[1] Whether a lessor is obligated to protect an opportunity to recover premiums under Article 10-4(1) of the former Commercial Building Lease Protection Act even in cases where a lessee is unable to exercise the right to request renewal of a contract for more than five years, including the first lease period, pursuant to Article 10(2) of the same Act (affirmative)

[2] In a case where Party A entered into a shopping mall lease agreement with Party B and renewed the contract more than twice in the course of operating a restaurant after delivering the commercial building, and requested Party B to enter into a new lease agreement concurrently before the expiration of the last lease term, but failed to comply with the conclusion of the lease agreement concurrently on the grounds that Party B was planned to reconstruct or repair the deteriorated building, the case holding that Party B did not bear the duty to protect the opportunity to recover the premium on the ground that Party A was unable to demand renewal of the lease agreement any longer at the time of concluding the contract on the premium

[1] In light of the language, content, and legislative intent of Article 10-4 of the former Commercial Building Lease Protection Act (amended by Act No. 15791, Oct. 16, 2018; hereinafter “former Commercial Building Lease Act”), in cases where a lessee is unable to exercise the right to request the renewal of a contract for more than five years pursuant to Article 10(2) of the former Commercial Building Lease Protection Act, the lessor is obliged to protect the opportunity to recover the premium pursuant to Article 10-4(1) of the same Act.

[2] In a case where Party A entered into a commercial building lease agreement with Party B and renewed the contract two times in the course of operating a restaurant after delivering the commercial building, and after entering into a new lease agreement with Party B at the end of the last lease period, Party B did not comply with the request of Party B to conclude a new lease agreement on the grounds that Party B had a plan to reconstruct or repair the deteriorated building, but Party A did not have an opportunity to recover the premium, the case holding that the judgment below did not err by misapprehending the legal principles on the ground that Party A did not have an opportunity to recover the premium on the ground that Party A could not request the renewal of the lease agreement any longer at the time of entering into the lease agreement, on the grounds that Party A was an agent for a new lessee from three months before the lease period expires to the end of the lease period under Article 10-4 (1) of the former Commercial Building Lease Protection Act (Amended by Act No. 15791, Oct. 16, 2018).

[1] Articles 10(1) and (2), 10-3(1), and 10-4(1) and (2) of the former Commercial Building Lease Protection Act (Amended by Act No. 15791, Oct. 16, 2018); / [2] Articles 10(1) and (2), 10-3(1), and 10-4(1) and (2) of the former Commercial Building Lease Protection Act (Amended by Act No. 15791, Oct. 16, 2018)

Plaintiff (Counterclaim Defendant) (Law Firm extent, Attorneys Kim Byung-in et al., Counsel for the plaintiff-appellant)

Defendant-Counterclaim (LLC LLC, Attorneys Credit-tin et al., Counsel for the defendant-Counterclaim plaintiff-appellant)

Seoul High Court Decision 2016Na2074621, 2074638 decided April 12, 2017

The part of the judgment of the court below concerning the claim for damages due to interference with the collection of premiums in principal lawsuit shall be reversed, and that part of the case shall be remanded to the

The grounds of appeal are examined.

1. Case summary

In addition to seeking the return of the lease deposit against the Defendant (Counterclaim Plaintiff; hereinafter “Defendant”), the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) claimed damages due to interference with the collection of the deposit pursuant to Article 10-4(1) and (3) of the former Commercial Building Lease Protection Act (amended by Act No. 15791, Oct. 16, 2018; hereinafter “former Commercial Building Lease Protection Act”). Accordingly, the Defendant sought unjust enrichment, etc. equivalent to rent as a counterclaim. The lower court rejected all of the remainder of the claim except for partial receipt of the claim for the return of the lease deposit. The Plaintiff is disputing the part of the claim for damages due to interference with the collection of the deposit.

The key issue of this case is whether a lessor bears the duty to protect the opportunity to recover premiums under Article 10-4 of the former Commercial Building Lease Act even in cases where a lessee is unable to exercise the right to request renewal of a contract for more than five years, including the initial term of lease, pursuant to Article 10(2) of the same Act.

2. Whether a lessor is obligated to protect the lessee the opportunity to recover premiums even after the period for exercising the right to request contract renewal expires.

