South Korea Commercial Eviction Process: 3-Month Arrears, Key Money Obligations, and Court Procedures

Governed primarily by the Commercial Building Lease Protection Act (CBLPA) and the Civil Act, evicting a commercial tenant in South Korea follows similar procedural requirements to residential eviction but with a higher arrears threshold and specific statutory protections for key money (gwolligeum).

Legal Grounds for Termination

Key difference: Commercial leases require 3 months of cumulative rent arrears for termination (CBLPA Art. 10-8), compared to 2 months for residential leases.

Renewal Refusal Grounds

When a tenant exercises the Contract Renewal Request Right (up to the 10-year limit), the landlord may refuse only for specific grounds under Art. 10(1):

1. 3 or more months of rent arrears
2. Obtaining the lease by fraud or improper means
3. Unauthorized subletting
4. Serious property damage through willful or gross negligence
5. Planned demolition or reconstruction, provided that: (a) the landlord notified the tenant of the plan at the time of the lease; (b) the building is unsafe due to damage or age; or (c) it is required by other laws (no compensation required under these conditions)
6. Mutual agreement where the landlord provides reasonable compensation
7. Material breach of tenant obligations (Art. 10(1)8)
8. Other statutory grounds

Key Money and Eviction

Landlord's Obligation

From 6 months before lease termination through the termination date, the landlord must not interfere with the tenant's ability to recover key money from an incoming tenant.

Important Waiver: Per the Proviso of Art. 10-4(1), this protection is VOID if any grounds for renewal refusal under Art. 10(1) exist. For example, if the tenant has 3 months of rent arrears, the landlord has no obligation to protect their key money recovery.

Prohibited Interference

• Refusing to contract with a prospective tenant introduced by the outgoing tenant without just cause
• Demanding significantly higher rent or deposit from the prospective tenant
• Demanding significantly higher key money from the prospective tenant
• Other acts that obstruct key money recovery

Key Money Protection After 10 Years

Per Supreme Court Decision 2018Da242727, the landlord's duty to protect key money recovery continues even after the 10-year renewal period has expired, provided the tenant has not committed a breach under Art. 10(1).

Damages for Interference

Landlords who interfere with key money recovery face damages liability (Art. 10-4(3)), calculated based on the lower of:

• The key money the tenant would have received from a prospective tenant; or
• The market-rate key money at the time of lease termination.

Eviction Procedure

Step 1: Certified Notice

Send formal termination and vacate notice via certified mail.

Step 2: Preliminary Injunction

File for an order preventing possession transfer during litigation.

Step 3: Eviction Lawsuit

Step 4: Forced Execution

After final judgment, apply for court-supervised forced vacating.

Deposit and Eviction Relationship

• Deposit return and premises surrender are simultaneous obligations
• An eviction without offering deposit return may be dismissed
• Overdue rent may be deducted from the deposit

Best Practices for Landlords

1. Track the 3-month arrears threshold carefully — cumulative, not necessarily consecutive
2. Understand key money obligations — interference exposes you to significant damages unless a statutory breach (Art. 10(1)) has occurred
3. Verify renewal refusal grounds before sending notice
4. Define restoration scope upfront — especially for tenant-installed interiors
5. Engage specialized legal counsel — commercial disputes tend to involve large sums

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