Criteria for determining whether the Commercial Lease Protection Act applies

When consulting on commercial leases, I often get asked this question.

“We are not registered as a business, but rather have a unique identification number. Does the Commercial Lease Protection Act apply to us?”

There are usually two groups of people asking questions. Landlords expect the protection law won't apply, while tenants wonder if they might be protected. Interestingly, these expectations often change once the dispute actually begins.

When determining whether the Commercial Lease Protection Act applies, many people first think of "formalities" like business registration certificates or identification numbers. However, the law's actual criteria lie entirely different. What the courts consider most important is whether the space is actually being used for business—in other words, the actual operational status.

A unique identification number is merely a tax-related convenience, not a criterion for determining the nature of a lease. Therefore, even if a business occupies a unique identification number, if it continues to provide services to outsiders and receives compensation for them, it's highly likely it will be classified as a commercial establishment.

How you operate will determine your legal status.

This point becomes even clearer when we look at examples frequently encountered in practice.

Being a non-profit organization doesn't necessarily mean it's exempt from the Commercial Lease Protection Act. While it's unlikely to apply if used solely as an internal office, the situation changes the moment you offer paid lectures or programs to external audiences.

The same applies to associations and unions. Those that simply manage membership receive significantly different evaluations than those that recruit external members and collect membership fees or training fees. The situation is even more clear when it comes to academies and study cafes. While their forms and operating methods are diversifying, as long as they charge usage fees or tuition and operate continuously, it's practically safe to assume that most fall within the scope of the Commercial Lease Protection Act.

In practice, this is where most disputes arise: what started out as a non-profit or internal workspace, over time, becomes a paid program or external user recruitment, ultimately transforming into a de facto business location. 

And if a dispute arises, the court will make a judgment based on the current actual operation rather than the name at the time of the contract.

Possibility of exclusion through contract drafting

There is one more question that comes up frequently.

“Then, wouldn’t it be okay to write in the contract that the Commercial Lease Protection Act does not apply?”

While such provisions appear quite frequently in practice, it's difficult to expect them to have much impact in reality. The Commercial Lease Protection Act is a mandatory provision designed to protect tenants. Regardless of the wording in the contract, if the actual use is for business purposes, the law ultimately works to protect tenants. In other words, the actual operating conditions are far more important than the contractual wording.

So what should landlords consider?

While complete exclusion is difficult, designing a lease to reduce the potential for disputes is certainly possible. For example, clearly limiting the lease purpose to internal office use, prohibiting external business activities, or stipulating termination of the lease for violations of the intended purpose is an option. However, it's important to consider that these approaches can have limitations depending on how the actual operation is conducted.

Ultimately, the question of whether the Commercial Lease Protection Act applies is surprisingly simple. “Is this space actually being used for business?” Whether it's a unique identification number, a business registration certificate, or a non-profit organization is a secondary question. Ultimately, the law judges based on reality, not formality. 

Both landlords and tenants need to fully understand this point and approach it appropriately during the contract signing process. Designing a contract solely based on the terms or documents can lead to unexpected legal consequences.