If a commercial property is leased with a short contract period of about six months or one year, and a clause is included in the contract stating, “This contract is a lease for temporary use and is not subject to the Commercial Building Lease Protection Act,” can one actually avoid the application of the Commercial Building Lease Protection Act?

To start with the conclusion, the application of the Commercial Building Lease Protection Act is not excluded merely because the contract period is short or the term "temporary use" is stated in the contract. Particularly careful consideration is required when extending the lease period by an additional six months with a tenant who has been operating normally for several years, especially as the contract is nearing its expiration.

When does the Commercial Building Lease Act not apply?

The Commercial Building Lease Protection Act is a law designed to protect the stable business operations of commercial tenants. Accordingly, it provides various safeguards for tenants who meet certain requirements, such as the right of opposition, the right to request contract renewal, and the protection of the opportunity to recover key money. However, Article 16 of the Commercial Building Lease Protection Act stipulates that “this Act shall not apply in cases where it is evident that the lease is for temporary use.”

The key point here is not merely "temporary use," but rather "cases where it is evident that the lease is for temporary use." Therefore, the court does not base its judgment solely on the title or wording of the contract, but rather considers various circumstances comprehensively, such as the purpose and circumstances under which the lease was concluded, the lease term, rent and security deposit, business type, whether facility investment was made, and the period of use anticipated by the parties at the time of the contract. In other words, substance is more important than form.

 If it is a 6-month contract, is it a temporary use lease?

The most common misconception in practice is that a six-month contract is a short-term agreement and therefore the Commercial Building Lease Act does not apply.

However, the contract period is only one of several factors in the determination. For example, if the purpose of short-term use is clear from the outset—such as for pop-up stores operating for a limited period at a specific location, exhibition or promotional venues, or shops used temporarily until demolition or reconstruction—it is highly likely to be recognized as a temporary use lease.

On the other hand, if the lessee has registered as a business and installed signboards and business facilities to continue ordinary business operations, and there is a possibility of continuing business even after the termination of the contract, it is difficult to conclude that it is a temporary use lease solely on the grounds that the contract period is six months or one year.

What the court ultimately looks at is “why it was decided to lease only for this period.”

Problems with extending for only 6 months after operating for several years

A more complex issue arises when, after a normal lease relationship has continued for several years, the landlord and tenant agree to use the property for only an additional six months ahead of the contract's expiration.
The mere fact that an existing lease has continued for a long period does not mean that a subsequent short-term extension necessarily has the same nature as the original lease. Conversely, simply designating a new contract as a "temporary use lease" does not automatically exclude it from the application of the Commercial Building Lease Act.

The key point is the purpose and circumstances under which an additional six months were granted. For example, one might consider a case where the landlord and tenant have already agreed on the termination of the lease itself, but the tenant requests a six-month grace period because they need time to relocate medical equipment or large facilities, or to secure a new business location.

Alternatively, there may be cases where the space is used for an additional period to handle remaining tasks for the termination of existing operations, such as staff layoffs, facility demolition, or the selection of a successor operator.
If a temporary period of occupancy is granted not to continue the existing lease but to achieve objectives such as eviction or relocation on the premise of the lease's termination, the agreement regarding the extension period may be evaluated as a lease for temporary use.

In particular, if the tenant first requested a short-term extension and clearly expressed an intention to vacate the premises at a certain point in the process, this can be an important circumstance supporting the temporary use aspect.

Is an extension for the purpose of recovering key money considered a short-term lease?

On the other hand, if the purpose of extending the contract period for a short period is not to prepare for the tenant's business termination but to continue operations or recover key money, the judgment may differ.

For example, if a tenant obtains a contract extension of approximately six to seven months to seek a new tenant and secure an opportunity to recover key money, the tenant maintains business value by continuing operations in the same manner as before during that period. In this case, the nature of the occupancy differs from temporary occupation merely for the purpose of preparing for eviction.

In actual court precedents, there are cases where the claim that the lease is for temporary use was not accepted, even if the lease term is relatively short, considering factors such as the period being additionally granted to the lessee to recover key money and the circumstances of continuous business operations.

Ultimately, what is used to do with the store during that period is much more important than whether it is six months or seven months.

Conclusion – The 'purpose' is more important than the 'contract period'.

In disputes surrounding temporary leases, the most important factor is not the length of the contract period. The key is why the use was restricted to a short period and what the parties planned for after that period ended.

While it is relatively easy to make a judgment in cases where short-term use is planned from the start, such as with a pop-up store, the situation is complicated when an existing tenant uses the space for an additional six months after operating for several years. This is because it must be distinguished whether the previous lease was effectively continued, or if only a temporary period of use was granted for the purpose of vacating or relocating after the termination of the lease had been confirmed.

Therefore, from the landlord's perspective, if it is necessary to clearly structure the lease as a temporary use lease, it is far more important to record the specific purpose and circumstances of entering into the contract in the contract and objective documents rather than merely labeling it as a 'temporary use lease.'

Ultimately, it is necessary to remember that the term 'temporary use' referred to in Article 16 of the Commercial Building Lease Act is not merely a phrase written in the contract, but a legal assessment determined by the substance of the contract.