South Korea Commercial Rent Increase Rules: 5% Cap, Conversion Rates, and 10-Year Renewal Context

Commercial rent increases in South Korea are regulated under the Commercial Building Lease Protection Act with the same 5% cap as residential leases, but the longer renewal period (10 years) and higher conversion rates create important practical differences.

The 5% Cap (Art. 11)

vs. Residential

When the Cap Applies / Does Not Apply

Applies: Agreed renewals, statutory renewal requests, mid-term increases

Does not apply: New contracts with new tenants, post-10-year renegotiations

Conversion Rates (Deposit ↔ Monthly Rent)

Commercial leases have higher conversion rate caps than residential leases:

Tenant's Right to Request a Decrease

Commercial tenants may request rent decreases when economic conditions change (area decline, market downturn). This right applies regardless of converted deposit thresholds.

Consequences of Exceeding the Cap

• Excess is automatically void
• Overpaid amounts reclaimable as unjust enrichment
• Commercial Building Lease Dispute Mediation Committee may resolve disputes

Best Practices for Landlords

1. Calculate increases precisely — amounts above 5% are void
2. Observe the 1-year rule — no re-increase within 12 months
3. Prepare market evidence — comparable commercial rents, tax changes
4. Apply the correct conversion rate — commercial rate is higher than residential
5. Plan for post-10-year negotiations — the 5% cap ceases after the renewal period expires

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