A. Article 10-3(1) of the former Commercial Building Lease Act provides, “The term “the premium” means the price for transfer or use of tangible and intangible property value, such as business facilities, fixtures, customers, credit, business know-how, and business advantages depending on the location of a commercial building, which is paid by a lessor or a lessee in addition to deposits and rents. The main text of Article 10-4(1) provides, “The lessor shall not interfere with the receipt of the premium from a person who intends to become a new lessee arranged by the lessee pursuant to the premium contract by doing any of the following acts from three months before the term of the lease expires until the termination of the lease.” Meanwhile, the proviso of Article 10-4(1) provides, “The lessor shall not be interfere with the receipt of the premium from a person who intends to become a new lessee arranged by the lessee pursuant to the premium contract with a new lessee arranged by the lessee without any other justifiable reason.” Meanwhile, the same shall not apply to cases where the lessor has a duty to refuse the conclusion of the lease contract with the lessee.”

B. In light of the language, content, and legislative intent of Article 10-4 of the former Commercial Building Lease Act, even in cases where a lessee is unable to exercise the right to request the renewal of a contract for the entire lease period including the initial lease period exceeding five years pursuant to Article 10(2) of the former Commercial Building Lease Act, the lessor is obliged to protect the opportunity to recover the premium pursuant to Article 10-4(1) of the same Act. The reasons are as follows.

(1) Article 10-4 of the former Commercial Building Lease Act does not stipulate the lessee’s expiration of the period for exercising the right to request the renewal of the contract as an exception to the duty to protect the opportunity to recover the premium. Article 10(2) of the former Commercial Building Lease Act limits the period for exercising the right to request the renewal of the contract by stating that “The lessee’s right to request the renewal of the contract may be exercised only within the extent that the entire period of lease including the initial period of lease does not exceed five years.” However, Article 10-4 does not stipulate Article 10(2) as an exception to the duty to protect the opportunity to recover the premium, and provides that “justifiable cause” under each subparagraph of Article 10(1) or each subparagraph of Article 10-4(2) concerning refusal of the contract exists. Therefore, it is faithful to the language and text that the lessor is obliged to protect the opportunity to recover the premium if the lessor satisfies the requirements prescribed in Article 10-4 regardless of whether the entire period of lease exceeds five years.

(2) The former Commercial Building Lease Act was amended on May 13, 2015, and newly established provisions related to premium (Articles 10-3 through 10-7). It is because the previous provisions alone could not sufficiently prevent economic benefits, such as expenses invested by a lessee or designation or credit formed by business activities, from being infringed upon by a lessor’s rejection of renewal. In other words, while a lessor is able to use without any consideration or restriction on the business value formed by a lessee, such as receiving directly premium, while entering into a new lease contract, he/she will be able to re-investment in the city facility and secure credit and form a nomination. However, it is intended to solve the problems that a lessee has to cope with business losses for a considerable period of time.

However, in cases where a lessor refuses to renew a contract due to the grounds for refusal to renew a contract under each subparagraph of Article 10(1) of the same Act, there is no obligation to protect the lessor for the opportunity to recover the premium, and thus, the phrase “where the interests of the lessee are infringed by the lessee’s refusal to renew the contract” to be protected through the amendment of the Act is the most typical type of cases where the lessee cannot exercise the right to request renewal of the contract more than five years after the whole lease period under Article 10(2) of

In the legislative process of the new provision, there is no reason to deem that the lessor intended to limit the duty to protect the opportunity to recover the premium to the extent of the exercise period of the right to request the renewal of the contract. Rather, it is difficult to find the need to recognize such a case as an exception to the duty to protect the opportunity to recover the premium in light of the fact that the tenant is not required to request the renewal of the commercial lease contract pursuant to Article 10(2) of the same Act.

(3) The lessee’s right to request renewal of the contract under Article 10(1) of the former Commercial Building Lease Act is to achieve the renewal of the lease contract under the initiative of the lessee in order to guarantee the minimum operating period to the lessee by preventing the lessor from refusing renewal unless there is any reason prescribed in the proviso (see, e.g., Supreme Court Decision 2009Da64307, Jun. 10, 2010). On the other hand, Article 10-4 of the same Act imposes a duty to protect the lessor of the opportunity to recover the premium in order to guarantee the lessee’s recovery of the commercial property value within a certain scope even if the lease contract is terminated, and it differs from the legislative intent and content of the two provisions.

