Supreme Court: Even Creditors Who Lent Jeonse Funds Cannot Claim Delivery of Implicitly Renewed Jeonse Apartments

Supreme Court building in Seocho-dong, Seoul.
[Photo by Yonhap News]

[Asia Economy Reporter Choi Seok-jin] The Supreme Court has ruled that if a jeonse (long-term lease) contract period has expired but the landlord has not expressed refusal to renew the contract, thereby implicitly renewing the contract period, a financial institution holding a loan claim against the tenant cannot demand the termination of the jeonse contract and request the tenant to deliver the leased property to the landlord for loan recovery purposes.

The Supreme Court's Third Division (Presiding Justice Lee Dong-won) announced on the 24th that it overturned the lower court's ruling in favor of Lotte Card in the appeal trial of a loan claim lawsuit filed against tenant A, and remanded the case to the Seoul Central District Court.

The court stated, "In cases where a lease contract is implicitly renewed, unless there are special circumstances, the lease period should be considered as two years," and added, "The lower court erred in misunderstanding the legal principles regarding the renewal of lease contracts for private rental housing."

In November 2015, A signed a jeonse contract for a rental house owned by Korea Land and Housing Corporation (LH) and borrowed 71 million KRW in jeonse funds from Lotte Card.

When A and Lotte Card entered into the loan contract, they also agreed that when the loan period ended and the loan had to be repaid, if Lotte Card requested, A would immediately deliver the apartment to the landlord and repay the loan by receiving the jeonse deposit back.

After the two-year loan period ended in November 2017, A failed to repay the loan, and in March of the following year, Lotte Card filed a lawsuit against A, demanding that A deliver the apartment to the landlord as agreed and repay the loan.

Previously, the first and second trials ruled in favor of Lotte Card, ordering A to hand over the apartment to LH and repay the loan.

However, the Supreme Court's judgment was different.

The Supreme Court acknowledged A's obligation to repay the principal and interest of the loan but rejected Lotte Card's claim to deliver the apartment to LH.

Although A did not enter into a separate contract to extend the lease with LH, the court found that LH had never expressed an intention to refuse the renewal of the lease contract to A, and that A had paid the difference in the deposit amount requested by LH as a condition for contract renewal after the contract period ended, concluding that the jeonse contract was implicitly renewed.

This content was produced with the assistance of AI translation services.