The Revision of Commercial Building Lease Protection Act and Desirable Policy of Protection of Tenants - Guarantee of Renewal and Compensation of Business -

The phenomenon referred to as “premium" in Korea is a group of various legal relations which have different contents and forms. These relations can be most extensively explained by analyzing whose and which interest should be protected in the context of tenancy. The analysis shows that location-interest should belong to landlords while business-interest should belong to business owners. In principle, business-interest can be reflected in rents via rent adjustment claim. If the landlord himself is the business-owner, established case law can deal with the problem of the restoration of premium adequately. Accordingly, the problem of premium can be rephrased as the problem of how to protect the business interest of tenant-business-owner. This approach could produce extensive and efficient policy. Many legal systems adopt this approach for this reason. Typical way of protection of tenants’ business interest includes guarantee of renewal and compensation of business. The former is more effective and efficient way but needs to be complemented by the latter in those exceptional cases where it is allowed for landlords to refuse to renew tenancy. Commercial Building Lease Protection Act (“CBLPA”) awards tenants claim for renewal within 5 years of from the beginning of the tenancy, which is insufficient to function as a proper system of guarantee of renewal. This is not only because 5 years is much shorter than the period that affects the decision of tenants on the amount of investment in the premise, but also because the fact that landlords can arbitrarily decide whether to renew tenancy after that period causes a gap between expected available tenancy period and actual available tenancy period, which leads to unexpected loss of tenants and social under-investment. Recently revised CBLPA impose on landlords duty to refrain from interference with tenants’ effort to reclaim the premium. This practically acts as a system of indirect guarantee of renewal and compensation of business beyond the period for exercise of the claim for renewal. But this function is very limited because of the narrow extent of the duty to refrain from interference. The standard to asses the amount of loss, especially the appraisal of premium is largely inappropriate and imperfect. Above all, vesting tenants with location-interest and the ambiguity of the period for assessment of expected interest implicates a lot of problems. There is also the need to revise some articles to obviate the evasion of law on the part of landlords and secure the viability of the system. All things taken together, it is required to introduce more comprehensive system of guarantee of renewal and compensation of business. As for guarantee of renewal, the maximum period for exercise of the claim for renewal should be extended longer than the period that affects the decision of tenants on the amount of investment, or abolished altogether. As for compensation of business, we need to go further than just relying on the private disposal of tenants by way of the reclamation of premium, and make landlords compensate for tenants’ business interest when tenancy terminates before the period of guaranteed renewal expires. In the assessment of the amount compensation, it is desirable to prevent the overlap with the system of the protection of tenants’ opportunity of reclamation of premium and have those systems reconcile with each other.