Supreme Court: "If Deposit Not Paid, Landlord Must Cover Maintenance Fees"

Supreme Court, Seocho-dong, Seoul. Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Daehyun] The Supreme Court has ruled that if a tenant continues to occupy a building without returning the deposit after the lease contract ends, the landlord must bear the management fees for that period.

On the 23rd, the Supreme Court's First Division (Presiding Justice Park Jeonghwa) announced that it overturned the part of the lower court's ruling regarding delayed damages in the appeal case where Corporation A sued tenant Mr. B for building eviction (handover) and sent the case back to the Daejeon District Court.

In December 2016, Mr. B signed a lease contract with Corporation A to operate a restaurant in their building, paying a deposit of 100 million KRW and a monthly rent of about 7.5 million KRW. However, the restaurant opened in April the following year and closed after just over a month. Afterwards, both parties terminated the contract but clashed over demands for 'unpaid rent' and 'return of the deposit.' During this process, Mr. B locked the door and occupied the commercial space, and Corporation A filed a lawsuit demanding the handover of the commercial space and payment of overdue rent.

The first trial ruled that Mr. B must hand over the commercial space to Corporation A and pay about 25 million KRW in unpaid rent for the three months before the contract termination. Mr. B filed a counterclaim against Corporation A, demanding the return of the 100 million KRW deposit while handing over the commercial space. Corporation A also countered, demanding additional rent and management fees up to the actual handover date.

The second trial judged that although Mr. B occupied the commercial space after contract termination, since he only locked the door and did not use it, he was not obligated to pay additional rent. However, it ruled that Mr. B must pay about 19 million KRW in overdue management fees, and ordered Corporation A to pay him the deposit of 100 million KRW minus the overdue management fees and about 34 million KRW in unpaid rent for the three months before contract termination.

On the other hand, the Supreme Court ordered a retrial and reconsideration of the part concerning overdue management fees in the lower court's ruling. The court stated, "If the contract has ended and the tenant has not received the deposit but continues to occupy the leased property without using or benefiting from it, the landlord must bear the management fees until the commercial space is handed over."