SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
Under the CBLPA Furthermore, for commercial building leases regulated under the CBLPA, the lease term may not be less than one year (unless the tenant, on its own, elects for a period of less than one year), and the tenant is entitled to request renewal of the lease for a cumulative term of up to ten years. In addition, for such leases, with respect to the right to request an increase or reduction of rent based on changes in economic circum - stances, rent may not be increased within one year from the execution date of the lease or of a prior rent increase, or by the maximum limit for a rent increase as prescribed by law. In September 2020, the CBLPA was amended, following the spread of the COVID-19 pandemic, to explicitly stipulate the outbreak of “Level 1 Infectious Disease” as an event qualifying as a change in economic circumstances based on which the tenant may request a rent reduction, although COVID-19 has since then been declared a Level 2 Infectious Disease and this provision is not currently applicable. In January 2022, where commercial tenants are going to close their busi - ness due to the impact of COVID-19, the CBLPA was amended to allow the tenant to terminate the lease contract immediately on account of a significant change in the economic situation caused by any collective restrictions or prohibi - tions imposed by the government for more than three months. 6.4 Typical Terms of a Lease A lease for business premises typically includes the following terms: • lease term may be one or two years, and may usually be extended to up to ten years by the tenant, as set out in the CBLPA; • the tenant is usually responsible for the main - tenance and repair of leased retail stores,
whereas the landlord is usually responsible for the maintenance and repair of leased office buildings; and • rent is paid monthly. The COVID-19 pandemic did not cause any apparent change in the typical terms 6.5 Rent Variation The amount of rent depends on the terms agreed between the parties but will usually increase for retail shop leases in accordance with an increase in the consumer price index (CPI). The CBLPA provides that if the rent or security deposit becomes insufficient due to taxes, import duties or any other increase or decrease in the bur - den on the leasehold building, or fluctuations in economic conditions, each party to a lease may claim an increase or decrease in the future rent or security deposit. However, the landlord may not increase the rent or security deposit by more than 5% at a time, and a rent increase is not allowed within one year of commencing the lease contract, or within one year of an agreed increase in the rent or security deposit. 6.6 Determination of New Rent New rent will be determined by an agreement between the parties after negotiations but, as stated in 6.5 Rent Variation , an increase in rent for certain leases will be regulated under the CBLPA, as applicable. 6.7 Payment of VAT VAT is payable on rent, unless the leased prop - erty is: • a rice paddy; • a garden;
• an orchard; • a ranch site; • forest land;
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