of tenants. The key features include: the right to assert the lease against third par - ties through simplified means other than registration; the right to request an extension of the lease term; and limitations on rental increases. 6.16 Effect of the Tenant’s Insolvency A lease agreement may stipulate the tenant’s insol - vency as a cause of termination by the landlord. How - ever, such a provision would likely be deemed invalid under the Debtor Rehabilitation and Bankruptcy Act, which grants the bankruptcy trustee the discretion to choose whether to terminate or perform the lease. 6.17 Right to Occupy After Termination or Expiry of a Lease The tenant has the right to occupy the leased prop - erty until the landlord refunds the security deposit. However, a lease agreement may provide that, upon expiration or termination of the lease, the tenant must first return the leased premises, and the landlord shall refund the security deposit only thereafter. 6.18 Right to Assign a Leasehold Interest The tenant may not assign the lease or sublet the leased property without the landlord’s consent. 6.19 Right to Terminate a Lease Typical grounds for the landlord to terminate the lease are the tenant’s failure to pay rent for three months or more, or the tenant’s transfer of the right to claim the security deposit. A typical ground for lease termination by the tenant is the landlord’s transfer of the leased property to a third
party. Accordingly, landlords often seek to include a clause in the lease agreement providing that the land - lord may freely transfer the property, provided that the transferee assumes all obligations under the lease. 6.20 Registration Requirements Im-cha-gwon (ie, a contractual leasehold right) is not subject to any registration requirements or specific formalities for execution. However, to protect right to use the leased property for the full term, a tenant may, with the landlord’s consent, register its Im-cha-gwon in the land registry. In practice, it is more common for a tenant, with the landlord’s consent, to register a mortgage, which secures the return of the security deposit upon expi - ration or termination of the lease. See 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security for information on fees and taxes applicable to such a mortgage. 6.21 Forced Eviction Evicting a defaulting tenant requires compliance with legal procedures. The landlord must file a lawsuit in court to obtain an eviction order. Once the court grants the eviction order, the landlord must then seek the court’s assistance to enforce the order. Depending on the circumstances and the court’s schedule, the eviction process may take several months. To avoid a lengthy litigation process, landlords often seek to include a clause in the lease agreement providing for a pre-trial settlement procedure at the time the lease agreement is signed. 6.22 Termination by a Third Party A tenant’s leasehold interest may be terminated if the leased property is expropriated by the government. Under the applicable law, the expropriating authority is required to compensate the tenant of a commercial lease for loss of profits resulting from business inter - ruption for up to four months. 6.23 Remedies/Damages for Breach If a tenant breaches a lease, the landlord is entitled to claim liquidated damages. However, if the lease agree - ment does not specify the amount of such damages, the landlord may only recover damages equivalent to
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