SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
6.2 Types of Commercial Leases There are two main types of commercial leases: • a gross lease typically used for offices – a tenant is not responsible for the payment of any amounts other than rent; and • a net lease typically used for retail stores – a tenant pays, in whole or in part, the cost of possession and maintenance with respect to the real estate, in addition to rent. 6.3 Regulation of Rents or Lease Terms Under the Civil Code Rents and lease terms are basically freely nego - tiable. However, under the Civil Code, certain terms may not be contractually agreed upon to the extent that they are unfavourable to a tenant. For example, in the event that the agreed rent becomes inadequate due to an increase in tax - es, public charges or other claims, the landlord is entitled by law to request an increase in future rent. However, the tenant’s right to request a reduction in rent in case of a change in economic circumstances may not be waived or excluded by contractual agreement. As another example, in the event that a tenant installs a fixture in or on the leased building for its benefit with the landlord’s consent, the tenant is entitled by law to request the landlord to purchase the fixture upon termination of the lease, and such right of the tenant may not be waived or excluded by contractual agreement. 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. 6.4 Typical Terms of a Lease A lease for business premises typically includes the following terms: • the 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 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 burden on the leasehold building, or due to 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 office buildings; and • rent is paid monthly. 6.5 Rent Variation
944 CHAMBERS.COM
Powered by FlippingBook