[Taemin Ryu's Real Estate A to Z] Can a Commercial Property with "Guaranteed O% Return" False Advertisement Have Its Contract Canceled?

Exaggerated False Advertising Hard to Justify as Reason... Must Carefully Review in Advance
Contract Cancellation Possible if Serious Defects or 'Deceptive Acts' Exist in the Subject Matter

[Asia Economy Reporter Ryu Tae-min] #Mr. A, who invested in commercial properties to prepare for retirement funds, hastily signed a commercial property sales contract believing the sales company's staff who guaranteed a 20% return on investment. However, after realizing that the actual rent did not meet that level, Mr. A requested to cancel the contract and get his deposit back, but the company responded that cancellation was difficult as the contract had already been finalized.

Recently, with the rapid increase in sales of income-generating real estate such as commercial properties and officetels, cases of attracting investors through exaggerated or false advertisements are on the rise. Many hastily sign contracts drawn by ads promising high returns, capital gains, or various development benefits, but often try to cancel the contracts because the actual conditions differ from the advertisements.

If there is a defect attributable to the developer or seller, contract cancellation can be requested and the deposit refunded. For example, a delay of more than three months in the move-in date stated in the contract or serious defects in the property are typical cases.

The controversial issue is false advertising. Whether contract cancellation is possible depends on the degree of the false advertisement. According to precedents, "somewhat exaggerated falsehoods" are not recognized as grounds for contract cancellation. For instance, if the sales company explained that "the market price will rise significantly in the future," but the price does not actually rise much, it is difficult to link this to "fraud" and cancel the contract. Also, even if the promise of interest-free loans for intermediate payments differs from reality, precedents show this is not recognized as grounds for contract cancellation.

However, if a "deceptive act" sufficient to constitute fraud has occurred, contract cancellation is possible. Falsehoods regarding major contract terms are representative examples. For instance, if the advertisement states facts that are untrue, such as "connected to the subway station via an underground passage" or "officetel allows Airbnb lodging business," it can be recognized as grounds for contract cancellation. There have been cases where guaranteeing a certain fixed return relative to the investment or promising a certain level of deposit and monthly rent, followed by signing the sales contract, was recognized as a deceptive act.

Experts advise that proving grounds for contract cancellation is difficult, so it is necessary to keep records. Attorney Jo Se-young of Law Firm Rowin explained, "In most cases, the sales contract itself does not specify the return as a special clause, so it is not easy to prove," and added, "If the contract is unfamiliar or uncertain, it is better to record the explanation stage." He further said, "The best way is to carefully review before signing and avoid contracts if suspicious," and "If you want to cancel the contract, it is advantageous to proceed as quickly as possible."