SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
and, if the bid is successful, to execute the construction contract (a general requirement for public procurement); • performance guarantees/bonds, which secure the performance of a contractor’s obligation under the contract; • warranties, which oblige a contractor to remedy defects that occur after completion of construction; and • advance payment guarantees, which secure the contractor’s obligation to return the advance payment under the construction contract. 7.6 Liens or Encumbrances in the Event of Non-payment In the event of non-payment, a contractor may exercise lien rights and refuse to hand over the project until the contract price is paid, provided that an incomplete building that is not deemed an independent building is classified as an improvement on the land, and thus may not be subject to a lien. Therefore, the subject property must be objectively considered to be an inde - pendent building in order for a lien to be exer - cised. According to relevant court precedents, an incomplete building will be considered an independent building if it has more than a mini - mum number of pillars, a roof and main walls. Civil and Commercial Liens There are two types of liens available, and a contractor may selectively assert a lien under the Civil Code (a civil lien) or under the KCC (a commercial lien). Civil liens For a civil lien, a contractor must be in posses - sion (including indirect possession) of the sub - ject property, and the claims for the contract price must be correlated to the property in pos - session (meaning that the property in posses -
sion must be the property in relation to which the claim for the contract price has arisen). The subject property is not required to be owned by the debtor. Commercial liens For a commercial lien, this correlation is not required, but the subject property must be owned by the debtor (ie, the project owner), and the contractor must be in possession of the subject property as a result of the relevant com - mercial transaction. In addition, a contractor may demand that the owner establish a mortgage on the subject real property to secure the contract price. Similarly, a designer may assert a commercial lien or demand that the owner establish a mort- gage on the subject real property, but the civil lien would not be available as the designer’s claim for the contract price would not be cor - related to the property in possession. To assert a commercial lien, the designer must be in pos - session of the subject property as a result of a commercial transaction. Lien Waivers The right to a lien and the right to a mortgage may both be waived by agreement of the parties. Since the parties may execute lien waivers at any time by mutual agreement, a comprehen - sive lien waiver is often executed in advance for convenience. If a comprehensive lien waiver is executed, a monthly/periodic lien waiver is not required. While there is no statutorily prescribed form for a lien waiver, the waiver will typically contain the location and other details of the subject prop - erty, and an expression of intent to waive a lien.
843 CHAMBERS.COM
Powered by FlippingBook