Commercial tenant paid no rent: lease terminated, eviction ordered

Background

Our client, a corporation, leased several ground-floor shops in its newly built building to one person, with the deposit to be offset against money our client had borrowed from that person. The tenant operated in only one shop and never paid rent, so our client terminated the lease and sued for return of the shop.

The issue

Whether the termination was valid, whether the tenant could refuse to vacate until the deposit was refunded, and how much rent could be deducted from the deposit.

Our approach

Our client sought return of the shop on the ground that the lease had been terminated for unpaid rent. It also argued that rent should be deducted from the deposit not only for the shop the tenant used but also for the other space the tenant never used.

The court's reasoning

The court held that, with five months' rent unpaid, the termination was valid and the tenant had to return the shop, but that return of the shop and refund of the deposit were concurrent obligations. It limited the deductible rent to an area-based share for the shop the tenant actually occupied and rejected the deduction for space never handed over.

Outcome

The court ordered the tenant to return the shop to our client upon receiving KRW 480 million less rent for the shop used (at KRW 832,000 a month). Each side bore its own costs.

What this case means

When rent arrears accumulate, a landlord can terminate and recover the premises, but return is concurrent with refund of the deposit, and deductible rent depends on actual use.

This is the outcome of an individual case and does not guarantee the same result in similar matters. Some facts have been generalized to protect the parties involved.