Appeal Dismisses Landlord’s Claims for Rent, Utilities and Repairs; Orders Return of Deposit

Case Overview

A dispute over the return of a lease deposit and settlement of expenses arose between a landlord and a tenant concerning property used as a commercial premises and lodging facility. The lease provided for a KRW 25 million deposit and monthly rent of KRW 500,000. Around the end of the lease term, the tenant vacated the property. The tenant later handed the building keys to the landlord, but the deposit was not returned.

The landlord claimed unjust enrichment equivalent to rent, alleging that the tenant continued to occupy and use the property after the lease ended. In the appeal, the landlord expanded the claims to seek a total of KRW 11,487,170, including KRW 8 million equivalent to rent, KRW 1,587,170 for water and electricity charges paid on the tenant’s behalf, and KRW 1.9 million for boiler repairs, leak detection and plumbing work. The tenant counterclaimed for the KRW 25 million deposit and delay damages. The landlord argued that the claimed costs and damages should be deducted from or set off against the deposit.

Issues

• Unjust enrichment equivalent to rent: The issue was not only whether the tenant continued to occupy the property after the lease ended, but also whether the tenant actually used and enjoyed it for the leased purpose and thereby obtained a benefit.
• Water and electricity charges: The court considered whether the claimed charges had arisen during a period when the tenant used and enjoyed the property, and whether the supporting materials established that fact.
• Boiler repairs and plumbing work: The issues included whether a freeze and the claimed expenditures were established, and whether the tenant had an affirmative duty to maintain the property during the period of occupation while awaiting return of the deposit.
• Return of the lease deposit; deduction and setoff: The court considered whether the deposit had to be returned after delivery of the property and whether the landlord’s claimed expense receivables could reduce the amount due.

Counsel’s Approach

Ahn Hyun-hee Law Office represented the landlord in the appeal. The judgment does not set out detailed arguments or the process by which individual evidence was assembled. Accordingly, no unverified details about counsel’s work are added. The landlord’s claims as described in the judgment, and the appellate court’s conclusions on the issues, are as follows:

• As to unjust enrichment equivalent to rent, the landlord argued that the tenant continued to occupy and use the property after the lease ended and claimed payment.
• Regarding water and electricity charges, the landlord argued that it was entitled to reimbursement for the amounts it had paid on the tenant’s behalf.
• Concerning the boiler freeze and leak detection and plumbing work, the landlord claimed repair and related costs, alleging that the tenant had failed to take measures to prevent freezing and had thereby caused loss.
• The landlord argued that these claims should be deducted from or set off against the deposit, and appealed the first-instance judgment while adding and expanding claims.

Court’s Decision

• Unjust enrichment equivalent to rent: The court held that the tenant’s remaining at the property or leaving belongings there after the lease ended did not, by itself, establish unjust enrichment. It was necessary to determine whether the tenant had actually used and enjoyed the property and obtained a real benefit. The submitted materials were insufficient to establish that, after moving out, the tenant had obtained a real benefit by using the property, for example by operating a restaurant or lodging business. The court’s reasoning was that there is no obligation to return unjust enrichment where “no real benefit was obtained.”
• Water and electricity charges: The court recognized that water and electricity charges incurred for the tenant’s use and enjoyment may be the tenant’s responsibility under a lease, but found it necessary to verify that the claimed costs had actually accrued during the tenant’s period of use. The tenant had already moved out, and the charges shown in the materials included usage after that point. The timing of the use underlying the unpaid charges was also unconfirmed. The court therefore found it difficult to conclude that these were costs incurred for the tenant’s use and enjoyment.
• Boiler and plumbing costs: The submitted materials were insufficient to establish that the boiler had frozen or that the landlord had paid the claimed repair and construction costs. The court further held that even assuming a freeze and expenditures had occurred, the tenant’s occupation amid the interrelated return of the deposit and delivery of the property did not, by itself, mean that the tenant had an affirmative duty to manage and maintain the property.
• Deposit counterclaim; deduction and setoff: The lease ended upon expiration of its term, and the tenant delivered the property. The court therefore held that the landlord had to return the KRW 25 million deposit. The landlord’s claims for unjust enrichment, utilities and repairs, which it relied on as grounds for deduction or setoff, were not established; its argument that those amounts should be taken from the deposit was rejected.

Outcome

The appellate court dismissed the landlord’s original claims and the additional claims brought on appeal. It allowed the tenant’s counterclaim for return of the KRW 25 million lease deposit, together with delay damages calculated at 12% per annum from the day after service of a copy of the counterclaim until full payment. The landlord was ordered to bear the litigation costs incurred after the appeal. Thus, although the landlord was represented in the appeal, its claims were not accepted and the opposing party’s claim for return of the deposit was allowed. The judgment ordering payment does not, by itself, confirm that payment was actually made.

If You Are Facing a Similar Situation

• When the period of occupation after a lease ends is disputed, it is important to distinguish the date the keys were returned from whether the property was actually used to conduct business or otherwise enjoyed. This judgment did not treat occupation as equivalent to actual use and enjoyment.
• To recover utility charges, it is not enough to state the amount claimed; it may be necessary to establish that each charge relates to the tenant’s period of use. In this case, the charges included usage after the tenant moved out, and the period of use underlying the unpaid amounts was not confirmed.
• To deduct repair costs from a deposit, evidence supporting the damage, actual expenditure and the tenant’s responsibility may be at issue. Here, the court found insufficient evidence of the freeze and expenditure, and separately considered whether the tenant had an affirmative duty to maintain the property.

Frequently Asked Questions

Must a tenant pay an amount equivalent to rent whenever the tenant keeps the keys or remains in possession after the lease ends?

In this case, the court held that occupation alone does not automatically establish unjust enrichment equivalent to rent. Whether the tenant actually used and enjoyed the property for the leased purpose and obtained a real benefit was central.

Can a landlord immediately deduct repair costs or utility charges from the lease deposit?

In this case, the landlord’s claims for utilities and repairs were not established, so the court held that they could not be deducted from or set off against the deposit. Whether the costs were actually incurred and connected to the tenant’s period of use or responsibility was specifically at issue.

This is a case in which Ahn Hyun-hee Law Office represented the landlord in the appeal. It is an individual case outcome and does not guarantee the same result in similar cases. Some facts, including party information and specific locations, have been generalized to protect the parties.