{"id":2062,"date":"2026-09-16T22:09:03","date_gmt":"2026-09-16T22:09:03","guid":{"rendered":"https:\/\/atlaw.kr\/en-blog\/commercial-lease-premium-excessive-rent-south-korea\/"},"modified":"2026-09-16T22:09:10","modified_gmt":"2026-09-16T22:09:10","slug":"commercial-lease-premium-excessive-rent-south-korea","status":"publish","type":"post","link":"https:\/\/atlaw.kr\/en-blog\/commercial-lease-premium-excessive-rent-south-korea\/","title":{"rendered":"Key Money Recovery and Excessive Rent in South Korea"},"content":{"rendered":"<p><!--  -->\n\n\n\n<!--  --><\/p>\n<p><!-- ATLAS_SEO_BLOCK_START --><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"Article\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/commercial-lease-premium-excessive-rent-south-korea\/#article\",\"mainEntityOfPage\":{\"@type\":\"WebPage\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/commercial-lease-premium-excessive-rent-south-korea\/#webpage\"},\"headline\":\"Key Money Recovery in South Korea: When Does a Landlord's Rent Demand to a New Tenant Become Excessive?\",\"description\":\"The Supreme Court of Korea held that whether a landlord's rent demand to an incoming tenant is excessive must reflect the gap from the existing rent, fair market rent and market practice, and that a key money damages claim should not be dismissed merely because fair rent was not proven.\",\"datePublished\":\"2026-09-17T09:00:00+09:00\",\"dateModified\":\"2026-09-17T09:00:00+09:00\",\"inLanguage\":\"en-US\",\"author\":{\"@type\":\"Person\",\"@id\":\"https:\/\/atlaw.kr\/taejin-kim\/#person\",\"name\":\"Taejin Kim\",\"alternateName\":\"\uae40\ud0dc\uc9c4\",\"jobTitle\":\"Managing Partner\",\"worksFor\":{\"@id\":\"https:\/\/atlaw.kr\/#legalservice\"}},\"publisher\":{\"@type\":\"LegalService\",\"@id\":\"https:\/\/atlaw.kr\/#legalservice\",\"name\":\"Atlas Legal\",\"url\":\"https:\/\/atlaw.kr\"},\"about\":[\"Article 10-4(1)3 of the Commercial Building Lease Protection Act of South Korea\",\"Damages for interference with key money recovery in South Korea\",\"Fair rent appraisal in Korean commercial lease disputes\",\"Supreme Court of Korea 2026Da201337\",\"Supreme Court of Korea 2017Da225312\"]}<\/script><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"FAQPage\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/commercial-lease-premium-excessive-rent-south-korea\/#faqpage\",\"inLanguage\":\"en-US\",\"mainEntity\":[{\"@type\":\"Question\",\"name\":\"How do Korean courts decide whether a landlord's rent demand to a new tenant is excessive?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Besides the taxes, public charges and rents of nearby commercial buildings listed in Article 10-4(1)3 of the Commercial Building Lease Protection Act, courts consider the gap between the existing rent and deposit and the terms demanded from the new tenant, the market value and fair rent of the building, and market practice and economic conditions, based on the specific facts (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).\"}},{\"@type\":\"Question\",\"name\":\"Is demanding three times the existing rent automatically interference with key money recovery?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"No, the size of the increase alone is not conclusive. However, where a landlord raised the monthly rent from KRW 6 million to KRW 20 million (about 333%) and the converted deposit from KRW 700 million to KRW 2.5 billion (about 357%), the Supreme Court of Korea held that the demand could well be regarded as excessive (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).\"}},{\"@type\":\"Question\",\"name\":\"Can a landlord justify a large rent increase because the tenant's business earns a lot?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Not on that basis alone. The Supreme Court of Korea found that a pharmacy's dispensing revenue largely reflected the tenant's own efforts, such as its client relationships, reputation and know-how, and noted an expert assessment valuing the location-based premium at KRW 0 and the business premium at KRW 2.015 billion (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).\"}},{\"@type\":\"Question\",\"name\":\"Who has to prove that the rent demand was excessive?