1.

Background and Purpose of Amendment

Article 11 (1) of the CBLPA provides that, where the rent or deposit under a commercial lease has become unreasonable, either party may request an increase or decrease for future rent or deposit amounts. Article 4 of the Enforcement Decree of the CBLPA further provides that any increase will not exceed 5%. Under the proviso to Article 10 (3) of the CBLPA, this 5% cap on increases also applies to rent and deposit adjustments made upon a tenant’s exercise of the lease renewal request right.

Historically, however, lower court decisions have consistently held that the 5% cap under the CBLPA does not apply to increases in management fees (e.g., Seoul Central District Court Decision 2023GaDan5483426, June 5, 2024).

The Amendment is intended to address situations where landlords attempt to circumvent the regulatory ceiling by keeping rent and deposit amounts unchanged while raising management fees instead, knowing that management fees fall outside the scope of the statutory increase cap. Particularly concerning is that, when landlords increase management fees, tenants have had no statutory right to request a fee breakdown and therefore no practical means of verifying whether the increased amounts are reasonable. The Amendment is designed to address this concern.
 

2.

Substance of Amendment

Article 19-2 of the amended CBLPA provides that, where a tenant is obligated to pay management fees to a landlord, the tenant may request the landlord to provide a breakdown of the charged management fees, and that a landlord is obligated to comply with such request upon receipt. However, given that the specific details of the breakdown that a landlord must provide will be delegated by a Presidential Decree, it will also be necessary to review the forthcoming amendments to the Enforcement Decree.

Separately, Article 2 (1) of the CBLPA limits its scope of application to commercial leases where the converted security deposit amount (“환산보증금액” in Korean) does not exceed a prescribed threshold, and Article 2 (3) provides that only a certain portion of the CBLPA’s provisions applies to leases exceeding such threshold. Newly added Article 19-2 was not included among those provisions listed in Article 2 (3) as applying to leases exceeding the threshold. Accordingly, the management fee breakdown disclosure requirements introduced by the Amendment will not apply to leases where the converted security deposit amount exceeds the statutory threshold.

The Amendment also introduces a provision requiring that the standard commercial lease form distributed by the Minister of Justice include a dedicated item for “management fee components.”
 

3.

Significance of Amendment

Lower court decisions holding that the statutory increase cap does not extend to management fees have generally proceeded on the premise that management fees are costs incurred to cover utilities or actual building maintenance expenses. Thus, in cases where management fees are considered to have no reasonable basis in actual underlying costs and function in substance as a substitute for rent, the statutory increase cap may well apply. The Amendment is expected to prompt an increasing number of tenants to request management fee breakdowns from their landlords and to scrutinize those figures as a basis for challenging the reasonableness of the charged amounts.