Plaintiff (Attorney Yang Jae-soo et al., Counsel for the plaintiff-appellant)

Defendant (Law Firm New Daegu, Attorneys Kim Dong-ho et al., Counsel for defendant-appellant)

May 13, 2020

Daegu District Court Decision 2019Kadan10882 Decided February 5, 2020

1. Revocation of the first instance judgment.

2. The defendant shall deliver to the plaintiff cement block structure slive roof 85.8 square meters between the plaintiff ( Address omitted) and the defendant's 85.8 square meters between the plaintiff's cement block slive roof slives.

3. All costs of the lawsuit shall be borne by the defendant.

4. Paragraph 2 can be provisionally executed.

The same shall apply to the order.

1. Facts of recognition;

This part of the judgment of the court of first instance refers to the relevant part of the judgment (main sentence of Article 420 of the Civil Procedure Act).

2. The parties' assertion

This part of the judgment of the court of first instance also refers to the relevant part of the judgment (main sentence of Article 420 of the Civil Procedure Act).

3. Determination

A. According to the current Commercial Building Lease Act, in case where a tenant requests the renewal of a contract between six months and one month before the expiration of the lease term, a lessor may not, in principle, refuse the contract without justifiable grounds (Article 10(1)).

However, it is not possible for a lessee to exercise the above right to request the renewal of a contract without limitation, but can be exercised only within the extent of ten years of total term of lease (Article 2(2)). In other words, if a lessee wishes, the lease term is guaranteed to ten years in total.

B. The term of lease guaranteed by the Commercial Building Lease Act was five (2) years in total, but it was amended by Act No. 15791 on October 16, 2018, and ten (10) years thereafter. This is because the lessee has continuously raised an argument that five (5) years would continue to operate the business in a stable manner.

C. In principle, the amended Commercial Building Lease Act was enforced from the date of its promulgation (Article 1 of the Addenda).

Therefore, it is clear that the lease contract for commercial buildings, which is concluded after the enforcement of the above amendment, is guaranteed for 10 years of the total lease term (if the lessee desires).

On the contrary, it is evident that there is no room to apply the above provision regarding the ten-year security to the lease agreement already terminated at the time of the enforcement of the above Act. This is because it is not a provision to reinstate the effect of the existing lease within the ten-year period (see Supreme Court Decision 2017Da9657, Dec. 5, 2017).

However, in the case of a lease contract which was already concluded before the enforcement of the above Act and is still in existence at the time of enforcement of the Act, it is a question whether the above Act is applied or whether the former Act is applied.

Article 2 of the Addenda to the Amendment Act is as follows.

The amended provisions of Article 10(2) of the Table contained in the main sentence of Article 2 (Application of the Period of Contract Renewal Request) shall apply from the lease concluded or renewed for the first time after this Act enters into force.

In other words, the ten-year guarantee provision not only applies to a lease contract which is concluded for the first time after the enforcement of the amended Act, but also applies to a lease contract which is concluded before the enforcement of the amended Act and renewed after the enforcement of the amended Act.

D. As to the meaning of the above renewed lease agreement, the Plaintiff asserts that “a lessee has the right to request renewal under the former Act.” Accordingly, in the instant case, the total term of the Defendant’s lease until the enforcement of the amended Act exceeds five years (from July 20, 2012 to October 16, 2018). Thus, although the instant lease agreement remains in force at the time of the enforcement of the amended Act, the Defendant does not have the right to request renewal under the former Act, and therefore, the amended Act does not apply to the instant lease agreement.

On the contrary, the Defendant asserts that “all the lease agreements continue to exist without ten years of the total term of lease.” According to this, in this case, the instant lease agreement remains in existence at the time of the enforcement of the amended Act, and the total term of lease has not been ten years. Thus, the instant lease agreement is subject to the amended Act, and the Defendant is guaranteed the ten-year term of lease.