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"The tenant claiming damages bears the burden of proof. But where the demand could be seen as excessive compared with the existing terms, the Supreme Court of Korea held that a court should not dismiss the claim simply because fair rent has not been established, and should instead determine fair rent, for example through an expert appraisal (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).\"}},{\"@type\":\"Question\",\"name\":\"Can a landlord ask a new tenant for different lease terms at all?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. The Supreme Court of Korea has stated that a landlord may require a new lease on new terms unless the rent and deposit are grossly excessive in light of market rates (Supreme Court of Korea, May 16, 2019, 2017Da225312, 225329). The question is whether the demand crosses that line.\"}},{\"@type\":\"Question\",\"name\":\"Is there a cap on damages for interference with key money recovery?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. Under Article 10-4(3) of the Commercial Building Lease Protection Act, damages may not exceed the lower of the key money the new tenant agreed to pay and the key money at the end of the lease. The claim must be brought within three years after the lease ends (Article 10-4(4)).\"}}]}<\/script><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":[\"LegalService\",\"LocalBusiness\"],\"@id\":\"https:\/\/atlaw.kr\/#legalservice\",\"name\":\"Atlas Legal\",\"alternateName\":[\"\ubc95\ubb34\ubc95\uc778 \uc544\ud2c0\ub77c\uc2a4\",\"Atlas Law Firm\"],\"url\":\"https:\/\/atlaw.kr\/en\/home-en\/\",\"telephone\":\"+82-32-864-8300\",\"email\":\"info@atlaw.kr\",\"priceRange\":\"$$$\",\"address\":{\"@type\":\"PostalAddress\",\"streetAddress\":\"B-2901, 323 Incheon Tower-daero\",\"addressLocality\":\"Yeonsu-gu, Incheon\",\"addressRegion\":\"Incheon Metropolitan City\",\"postalCode\":\"22007\",\"addressCountry\":\"KR\"},\"geo\":{\"@type\":\"GeoCoordinates\",\"latitude\":37.399438,\"longitude\":126.629812},\"openingHoursSpecification\":[{\"@type\":\"OpeningHoursSpecification\",\"dayOfWeek\":[\"Monday\",\"Tuesday\",\"Wednesday\",\"Thursday\",\"Friday\"],\"opens\":\"09:00\",\"closes\":\"18:00\"}],\"areaServed\":[{\"@type\":\"Country\",\"name\":\"South Korea\"},{\"@type\":\"Place\",\"name\":\"Songdo International Business District\"},{\"@type\":\"Place\",\"name\":\"Cheongna International City\"},{\"@type\":\"Place\",\"name\":\"Yeongjong International City\"},{\"@type\":\"Place\",\"name\":\"Incheon\"},{\"@type\":\"Place\",\"name\":\"Seoul Metropolitan Area\"},{\"@type\":\"Place\",\"name\":\"Incheon Free Economic Zone (IFEZ)\"}],\"knowsAbout\":[\"Commercial Building Lease Protection Act of South Korea\",\"Key Money (Premium) Recovery Disputes in South Korea\",\"Commercial Lease Rent Disputes in South Korea\",\"Landlord and Tenant Litigation in South Korea\",\"Real Estate Disputes in South Korea\",\"Incheon Free Economic Zone (IFEZ) Legal Services\"],\"serviceType\":[\"Commercial Lease Dispute Resolution\",\"Key Money Damages Litigation\",\"Real Estate Litigation\",\"Lease Contract Review\",\"Foreign Direct Investment Legal Services\"]}<\/script><br \/>\n<!-- ATLAS_SEO_BLOCK_END --><\/p>\n<style>@import url('https:\/\/cdn.jsdelivr.net\/gh\/orioncactus\/pretendard@v1.3.9\/dist\/web\/static\/pretendard.css'); 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} .hero-info { font-size: 12px; } .content { padding: 28px 0 60px; } .toc-nav { margin-left: -14px; margin-right: -14px; border-radius: 0; border-left: none; border-right: none; padding: 12px 4px; margin-bottom: 28px; } .toc-label { font-size: 16px; } .toc-nav ol li { font-size: 14px; padding: 3px 0; } h2 { font-size: 20px; margin: 44px 0 10px; } h3 { font-size: 15px; margin: 24px 0 8px; } .lead-text { font-size: 16px; } .summary-text { font-size: 15px; } .context-text { font-size: 14px; } .formula { flex-direction: column; padding: 16px 12px; } .f-num { font-size: 18px; } th { font-size: 13px; padding: 8px 10px; } td { font-size: 13px; padding: 8px 10px; } .faq-q { font-size: 14px; } .faq-item p:not(.faq-q) { font-size: 14px; } .author-box { display: block; overflow: hidden; } .author-avatar { float: left; width: 36px; height: 36px; margin-right: 10px; border-radius: 