Ministry of Justice Proposes New 'Contract Termination Right' for Tenants Who Closed Due to COVID-19... Commercial Lease Act Amendment Draft Announced

Ministry of Justice, Government Gwacheon Complex.

[Asia Economy Reporter Choi Seok-jin] The Ministry of Justice is pushing for a legal amendment that recognizes the right to terminate lease contracts due to changed circumstances for commercial tenants who suffered damage and went out of business due to COVID-19-related gathering bans or business restrictions.

On the 24th, the Ministry of Justice announced a legislative notice for an amendment to the Commercial Building Lease Protection Act (hereinafter referred to as the Commercial Lease Act) containing these provisions.

The proposed amendment announced by the Ministry of Justice newly establishes Article 11-2 (Right to Terminate Due to Business Closure, etc.). Paragraph 1 of this article stipulates that "If a tenant who has been subject to a gathering ban or restriction for more than three months pursuant to Article 49, Paragraph 1, Subparagraph 2 of the Infectious Disease Prevention and Control Act files a business closure report due to significant changes in economic circumstances, the tenant may terminate the contract," thereby granting the right to terminate the contract to commercial tenants who filed a business closure report due to the impact of COVID-19.

Paragraph 2 of the same article stipulates that "The effect of termination under Paragraph 1 shall occur three months after the landlord receives the notice of exercise of the right to terminate," making the effect of the termination right take place three months after the landlord is notified of the termination.

Previously, in September last year, the Ministry of Justice amended Article 11, Paragraph 1 of the Commercial Lease Act (Right to Request Increase or Decrease of Rent, etc.) to add "a first-class infectious disease under Article 2, Subparagraph 2 of the Infectious Disease Prevention and Control Act" as a reason for changes in economic circumstances allowing tenants to request a reduction in rent or deposit, and applied it to existing commercial lease contracts.

The Ministry of Justice plans to collect opinions from related ministries and various sectors during the 40-day legislative notice period and then submit the amendment bill to the National Assembly.

A Ministry of Justice official stated, "Going forward, commercial tenants will be able to request a rent reduction before going out of business, and if they do go out of business, they will ultimately be able to exit the lease contract, which is expected to reduce the rent burden on commercial tenants," adding, "The Ministry of Justice will strive to ensure that the amended Commercial Building Lease Protection Act can operate swiftly and stably amid the crisis caused by COVID-19."