Mr. A has been operating a restaurant in a university district for three years under a lease. Mr. A has secured many regular customers due to his innate sincerity, unique recipes, and his gentle and Honam-type appearance. However, the building owner has recently stated that he has no intention of renewing the contract and is demanding that he vacate the store when the contract period ends. Judging from the situation, it seems that he thinks that if he kicks Mr. A out and operates the same restaurant, he can easily increase profits based on the customers he has secured so far.
In this situation, is there no way for Mr. A to extend the lease?
In operating a restaurant, a lot of money is spent on securing customers, and when the lease agreement for the store ends, the customers secured in this way are inevitably lost. Therefore, as a tenant of a store, it is necessary to continue operating the store by any means, even if the landlord is against it.
Is there any way to renew a lease agreement at the tenant's own discretion without the landlord's assistance?
In conclusion, there is such a method. However, you cannot just wait around, but you need to actively exercise your rights, that is, express your intention to extend the contract.
In other words, the tenant can request the building owner to renew the lease agreement from 6 months to 1 month before the expiration of the lease agreement. In this case, the building owner cannot refuse without a justifiable reason. Therefore, as a tenant, you can enjoy the effect of the contract being safely renewed by simply requesting the building owner to renew the contract during the above period. However, since the tenant must prove that he/she requested the building owner to renew the contract, it is safer to send it by certified mail if possible.
So what are the legitimate reasons a building owner can refuse to renew?
If the tenant requests a renewal of the contract, the building owner must comply. However, if the tenant subleases the building without permission, intentionally damages the building through gross negligence, notifies the tenant of the construction plan in advance at the time of the lease agreement and carries out the construction according to the plan, or otherwise significantly violates the contract, the landlord may refuse. However, if the tenant is in arrears with the rent, the amount in arrears must be equivalent to three months’ rent. Therefore, even if the tenant is in arrears with the rent for one to two months, the landlord may not refuse the request for renewal of the contract.
Therefore, even in cases of minor breach of contract, tenants can renew the contract under the Commercial Lease Protection Act.
If the building owner transfers the building, can the new building owner refuse to renew the lease?
There are cases where the building is transferred to someone else shortly after the tenant has leased the commercial space. In such cases, the new building owner may refuse to renew the contract on the grounds that the contract was signed with the previous building owner without his knowledge.
However, even in this case, there is no need to worry. According to the Commercial Lease Protection Act, the transferor of the leased building (=new building owner) is considered to have succeeded to the status of landlord from the existing building owner. Therefore, the right to request contract renewal can be exercised without any problem against the new building owner.
If the tenant does not request renewal during the above period, the contract period ends.
What if there are less than 30 days left?
As a tenant, you often don't realize that your lease is about to expire because you are busy running your store. As a natural consequence, if you fail to request a renewal of your lease 30 days before the expiration of your lease, will your lease be terminated as is?
First of all, if the building owner expresses his/her intention not to renew the contract 30 days in advance, the contract is terminated and there is no other remedy.
Next, if the building owner does not notify of a change in conditions or refusal to renew, time passes and there are less than 30 days left in the contract period. In this case, the conclusion varies depending on the amount of the conversion deposit.
First, if the conversion deposit is low and the Commercial Lease Protection Act is fully applied, the contract is renewed under the same conditions as before (implicit renewal). However, the contract period is one year. The lessee can exercise the right to request contract renewal again after one year.
Next, if the conversion deposit is excessive (over 900 million won in Seoul), the contract is terminated without tacit renewal. This is the result of the Commercial Lease Protection Act being only partially applied. Therefore, if the conversion deposit is excessive, special care must be taken to determine whether to extend the contract in order to prevent unexpected damage.
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