50%; } .author-section-label { display: inline; font-size: 11px; letter-spacing: 0; margin: 0 3px 0 0; } .author-name { display: inline; font-size: 14px; } .author-detail { clear: both; font-size: 13px; line-height: 1.55; margin-top: 8px; margin-bottom: 1px; } .author-detail ~ .author-detail { clear: none; margin-top: 2px; } .author-link { clear: both; display: block; font-size: 13px; margin-top: 8px; } p.closing { font-size: 14px; } }<\/style>\n<div class=\"hero\">\n  <span class=\"category-tag\">Commercial Lease \u00b7 Real Estate<\/span><\/p>\n<div class=\"hero-title\">Key Money Recovery in South Korea<br \/>When Does a Landlord&#039;s Rent Demand Become Excessive?<\/div>\n<div class=\"hero-meta\">\n<div class=\"hero-info\">\n      <strong>Taejin Kim<\/strong> \u00b7 Managing Partner, Atlas Legal<br \/>\n      Supreme Court of Korea, July 16, 2026, 2026Da201337 &nbsp;\u00b7&nbsp; May 16, 2019, 2017Da225312\n    <\/div>\n<\/p><\/div>\n<\/div>\n<div class=\"content\">\n<div class=\"direct-answer\">\n    <strong>Key answer:<\/strong> Under South Korean law, whether a landlord&#039;s rent and deposit demand to a tenant&#039;s proposed successor is &quot;grossly excessive&quot; is judged not only by nearby market rents but also by the gap from the existing rent, fair rent and market practice. The Supreme Court of Korea found that a demand of about 333% of the existing rent and about 357% of the converted deposit could well be excessive, and set aside a ruling that dismissed the tenant&#039;s key money damages claim without determining fair rent (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).\n  <\/div>\n<div class=\"toc-nav\">\n<p class=\"toc-label\">Contents<\/p>\n<ol>\n<li><a href=\"#sec-1\">1. What happened in the KRW 2.2 billion pharmacy key money case?<\/a><\/li>\n<li><a href=\"#sec-2\">2. What is key money and how does Korean law protect it?<\/a><\/li>\n<li><a href=\"#sec-3\">3. Why did the lower court dismiss the tenant&#x27;s claim?<\/a><\/li>\n<li><a href=\"#sec-4\">4. What test did the Supreme Court of Korea set out?<\/a><\/li>\n<li><a href=\"#sec-5\">5. Is three times the existing rent excessive?<\/a><\/li>\n<li><a href=\"#sec-6\">6. Can a tenant&#x27;s high revenue justify a large rent increase?<\/a><\/li>\n<li><a href=\"#sec-7\">7. Is a claim dismissed if the tenant cannot prove fair rent?<\/a><\/li>\n<li><a href=\"#sec-8\">8. Can a landlord still ask a new tenant for new terms?<\/a><\/li>\n<li><a href=\"#sec-9\">9. What should tenants and landlords in South Korea prepare?<\/a><\/li>\n<li><a href=\"#sec-10\">10. What does this mean for foreign-invested businesses in IFEZ?<\/a><\/li>\n<li><a href=\"#sec-11\">11. Frequently asked questions<\/a><\/li>\n<\/ol><\/div>\n<p class=\"lead-text\">A pharmacist ran a pharmacy in the same unit for more than 20 years. When the lease was ending, the pharmacist found a successor who agreed to pay KRW 2.2 billion in key money. The landlord then asked the successor for more than three times the existing rent, and the deal collapsed.<\/p>\n<p class=\"summary-text\">South Korea&#039;s Commercial Building Lease Protection Act prohibits a landlord from blocking a tenant&#039;s recovery of key money by demanding grossly excessive rent and deposit from the new tenant the outgoing tenant introduces. A landlord who does so is liable for damages. The hard part is knowing where &quot;grossly excessive&quot; begins.<\/p>\n<p class=\"context-text\">In this case, the appellate court dismissed the tenant&#039;s claim, partly because the tenant had not produced objective evidence of fair rent. On July 16, 2026, the Supreme Court of Korea reversed that part, clarified the factors for judging excessive rent, and indicated that where a demand looks excessive, the court should determine fair rent, for example through an appraisal. The decision matters for both tenants and landlords approaching the end of a commercial lease in South Korea.<\/p>\n<p><\/p>\n<h2 id=\"sec-1\">What happened in the KRW 2.2 billion pharmacy key money case?