The Commercial Lease Protection Act stipulates provisions to protect tenants of commercial buildings. However, the Commercial Lease Protection Act does not apply to all leases, but only applies to cases where the converted deposit is less than the standard amount. If so, let’s check the content and scope of the converted deposit, which is a requirement for application of the Commercial Lease Protection Act.
Concept of converted deposit under the Commercial Lease Protection Act
The Commercial Lease Protection Act is fully applied only when the converted deposit is less than a certain amount (for example, 900 million won or less in the case of Seoul), and only specific provisions apply when it exceeds a certain amount. At this time, the converted deposit is the sum of the monthly rent multiplied by 100 and the deposit.
Converted deposit = (monthly rent × 100) + deposit
Scope of converted deposit under the Commercial Lease Protection Act
At this time, the converted deposit amount, which is the standard for application of the Commercial Lease Protection Act, is different for each region, and as of January 2024, it is as follows.
1. Seoul Metropolitan City: 900 million won
2. Overpopulation control area (excluding Seoul Metropolitan City) and Busan Metropolitan City according to the “Metropolitan Area Readjustment Plan”: KRW 690 million
3. Metropolitan cities (regions and counties included in the overpopulation control area according to the “Metropolitan Area Readjustment Plan”)
Region (excluding Busan Metropolitan City), Sejong Special Self-Governing City, Paju City, Hwaseong City, Ansan City, Yongin City, Gimpo City, and Gwangju City: KRW 540 million
4. Other regions: 370 million won
In other words, in the case of Seoul, the Commercial Lease Protection Act is fully applied only when the converted deposit is KRW 900 million or less, in Busan it is KRW 690 million, in other metropolitan cities it is KRW 550 million, and in other regions it is KRW 300 million. It's 10 million won. Since these conversion deposit standards often change, it is necessary to check the enforcement ordinance of the Commercial Lease Protection Act from time to time.
For example, in Seoul, if the monthly rent exceeds 10 million won, even if the deposit is 1 won, the converted deposit becomes 1 billion won and 1 won, exceeding the scope of application of the Commercial Lease Protection Act, as shown below.
* Converted deposit = (monthly rent × 100) + deposit = (10 million won × 100) + 1 won = 1 billion 1 won
As such, the Commercial Lease Protection Act does not apply in all cases, so keep this in mind when concluding a commercial lease contract. However, according to the Commercial Lease Protection Act, certain provisions may be applied regardless of the amount of the converted deposit (Article 2, Paragraph 3 of the Commercial Lease Protection Act). From the next issue, we will look at the contents that are applied regardless of the amount of the converted deposit. .
Attorney Sunjin Kim has been mediating franchise disputes based on coexistence for the past 10 years and is working to restore the franchise to its original state. KLF handles nearly 100 franchise lawsuits every year and is Korea's top franchise-specialized law firm that serves as an advisor to several franchise companies.
KLF Franchise Law Firm Room 205, 2nd floor, 151 Seochojungang-ro, Seocho-gu, Seoul 02-738-9600
