[Ryutaemin's Real Estate A to Z] Are Contract Renewal Claims Recognized for Corporate-Owned Houses?

Even if employees reside in company housing, tenant's claim takes precedence
Under the Lease Act, landlords must be 'natural persons'... "Corporations cannot refuse renewal" ruling

[Asia Economy Reporter Ryu Tae-min] Corporate representative Mr. A informed tenant Mr. B, who was renting a house owned by his corporation, of his intention to refuse contract renewal four months before the contract expired. This was because the corporation’s executives and employees intended to use the house as a dormitory for actual residence. However, Mr. B declared that he would exercise his right to request contract renewal, and the court ruled that "Mr. B’s right to request contract renewal takes precedence."

Although it has been a year and a half since the amendment to the Lease Protection Act was implemented, confusion continues in the field. This is because the right to request contract renewal, which allows the contract to be extended once more after a two-year contract period, is applied differently to ordinary individuals and corporations depending on the name under which the property is registered, requiring caution. According to the new amendment to the Lease Protection Act, landlords cannot refuse a tenant’s right to request contract renewal without special reasons. However, if the landlord or their direct ascendants or descendants intend to reside in the property, the landlord may refuse contract renewal, which is considered a representative reason for refusal.

However, houses registered under a corporation’s name are different. In June of last year, the court ruled that a corporation cannot refuse the right to request contract renewal on the grounds of using the property as accommodation for its executives and employees. This was an authoritative interpretation based on the premise that the Lease Protection Act assumes the landlord to be a natural person, so when the landlord is a corporation, refusal of renewal on the grounds of direct residence is not possible. Since the landlord is the corporation itself, the corporation’s executives and employees do not qualify as the landlord’s direct ascendants or descendants.

The opposite case is similar. Corporate tenants residing in houses owned by ordinary individuals are also not covered by the Lease Protection Act. Therefore, even if they request contract renewal after a two-year contract, the landlord can refuse.

Because of this, the industry points out that there could be significant infringement on the property rights of corporations. In fact, in the market, houses with corporate tenants are even more popular than those occupied by ordinary tenants. Therefore, if the house is currently registered under a corporation’s name, it is advantageous to reach a prior agreement with the landlord or tenant regarding contract renewal instead of relying on the right to request contract renewal.