<\/h2>\n<p class=\"lead-text\">The tenant leased the unit from around September 2001 and ran a pharmacy there. On January 1, 2018, the tenant signed a two-year lease with the landlord, who had become the sole owner, for a deposit of KRW 100 million and monthly rent of KRW 6 million (excluding VAT). The lease was tacitly renewed after December 31, 2019 (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<table>\n<thead>\n<tr>\n<th>Date<\/th>\n<th>Event<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Around April 2023<\/td>\n<td>The landlord asked to raise monthly rent from KRW 6 million to KRW 24 million<\/td>\n<\/tr>\n<tr>\n<td>September 18, 2023<\/td>\n<td>With no agreement, the landlord refused renewal and gave notice that the lease would end on December 31, 2023<\/td>\n<\/tr>\n<tr>\n<td>October 24, 2023<\/td>\n<td>The tenant signed a key money agreement for KRW 2.2 billion with a prospective new tenant<\/td>\n<\/tr>\n<tr>\n<td>Afterward<\/td>\n<td>The landlord proposed a deposit of KRW 500 million and monthly rent of KRW 20 million to the new tenant; no lease was signed because the rent was too high, and the tenant terminated the key money agreement<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>According to the facts found by the appellate court, on November 28, 2023, the tenant sent a certified letter proposing renewal at a deposit of KRW 200 million and monthly rent of KRW 14 million, or else introducing the new tenant. The new tenant argued that rent should be cut to KRW 15 million a month, citing among other things the possibility of a new pharmacy opening in a nearby unit, and no agreement was reached. The tenant sued for KRW 2,150,200,000 in damages (Busan District Court, January 21, 2026, 2025Na41158, 2025Na41165).<\/p>\n<p><\/p>\n<h2 id=\"sec-2\">What is key money and how does Korean law protect it?<\/h2>\n<p class=\"lead-text\">Key money (gwolligeum) is the payment a new tenant makes to an outgoing tenant for the value of the business, such as its facilities, customers, goodwill and location. It is paid between tenants, not to the landlord.<\/p>\n<p>Article 10-4(1) of the Commercial Building Lease Protection Act prohibits a landlord, from six months before the lease ends until it ends, from interfering with the tenant&#039;s receipt of key money from a new tenant the tenant has introduced. One listed form of interference is demanding from that new tenant rent and a deposit that are grossly excessive in light of taxes, public charges, the rent and deposit of nearby commercial buildings and other burdens (Article 10-4(1)3). A landlord who causes loss this way must pay damages (Article 10-4(3)).<\/p>\n<p><\/p>\n<h2 id=\"sec-3\">Why did the lower court dismiss the tenant&#x27;s claim?<\/h2>\n<p class=\"lead-text\">The Busan District Court, sitting as the appellate court, found insufficient evidence that the landlord had demanded grossly excessive rent. It relied on these points (Busan District Court, January 21, 2026, 2025Na41158, 2025Na41165):<\/p>\n<ol>\n<li>The tenant did not present objective evidence of the fair rent and deposit or that the landlord&#039;s proposal was substantially higher.<\/li>\n<li>The unit was near a hospital&#039;s main entrance, a strong pharmacy location, and the pharmacy&#039;s average monthly dispensing revenue in 2023 was KRW 104,329,156.<\/li>\n<li>The landlord had kept the same terms for about five years after January 1, 2018, before asking for an increase in April 2023.<\/li>\n<li>The tenant also leased a nearby unit from the landlord&#039;s side, where the terms had stayed the same apart from a KRW 1 million monthly rent increase for a half share.<\/li>\n<li>The landlord had asked for the same level of terms from both the tenant and the new tenant, starting eight months before the lease ended.<\/li>\n<\/ol>\n<p>The appellate court also found no unjustified refusal to contract, noting that the landlord had negotiated with the new tenant and later looked for another incoming tenant (Busan District Court, January 21, 2026, 2025Na41158, 2025Na41165). The Supreme Court of Korea took issue with the excessive rent analysis.<\/p>\n<p><\/p>\n<h2 id=\"sec-4\">What test did the Supreme Court of Korea set out?<\/h2>\n<p class=\"lead-text\">The Supreme Court of Korea held that courts must look beyond the factors listed in the statute.