[Ryu Taemin's Real Estate A to Z] If a Building is Suddenly Reconstructed, Can You Not Receive the Commercial Lease Premium?

If the Building Owner Did Not Provide Prior Notice at Contract Signing, a Lawsuit for Key Money Refund Is Possible

[Asia Economy Reporter Tae-min Ryu] Tenant A, who rents a commercial space, recently received a sudden notice from the building owner that the building would undergo reconstruction. Although the lease term has not yet ended and the location is prime, he paid a high amount of key money to move in, and now he is losing sleep over the possibility that he might not even recover the key money.

When a building owner suddenly notifies tenants of reconstruction or remodeling, commercial tenants experience great confusion. However, if the building owner did not provide prior notice of reconstruction or remodeling plans at the time of signing the lease contract, this can be recognized as an obstruction to the tenant’s opportunity to recover key money. In such cases, it constitutes a violation of the obligation to protect key money, and a lawsuit for the return of key money is possible.

Attorney Jeom-sook Eom of Beopdo Comprehensive Law Office advised, "A building owner’s reconstruction or remodeling plan without prior notice is merely a personal matter," adding, "If the owner refuses to accept new tenants for this reason, the existing tenant should file a damages claim lawsuit against the owner for an amount equivalent to the key money lost due to the missed recovery opportunity." Typically, the key money amount is determined through appraisal during litigation.

On the other hand, if the building owner informed the tenant of the reconstruction or remodeling plans in advance, the key money is unlikely to be protected. According to Article 10, Paragraph 1 of the Commercial Lease Protection Act, "If the demolition or reconstruction plan, including the timing and duration of construction, is specifically notified to the tenant at the time of lease contract signing and the plan is followed, the building owner may refuse the tenant’s renewal request."

However, there are cases where sudden notification of reconstruction or remodeling is recognized as a justifiable reason. If the building is aged, damaged, or partially destroyed, raising safety concerns, refusal of the tenant’s renewal request is considered a legitimate reason. In such cases, protection of key money is likely to be difficult.

Additionally, if construction is carried out due to urban maintenance projects such as redevelopment conducted by the government, the building owner is not responsible for renewal requests or the obligation to protect key money. Attorney Eom explained, "For redevelopment projects conducted by the government, local governments such as cities, counties, and districts are required to provide compensation for business suspension and relocation costs, so tenants can claim damages from the government."