E. Article 2 of the Addenda to the amended Act provides that “a renewed lease to which a ten-year guarantee is applied shall be interpreted as “a lease to which a lessee may demand renewal before the expiration of the period of guarantee under the former Act even if it is based on the former Act because five years have not passed since the period of guarantee under the former Act was enforced at the time of its enforcement.” The reasons are as follows.

- Since a lessor who already leased a commercial building before the enforcement of the amended Act was anticipated only to have a 5-year guarantee period, applying the 10-year guarantee period to a lease that was concluded prior to the enforcement of the amended Act may cause unexpected damage to a lessor. Therefore, even considering the intent of the amended Act, the lessor’s position should be taken into account, and accordingly, it is necessary to reasonably interpret the scope of application of the amended Act pursuant to the aforementioned Addenda provision.

- From the standpoint of the lessor, there is a clear difference between the lease for which the coverage period of five years has already elapsed at the time of enforcement of the amended Act and the other lease.

In the event of lease for which the guarantee period of five years has not yet lapsed at the time of enforcement of the amended Act, the lessor is expected to be able to request renewal in the future.

On the other hand, if the guarantee period of five years has already elapsed at the time of the enforcement of the amended Act, the lessor may terminate the lease upon the expiration of the term fixed by the renewal agreement, and the lessee shall not have the right to request renewal any longer. In other words, if the guarantee period has elapsed five years, the lessor is no longer obligated to respond to the lessee’s request for renewal, and the lessor may enter into a voluntary renewal agreement with the lessee on the premise that the lease can be terminated only by the period fixed by both agreements. As such, the lessor’s obligation to guarantee the lease period (or the obligation to respond to the lessee’s request for renewal) shall be restored due to the amendment of the Act during the lease in existence of the renewed lease by agreement, and it is too harsh for the lessor to guarantee ten years in total.

- Article 2 of the Addenda provides that "a renewed lease" is "a lease with the right to request renewal under the former Act" and does not provide that "a lessee has the right to request renewal under the former Act."

However, if a renewed lease is interpreted as any lease which remains in force at the time of the enforcement of the amended Act as alleged by the defendant, the phrase of “resigned” itself is an ambiguous phrase.

If the above supplementary provision is interpreted as the defendant's assertion, it would have been a letter that "The amended provisions of Article 10 (2) shall apply not only to the first lease made after this Act enters into force, but also to all the lease already made and continued before this Act enters into force," or that "The amended provisions of Article 10 (2) shall also apply to the lease made before this Act enters into force."

In light of the purport of the amendment of the Act that expands the period of guarantee to 10 years, the lessee may demand renewal by up to 10 years if it has not yet been ten years since the enforcement of the Act, is close to the circular logic that is premised on the conclusion. It is at issue whether the amended Act applies to the lease for which 5 years have already elapsed at the time of enforcement of the Act. In this situation, the same holds holds true to the assertion that “The amended Act shall apply to the lease for which 10 years have yet to elapse since 10 years have not elapsed since the period of guarantee under the amended Act, it constitutes a renewed lease under Article 2 of the Addenda of the amended Act, i.e., the lease for which the lessee may demand renewal within the scope of 10 years, and therefore, the amended Act shall apply.”

F. Accordingly, the amended Act does not apply to the instant lease agreement for which the term of lease is more than five years at the time of the enforcement of the amended Act. In addition, the period of guarantee under the former Act has already expired five years.

Therefore, the instant lease contract was terminated on July 20, 2019, which was determined by the Plaintiff and the Defendant as extension agreement, and the Defendant does not have the right to request renewal. Therefore, the Defendant is obligated to deliver the instant building to the Plaintiff.

4. Conclusion

Thus, the plaintiff's claim of this case shall be accepted on the ground of the reasons.

The judgment of the court of first instance is unfair with a different conclusion, and thus it is revoked, and the plaintiff's claim is accepted.

(attached Form omitted)

Judges Cho Jae-han (Presiding Judge)

Note 1 see the relevant laws and regulations

(2) Article 10(1) and (2) of the former Commercial Building Lease Act (Amended by Act No. 15791, Oct. 16, 2018); see the relevant statutes