<\/p>\n<p>The Court explained that the provision aims to stop a landlord from blocking key money recovery by proposing rent and a deposit the new tenant cannot accept, in order to avoid contracting with the tenant&#039;s successor. It then held that whether the demanded rent and deposit are grossly excessive should be judged on the specific facts, taking into account, in addition to the statutory factors, the gap between the existing tenant&#039;s rent and deposit and the terms demanded from the new tenant, the market value and fair rent of the building, and market practice and economic conditions (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<ul>\n<li><strong>Statutory factors<\/strong>: taxes and public charges on the building, and rent and deposits of nearby commercial buildings<\/li>\n<li><strong>Additional factors<\/strong>: gap from the existing terms, market value and fair rent, market practice and economic conditions<\/li>\n<\/ul>\n<p><\/p>\n<h2 id=\"sec-5\">Is three times the existing rent excessive?<\/h2>\n<p class=\"lead-text\">The ratio alone does not decide the case, but the Court found this gap could well be regarded as excessive.<\/p>\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th>Deposit<\/th>\n<th>Monthly rent<\/th>\n<th>Converted deposit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Existing lease<\/td>\n<td>KRW 100 million<\/td>\n<td>KRW 6 million<\/td>\n<td>KRW 700 million<\/td>\n<\/tr>\n<tr>\n<td>Terms demanded from new tenant<\/td>\n<td>KRW 500 million<\/td>\n<td>KRW 20 million<\/td>\n<td>KRW 2.5 billion<\/td>\n<\/tr>\n<tr>\n<td>Compared with existing lease<\/td>\n<td>5 times<\/td>\n<td>About 333%<\/td>\n<td>About 357%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The converted deposit adds 100 times the monthly rent to the deposit, as provided in Article 2(2) of the Act and Article 2(2) and (3) of its Enforcement Decree. The Court said that although the size of the difference alone cannot establish excessiveness, a difference of this size could well be regarded as excessive (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338). It also noted that:<\/p>\n<ul>\n<li>Even allowing for no increase since 2018 and rising nearby rents, nothing in the record showed that a more than threefold increase was not excessive compared with nearby buildings.<\/li>\n<li>The landlord demanded more than three times the rent from both the tenant and the new tenant with little room for negotiation, which could undermine the Act&#039;s purpose of letting tenants recover the value they built.<\/li>\n<li>An expert assessment found that pharmacy key money typically equals about 20 months of average dispensing revenue, so KRW 2.2 billion looked reasonable and the tenant had not introduced a successor unable to pay rent.<\/li>\n<\/ul>\n<p><\/p>\n<h2 id=\"sec-6\">Can a tenant&#x27;s high revenue justify a large rent increase?<\/h2>\n<p class=\"lead-text\">No. The appellate court had relied on the pharmacy&#039;s average monthly dispensing revenue of KRW 104,329,156, but the Supreme Court of Korea found that this revenue largely reflected the tenant&#039;s own efforts.<\/p>\n<p>The Court held that the revenue appeared to include substantial personal factors such as client relationships, reputation and business know-how, in addition to the location, and noted that an expert assessment valued the location-based premium at KRW 0 and the business premium at KRW 2.015 billion. A sharp increase that ignored these points was hard to regard as objectively justified (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<p><\/p>\n<h2 id=\"sec-7\">Is a claim dismissed if the tenant cannot prove fair rent?<\/h2>\n<p class=\"lead-text\">The tenant bears the burden of proof, but a claim should not be dismissed simply because fair rent has not been established when the demand appears excessive.<\/p>\n<p>The Court held that an appraisal is not always required to determine fair rent. However, where the demanded rent and deposit could be seen as grossly excessive compared with the existing terms, the court should not reject the tenant&#039;s damages claim just because fair rent has not been confirmed, and it is desirable to determine fair rent through an appraisal or similar means and then decide whether the demand is excessive enough to defeat the purpose of the Act (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<p>The Supreme Court of Korea therefore set aside the part of the appellate judgment dismissing the damages counterclaim and sent it back to the Busan District Court, while dismissing the rest of the appeal, including the eviction claim (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338). Whether and how much the landlord must pay will be decided on remand.