Comprehensive Advisory Case on Lease Agreement Risks for Illegal Buildings and Buildings With Non-Conforming Use

1. The Client's Situation

A mid-sized distribution company, before concluding a lease for the entry of a new store, confirmed that the building that was the object of the lease had been designated an "illegal building," and that the use stated in the building register was "entertainment restaurant," which differed from the retail business that was its own operating purpose. Accordingly, it requested a prior review of how the legal risks of the building might affect actual operations.

Your Legal Team first specifically organized the major risks under the Building Act for illegal buildings and buildings with use mismatches, such as corrective orders, enforcement fines, criminal punishment, and the possibility of business suspension. We then analyzed the responsible party for the use-change procedure and its practical feasibility, and clarified that the change of use of the building in question could fall under those subject to "reporting." In addition, by advising that the lease agreement include the lessor's obligation to correct and change the building, conditions for contract termination, and damages clauses, we enabled the contractual risk to be substantially mitigated.

Through Your Legal Team's advice, the client laid the groundwork to control in advance the possibility of business suspension and administrative dispositions arising from the illegal building and use mismatch, by reflecting specific risk-response clauses in the contract terms. Ultimately, by clearly grasping the possibility of business reporting and the requirements for business registration, the client was able to secure legal stability in pursuing the business.