▲ Apartment buildings and high-rises
The Supreme Court has ruled that if a landlord refuses a tenant's request for contract renewal on the grounds of personal residence and later leases the property to a new tenant, the landlord must prove that the new lease was unavoidable due to circumstances that could not have been anticipated at the time of the refusal.
According to legal circles on October 12, Supreme Court's Division 2 (Presiding Justice Kwon Young-jun) finalized the appellate court's ruling in favor of the plaintiff last month in a damage suit filed by a tenant, identified as A, against a landlord, identified as B.
In July 2020, tenant A leased an apartment in Seodaemun-gu, Seoul, from landlord B for two years (September 2020 to September 2022) with a deposit of 660 million won.
Ahead of the contract expiration, tenant A requested a contract renewal in May 2022, but landlord B refused, stating that he would live there himself.
Landlord B registered his move-in in September 2022, entered the country in February of the following year, and actually resided there until April 2024.
However, in February 2024, landlord B signed a contract to lease the apartment to a new third-party tenant for a deposit of 820 million won (with a lease period from April 2024 to April 2026).
In response, tenant A filed a lawsuit seeking damages under the Housing Lease Protection Act, arguing that landlord B had signed a new lease contract before the expiration of the two-year period that would have been renewed had the renewal request not been refused.
Paragraph 5 of Article 6-3 of the Housing Lease Protection Act stipulates that if a landlord refuses renewal on the grounds of personal residence and leases the home to a third party without a "justifiable reason" before the expiration of the period that would have been renewed had the renewal request not been refused, the landlord must compensate the tenant for damages incurred.
The core issue in the lawsuit was whether landlord B could be recognized as having a "justifiable reason."
Landlord B argued that a "justifiable reason" was recognized because tenants of six units in a multi-family housing property he co-owned with his wife demanded the return of their deposits all at once.
At the time, the total deposits landlord B had to return amounted to 690 million won, while the deposits received from new tenants were only 180 million won. He claimed he had no income, made loans impossible, and would have had to pay about 300 million won in capital gains tax even if he sold the house, leaving him with no choice but to lease to a third party.
The first instance court ruled in favor of landlord B.
It concluded that as lease fraud issues emerged socially around the end of 2022 and heightened risks regarding lease deposits, tenants of multi-family housing demanded the return of their deposits simultaneously, which amounted to circumstances that landlord B could not have anticipated when he refused tenant A's renewal request.
However, the second instance court overturned this and ruled that landlord B must compensate tenant A for damages.
The appellate court stated that the obligation to return the multi-family housing deposits already existed at the time of the renewal refusal, and that the fact that the contract period would end in February 2024, requiring the fulfillment of the return obligation, was also foreseeable.
Furthermore, the court judged that landlord B merely chose one of several options to secure the multi-family housing deposits, and it could not be considered that there were unavoidable circumstances necessitating a lease to a third party.
The appellate court recognized 38 million won claimed by tenant A as damages, within the scope of the two-year difference (44 million won) between the converted monthly rent obtained from the new tenant and the converted monthly rent at the time of the renewal refusal.
Landlord B appealed the second instance ruling, but the Supreme Court reached the same conclusion.
The Supreme Court ruled for the first time on two requirements for recognizing a "justifiable reason" under Paragraph 5 of Article 6-3 of the Housing Lease Protection Act: "due to circumstances that the landlord could not have anticipated at the time of the renewal refusal, leasing to a third party must have been unavoidable."
It further stated that the burden of proof regarding the existence of such justifiable reasons lies with the landlord.
The Supreme Court dismissed the appeal, holding that there were no errors in the second instance court's judgment that the circumstances claimed by landlord B were foreseeable at the time of the renewal refusal and that leasing to a third party was not unavoidable.
(Photo: Yonhap News)
※
Copying, redistribution, and unauthorized use in AI training are strictly prohibited.