<\/p>\n<p><\/p>\n<h2 id=\"sec-8\">Can a landlord still ask a new tenant for new terms?<\/h2>\n<p class=\"lead-text\">Yes. The Act prohibits grossly excessive demands, not new terms as such.<\/p>\n<p>In a 2019 decision, the Supreme Court of Korea held that a landlord owes the duty to protect key money recovery even after the total lease term exceeds five years and the tenant can no longer demand renewal. As one reason this does not unduly burden landlords, the Court stated that a landlord may require a new lease on new terms unless the rent and deposit are grossly excessive in light of market rates (Supreme Court of Korea, May 16, 2019, 2017Da225312, 225329). That case applied the law before its 2018 amendment. The 2026 decision fills in how to judge what is grossly excessive.<\/p>\n<ul>\n<li><strong>Protection period<\/strong>: from six months before the lease ends until it ends (Article 10-4(1))<\/li>\n<li><strong>Damages cap<\/strong>: the lower of the key money agreed with the new tenant and the key money at the end of the lease (Article 10-4(3))<\/li>\n<li><strong>Limitation period<\/strong>: three years from the end of the lease (Article 10-4(4))<\/li>\n<\/ul>\n<p><\/p>\n<h2 id=\"sec-9\">What should tenants and landlords in South Korea prepare?<\/h2>\n<h3>Tenants<\/h3>\n<ol>\n<li><strong>Keep written records of the landlord&#039;s proposals<\/strong> to you and to your proposed successor.<\/li>\n<li><strong>Calculate the increase<\/strong> in both rent and converted deposit.<\/li>\n<li><strong>Request a fair rent appraisal<\/strong> at trial, since the burden of proof is on the tenant.<\/li>\n<li><strong>Check how key money is split<\/strong> between location-based and business premium; it can rebut arguments based on your revenue.<\/li>\n<\/ol>\n<h3>Landlords<\/h3>\n<ol>\n<li><strong>Prepare evidence of market rent<\/strong> for nearby buildings rather than relying on the tenant&#039;s revenue.<\/li>\n<li><strong>Leave room to negotiate.<\/strong> The Court weighed the lack of negotiation against the landlord.<\/li>\n<li><strong>Assess the new tenant&#039;s ability to pay separately.<\/strong> Lack of means is a statutory ground for refusal (Article 10-4(2)1), but here the Court found the key money amount reasonable.<\/li>\n<\/ol>\n<p><\/p>\n<h2 id=\"sec-10\">What does this mean for foreign-invested businesses in IFEZ?<\/h2>\n<p class=\"lead-text\">Foreign-invested companies that lease retail, clinic or office space in Songdo International Business District, Cheongna International City or Yeongjong International City are covered by the same rules when the lease falls under the Commercial Building Lease Protection Act.<\/p>\n<p>For an outgoing foreign tenant, key money can be a significant asset, and the new tenant introduced by the tenant should receive terms that are not grossly excessive. For a foreign landlord or real estate investor, rent increases at the end of a lease should be backed by market evidence. Atlas Legal, based in Songdo, advises both tenants and landlords on commercial lease terminations and key money disputes in South Korea.<\/p>\n<p><\/p>\n<h2 id=\"sec-11\">Frequently asked questions<\/h2>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. How do Korean courts decide whether a landlord&#x27;s rent demand to a new tenant is excessive?<\/p>\n<p>A. Besides the taxes, public charges and rents of nearby commercial buildings listed in Article 10-4(1)3 of the Commercial Building Lease Protection Act, courts consider the gap between the existing rent and deposit and the terms demanded from the new tenant, the market value and fair rent of the building, and market practice and economic conditions, based on the specific facts (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Is demanding three times the existing rent automatically interference with key money recovery?