If the landlord obstructs key money recovery... "Collect evidence and send a certified letter first"

If Not Resolved Amicably Through Certified Mail
Proceed with Compensation Lawsuit for Key Money and Enforcement Procedures

A rental information banner posted on a closed store in Myeongdong, Jung-gu, Seoul on the 5th of last month

As the commercial market has been in prolonged stagnation due to COVID-19, the number of self-employed business owners considering closing their businesses is increasing. Some tenants plan to close their operations after recovering the key money, but there are frequent complaints about landlords obstructing the recovery of key money during this process. In such cases, experts advise collecting evidence of the landlord’s obstruction and proceeding with a certified mail notification.

Key money refers to the monetary value derived from business facilities, clientele, credit, business know-how, and location advantages. Since the amendment of the Commercial Building Lease Protection Act (hereinafter referred to as the Act) in 2015, it has been legally protected.

Article 10-4 of the Act (Protection of Opportunity to Recover Key Money, etc.) defines four main types of "obstruction to key money recovery": ▲the landlord demanding or receiving key money from a prospective new tenant arranged by the current tenant, ▲the landlord preventing the prospective new tenant arranged by the current tenant from paying key money to the tenant, ▲the landlord demanding excessively high rent and deposit from the prospective new tenant arranged by the tenant, and ▲the landlord refusing to enter into a lease contract with the prospective new tenant arranged by the tenant without justifiable reasons.

Real estate attorney Eom Jeong-sook stated, "Legally, key money protection is the tenant’s right and the landlord’s obligation," and advised, "If the landlord violates the obligation to protect the tenant’s key money, the tenant should remember the three-step procedure." The three-step procedure for recovering key money includes ▲sending a certified mail notification ▲filing a lawsuit for damages ▲and enforcing a compulsory execution.

The first step is to send a certified mail notification to the landlord. Certified mail is a system that proves to a third party and public institution, the post office, who sent what content to whom. By conveying a firm intention, it exerts psychological pressure on the other party.

There is no special format required; it is sufficient to write the main points concisely and clearly. Attorney Eom advised that when drafting the certified mail, "It is best to thoroughly investigate the reasons why the landlord is violating the obligation to protect key money and base the letter on those reasons."

After preparing three copies of the document and submitting them to the post office, the post office stamps the letter with a mark certifying it was submitted as certified mail, keeps one copy, sends one to the recipient, and returns one to the sender. Certified mail must be sent by registered mail.

If the issue is resolved amicably at this stage, it can be solved more quickly and at a lower cost than through litigation.

The second step is filing a lawsuit for damages related to key money. This is to claim compensation for the lost opportunity to recover key money due to the landlord’s obstruction. Attorney Eom said, "Lawsuits are a procedure to be pursued when certified mail does not work," and advised, "It is better to proceed with legal assistance rather than individually, as legal experts can effectively argue legal claims during the trial, increasing the chances of winning."

The third step is compulsory execution. This is to enforce execution against landlords who refuse to pay even after the tenant wins the lawsuit. Attorney Eom explained, "Compulsory execution can only be applied for after obtaining a favorable court judgment," and added, "Compulsory execution includes ▲real estate auction ▲seizure of movable property ▲attachment of claims and collection orders ▲property declaration ▲and property investigation."

However, before asserting key money claims, tenants must first confirm whether they qualify as key money recipients. Factors to check include ▲whether rent has been overdue for three or more periods ▲whether redevelopment or other laws require the landlord to vacate the building ▲and whether the tenant arranged a new tenant for the landlord within six months before the contract expiration, as failure to meet these conditions may disqualify the claim.

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