Tenants of commercial buildings can recover their investment or key money by transferring their lease rights to another person from 6 months before the expiration of the contract period to the end of the lease. In this case, the landlord's approval for the transfer of lease rights is mandatory, and if the landlord refuses approval for reasons stipulated in the law, such as the tenant's non-payment of rent, the transfer of lease rights is impossible.
What should I do if the landlord refuses to transfer the lease even though there is no reason to do so, or demands a monthly rent that is significantly higher than the market price as a condition of approval?
Let's take a look below.
What happens if the landlord stubbornly refuses to transfer the property?
What should I do if the landlord refuses to transfer the lease without any legal reason? This also applies if the landlord refuses to meet with the new tenant or consistently fails to respond to requests for approval of the transfer.
At this time, the landlord must pay the tenant the equivalent of the key money as compensation. However, the equivalent key money amount is determined as the lower amount by comparing the amount the new tenant agreed to pay with the key money amount based on the market price at the time of termination of the lease. The key money based on the market price is usually determined by a court through a key money appraisal.
What happens if the landlord demands a higher rent than before?
As a landlord, it is often advantageous to refuse to transfer the lease and find a new tenant. However, after consulting with lawyers and others, you will learn that you cannot refuse to transfer the lease under the Commercial Lease Protection Act. So after much thought, you will come up with a method to make the new tenant give up on his own by offering a high rent. In most cases, landlords use this method, and it is also a clever way to refuse to transfer the lease without the landlord's responsibility.
However, the Commercial Lease Protection Act does not allow such acts. In other words, even if the landlord demands significantly high rent and deposit, the amount equivalent to the key money is paid as damages in the same way as when refusing to transfer the lease (Article 10-4, Paragraph 1 of the Commercial Lease Protection Act). In this case, whether the amount is significantly high is determined by considering taxes, utility charges, rents and deposits of surrounding commercial buildings, and other burdens. In practice, the court considers these factors and evaluates the appropriate rent, and then compares it with the amount proposed by the landlord.
Therefore, if the landlord proposes a high rent, it is reasonable for the tenant to first check whether the amount is acceptable to the new tenant, and if not, to terminate the assignment contract and claim damages equivalent to the key money from the landlord.
If there is a special provision for waiver of royalties
If you look at the lease agreement, there are cases where it is written as a special provision that 'the tenant cannot claim key money from the landlord under any circumstances.' In this case, can't the tenant claim damages even if the landlord refuses to transfer the lease?
The provisions of the Commercial Lease Protection Act take precedence over the agreement between the lessee and the lessor. Any agreement that is against the Commercial Lease Protection Act and disadvantageous to the lessee is invalid (provisions that are favorable to the lessee are valid). Therefore, if the lessor refuses to transfer the lease without a justifiable reason, the lessee may claim damages regardless of whether there is a special agreement as mentioned above.
Attorney Lee Yong-hwa of Ubiz Law Firm has extensive experience and deep expertise in the real estate field. Through his long practical experience, he has handled a variety of real estate-related issues and provides reasonable and practical solutions to customers.
UBIZ Law Firm, 6th floor, 418 Nonhyeon-ro, Gangnam-gu, Seoul 02-3452-9290