<\/p>\n<p>A. No, the size of the increase alone is not conclusive. However, where a landlord raised the monthly rent from KRW 6 million to KRW 20 million (about 333%) and the converted deposit from KRW 700 million to KRW 2.5 billion (about 357%), the Supreme Court of Korea held that the demand could well be regarded as excessive (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Can a landlord justify a large rent increase because the tenant&#x27;s business earns a lot?<\/p>\n<p>A. Not on that basis alone. The Supreme Court of Korea found that a pharmacy&#x27;s dispensing revenue largely reflected the tenant&#x27;s own efforts, such as its client relationships, reputation and know-how, and noted an expert assessment valuing the location-based premium at KRW 0 and the business premium at KRW 2.015 billion (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Who has to prove that the rent demand was excessive?<\/p>\n<p>A. The tenant claiming damages bears the burden of proof. But where the demand could be seen as excessive compared with the existing terms, the Supreme Court of Korea held that a court should not dismiss the claim simply because fair rent has not been established, and should instead determine fair rent, for example through an expert appraisal (Supreme Court of Korea, July 16, 2026, 2026Da201337, 201338).<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Can a landlord ask a new tenant for different lease terms at all?<\/p>\n<p>A. Yes. The Supreme Court of Korea has stated that a landlord may require a new lease on new terms unless the rent and deposit are grossly excessive in light of market rates (Supreme Court of Korea, May 16, 2019, 2017Da225312, 225329). The question is whether the demand crosses that line.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Is there a cap on damages for interference with key money recovery?<\/p>\n<p>A. Yes. Under Article 10-4(3) of the Commercial Building Lease Protection Act, damages may not exceed the lower of the key money the new tenant agreed to pay and the key money at the end of the lease. The claim must be brought within three years after the lease ends (Article 10-4(4)).<\/p>\n<\/div>\n<p class=\"closing\">This article summarizes the test for excessive rent demands in key money disputes under the Commercial Building Lease Protection Act of South Korea, based on published court decisions. It is not legal advice on any particular matter. The case was remanded by the Supreme Court of Korea and proceedings may continue, and whether a demand is excessive depends on market rents, the existing terms and the negotiation history, so specific situations require separate review.<\/p>\n<div class=\"author-box\">\n    <img decoding=\"async\" class=\"author-avatar\" src=\"https:\/\/atlaw.kr\/wp-content\/uploads\/2022\/12\/\uae40\ud0dc\uc9c4-1.png\" alt=\"Taejin Kim, Managing Partner \u2014 Atlas Legal\"><\/p>\n<div class=\"author-text\">\n<div class=\"author-section-label\">About the Author<\/div>\n<div class=\"author-name\">Taejin Kim | Managing Partner<\/div>\n<div class=\"author-detail\">Corporate Counseling, Corporate Disputes, White-Collar Crime<\/div>\n<div class=\"author-detail\">Former Public Prosecutor | Judicial Research and Training Institute, 33rd Class<\/div>\n<div class=\"author-detail\">Korea University LL.B. &amp; LL.M. (Criminal Law), University of California, Davis LL.M.<\/div>\n<div class=\"author-detail\">Atlas Legal | Incheon Songdo, South Korea<\/div>\n<p>      <a class=\"author-link\" href=\"https:\/\/atlaw.kr\" target=\"_blank\" rel=\"noopener noreferrer\">Visit Atlas Legal Homepage \u2192<\/a>\n    <\/div>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A landlord&#8217;s rent demand to a tenant&#8217;s successor in South Korea is judged against existing and fair rent, the Supreme Court of Korea held.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[17],"tags":[970,973,972,974,971],"class_list":["post-2062","post","type-post","status-publish","format-standard","hentry","category-civil","tag-commercial-building-lease-protection-act","tag-commercial-lease-dispute","tag-excessive-rent","tag-fair-rent-appraisal","tag-key-money"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Key Money Recovery and Excessive Rent in South Korea | Atlas Legal<\/title>\n<meta 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