(4) The grounds for refusing to renew the lease stipulated under the proviso of Article 10(1) of the former Commercial Building Lease Act are: (a) a lessee’s delay in rent (No. 1); (b) a lessee’s lease by unlawful means (No. 2); (c) a lessee’s lease by intention or negligence (No. 4); (d) a lessee’s damage to the object of lease by intention or negligence (No. 5); or (e) a lessee’s substantial violation (No. 8); or (c) a lessor’s provision of reasonable compensation to the lessee (No. 3); (d) a lessor is unable to achieve the purpose of the lease due to the destruction of the leased building; (e) a lessor’s removal or reconstruction plan was notified in advance to the lessee at the time of the lease; or (e) a lessee’s removal or reconstruction of the commercial building is likely to have become aware of the property value formed by the lessee due to the destruction of the commercial building; and thus, it is difficult for the lessee to recover the premium.

It is difficult to see that the whole term of lease of a commercial building has passed five years when examining the above grounds for rejection of renewal. This is because the property value such as customers, customers, credit, etc. formed by the lessee has still been maintained for five years after the whole term of lease, and there is a need to guarantee the lessee to recover the premium.

(5) Such interpretation may not be deemed to excessively restrict a lessor’s right to use and benefit from a commercial building. This is because Article 10-4(2) of the former Commercial Building Lease Act provides for the protection of a lessor’s right to use and benefit from a commercial building by allowing the lessor to refuse the conclusion of the lease contract where the lessee, arranged by the lessee, has no ability to pay the deposit or rent (Article 10-4(2)), where a person who intends to become the new lessee, is likely to violate the lessee’s duty to maintain the lessee’s lease (Article 12(1)1), where the new lessee is likely to violate the lessee’s duty to maintain the lessee’s lease, or where the new lessee fails to use the commercial building for profit for at least one year and six months (Article 10(2)2), and where it is unreasonable to compel the lessee to enter into the lease contract with the new lessee, the lessor may request the new lessee to enter into the lease contract with the new lessee with the new lessee with the new lessee with the new lessee with the new lessee’s right to use of the deposit.

3. Determination on the instant case

A. According to the reasoning of the lower judgment, the following facts are revealed.

(1) On October 1, 2010, the Plaintiff entered into a lease agreement with the Defendant to lease the instant commercial building with a deposit of KRW 70 million, monthly rent of KRW 2350,000,000, and from October 8, 2010 to October 7, 2012, and operated a restaurant with the delivery of the said commercial building.

(2) On October 7, 2012, the Plaintiff renewed the lease agreement by October 7, 2014, which is KRW 2550,000,000 per month, and the contract term was renewed by October 7, 2014. On the same condition, the Plaintiff renewed the said lease agreement for one year on the same condition.

(3) On July 16, 2015, before the expiration of the lease term, the Plaintiff entered into a premium contract with the Nonparty to transfer tangible and intangible property value, such as business facilities, fixtures, and customers of the instant shopping mall in KRW 145 million for premium, and requested the Defendant to enter into a new lease contract with the Nonparty.

(4) However, the Defendant did not comply with the conclusion of the lease contract with the Nonparty on the ground that it had a plan to reconstruct or repair the aged building.

B. Examining these facts in light of the legal principles as seen earlier, since the Plaintiff arranged a new lessee from three months before the term of lease expires to the expiration of the term of lease pursuant to Article 10-4(1) of the former Commercial Building Lease Act, the Defendant should not refuse to enter into a lease contract with a new lessee without justifiable grounds. This also applies where the entire term of lease between the Plaintiff and the Defendant has expired five years.

C. Nevertheless, the lower court determined that Article 10-4(1) of the former Commercial Building Lease Act does not apply to cases where the lessee is unable to request the renewal of the contract to the lessor more than five years after the entire lease period was five years, and that the Plaintiff was not obligated to protect the opportunity to recover the premium on October 8, 2010, on the ground that the Plaintiff concluded the lease contract with the Defendant on October 8, 2010 and concluded the lease contract with the Defendant on October 7, 2015 after the second renewal on October 7, 2015, which concluded the lease contract with the Nonparty was no longer possible at the time of July 16, 2015.

In so determining, the lower court erred by misapprehending the legal doctrine on the requirements to protect a lessor’s duty to recover premiums under Article 10-4(1) of the former Commercial Building Lease Act, thereby adversely affecting the conclusion of the judgment. The ground of appeal assigning this error is with merit.

4. Conclusion

Therefore, without further proceeding to decide on the remainder of the grounds of appeal, the part concerning the claim for damages arising from interference with the collection of premiums in the judgment below is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices

Justices Park Jung-hwa (Presiding Justice)