1. The Client's Situation
The client had entered into a commission-based store lease agreement and sought to confirm whether the agreement fell within the scope of protection under the Commercial Building Lease Protection Act (hereinafter the "Commercial Lease Act"). In particular, the client requested a legal interpretation of whether commission-based rent is included in calculating the converted deposit, as well as of the minimum guaranteed rent and the requirements for exercising the right to request renewal.
2. Your Legal Team's Advice
Your Legal Team analyzed the conflicting lower-court precedents on whether a commission may be included in the "rent" used to calculate the converted deposit, and, taking into account the legal nature of the commission, presented the opinion that the "exclusion theory" is more persuasive. However, we also advised that where the agreement expressly designates the commission as "rent," there is a possibility of a counterargument based on the inclusion theory. In addition, we examined in detail that the minimum guaranteed rent, being fixed rent, is included in the converted deposit, and that a request to renew the lease may be made freely within ten years and may be given by notice without any restriction as to form.
3. Outcome
Through this advice, the client clearly recognized the legal risks related to calculating the converted deposit and was able to establish a direction for the use of terminology when drafting agreements in the future. The client also received assistance in stably securing its position as a tenant by establishing practical standards regarding the timing and method of exercising the right to request renewal.