Conclusion of lease agreement
Lease agreement
- The Civil Act or the Commercial Building Lease Protection Act applies when a lease agreement for the store space needs to be signed for the establishment and operation of a makeup shop.
- However, the Commercial Building Lease Protection Act shall only apply to agreements entered into in relation to commercial buildings with deposits less than the amounts set forth below for each region (Article 2 (1) of the Commercial Building Lease Protection Act and Article 2 (1) of the Enforcement Decree of the Commercial Building Lease Protection Act).
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Region
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Amount of deposit
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Seoul Metropolitan City
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KRW 900 million
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Overpopulation control area within the Seoul Metropolitan Area prescribed in the Seoul Metropolitan Area Readjustment Planning Act (excluding the Seoul Metropolitan City) and Busan Metropolitan City
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KRW 690 million
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Metropolitan city (excluding areas included in the overpopulation control areas prescribed in the Seoul Metropolitan Area Readjustment Planning Act, Guns, and Busan Metropolitan City), Sejong Special Self-Governing City, Paju City, Hwaseong City, Ansan City, Yongin City, Gimpo City and Gwangju City
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KRW 540 million
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Other regions
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KRW 370 million
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※ Conversion of the amount of deposit
- When determining the amount of deposit pursuant to the Commercial Building Lease Protection Act, it must include the amount obtained through multiplying the monthly rental value by 1/100 (Article 2 (2) of the Commercial Building Lease Protection Act and Article 2 (2) and (3) of the Enforcement Decree of the Commercial Building Lease Protection Act).
Term of lease
- If no period for a lease has been fixed, either party may give notice to the other party at any time to terminate the lease. The termination of the lease shall be effective upon the expiry of six months if the lessor has given notice of termination, and one month if the lessee has given notice of termination (Article 635 of the Civil Act).
- As for lease agreements subject to the Commercial Building Lease Protection Act, a lease, the period of which has not been determined or the period of which has been determined for not more than one year, such period shall be deemed to be one year. However, a lessee may assert that a period determined for less than one year is valid (Article 9 (1) of the Commercial Building Lease Protection Act).
- The lessee's right to request renewal of the contract may be exercised to the extent that the whole period of lease including the period of initial lease does not exceed ten years. Where a lessee requests a renewal of the contract between six months and one month before the expiry of period of lease, a lessor shall not refuse it without justifiable grounds (Article 10 (1) and (2) of the Commercial Building Lease Protection Act).
Preferential payment right
- The term “preferential payment right" refers to the right for a lessee under the Commercial Building Lease Protection Act to be refunded security deposit in preference to subordinated creditors from the price paid at a successful bid in the event where the leased commercial building is sold through an auction or public tender (Article 5 (2) of the Commercial Building Lease Protection Act).
- To obtain the preferential payment right, a lessee subject to the Commercial Building Lease Protection Act must ensure that ① the building has been transferred, ② his/her business has been registered, and ③ a fixed date on the lease contract certificate has been obtained. Therefore, a makeup shop operator must, either at the same time as the registration of business or after the registration of business, apply for a fixed date at the competent tax office (Article 5 (2) of the Commercial Building Lease Protection Act).
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※ First preferential payment right of lessees with small amount of deposit - A lessee with a small amount of deposit that falls within the following scope shall be entitled to reimbursement of the amount equivalent to or below the scope of his/her first preferential payment right in preference to other holders of real rights granted by way of security, if he or she satisfies the requirements for counteraction prior to the registration of an application for the auction of the leased commercial building (Article 14 (1) of the Commercial Building Lease Protection Act and Article 6 and Article 7 of the Enforcement Decree of the Commercial Building Lease Protection Act).
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Region
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Amount of deposit
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Scope of the first preferential payment right
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Seoul Metropolitan City
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KRW 65 million
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KRW 22 million
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Overpopulation control area prescribed in the Seoul Metropolitan Area Readjustment Planning Act (excluding the Seoul Metropolitan City)
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KRW 55 million
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KRW 19 million
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Metropolitan city (excluding areas included in the overpopulation control areas prescribed in the Seoul Metropolitan Area Readjustment Planning Act and Guns), Ansan City, Yongin City, Gimpo City and Gwangju City
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KRW 38 million
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KRW 13 million
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Other regions
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KRW 30 million
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KRW 10 million
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※ What is premium?
▪ The term “premium" refers to a price, such as money, paid to a lessor or a lessee, other than deposits and rents, as a price for the transfer or use of tangible or intangible property value, such as business facilities, equipment, customers, credit, business know-how, and business benefits generated from the location of a commercial building, which is paid by a person who conducts or who intends to conduct a business in a commercial building, the subject matter of the lease (Article 10-3 (1) of the Commercial Building Lease Protection Act).
▪ No lessor shall obstruct any lessee in receiving any premium pursuant to a premium contract from a person arranged by the lessee to become a new lessee, from six months prior to the expiry of the lease period until the end of the lease (Article 10-4 (1) of the Commercial Building Lease Protection Act).