Ministry of Justice Establishes Criteria for Rent Reduction Claims Following 30% Sales Decline Due to Quarantine Measures

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The government has established criteria for rent reduction to alleviate the economic burden on small business owners affected by quarantine measures due to the spread of COVID-19.

This specifies the requirements and reduction standards for the newly added reason for rent reduction claims, "Changes in economic circumstances due to infectious diseases, etc.," which was added by amending the Commercial Building Lease Protection Act in September 2020.

On the 31st, the Ministry of Justice, together with the Ministry of SMEs and Startups and the Ministry of Land, Infrastructure and Transport, presented the basic policy of guidelines to be used by the Lease Dispute Mediation Committee based on the results of a joint research project.

According to the basic policy announced by the Ministry of Justice that day, "Changes in economic circumstances due to infectious diseases, etc." means that ▲ quarantine or preventive measures are implemented, ▲ the average sales after the measures decrease by a certain percentage or more, allowing small business owners (tenants) to request a reduction, and ▲ the amount of reduction is proportional to the decrease in sales.

Specifically, if quarantine or preventive measures due to infectious diseases, etc. are strengthened after the lease contract date, and the average sales decrease by 30% or more, a rent reduction claim is possible.

However, if the quarantine or preventive measures are lifted and sales recover to the level before the strengthening of such measures, the landlord can request a rent increase again.

For example, if a tenant paying 4 million KRW in rent experiences a 30% drop in sales after the government strengthens quarantine measures, the tenant can request a rent reduction to 2.8 million KRW, which is the original rent minus 30% of sales (1.2 million KRW). However, if the landlord, who purchased the commercial property for 1 billion KRW, claims that the rent must be at least 3 million KRW due to fixed costs such as loan interest and property tax amounting to 3 million KRW, the rent will be set at the higher amount of 3 million KRW.

These criteria have a recommendatory effect between landlords and tenants but will be applied to actual cases by the Mediation Committee in the future.

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