“I’m three months behind on rent, so please vacate the store”… When I looked at the contract, it was ‘invalid.’

The court ruled that if the unit for paying rent and the unit for contract termination due to late payment were set differently during a lease contract, it would be an unfair contract disadvantageous to the tenant and therefore invalid.

On the 11th of last month, the 11th Civil Affairs Division of the Incheon District Court announced that it ruled in favor of the plaintiff company A in the 'suit to confirm the existence of a rental contract relationship' filed by cafe operator A against the Incheon Tourism Organization.

The incident dates back to 2023. Company A signed a 10-year lease agreement with the Incheon Tourism Organization to move into a tourist facility in Incheon. The terms of the contract included a provision to pay one year's rent in advance at the beginning of each year.

However, contrary to expectations, as the number of visitors fell short of expectations, Company A ran into financial difficulties and was unable to pay rent last year.

Accordingly, the construction side sent a certificate of contents to Company A early this year, urging them to pay rent. The proof of contents also included information that the contract would be terminated due to late payment. It was based on the clause in the contract that said, ‘If the monthly rent arrears reach 3 months, the contract can be terminated.’ The current Commercial Building Lease Protection Act stipulates that the landlord can terminate the contract when the tenant's rent arrears reach three periods.

Company A immediately objected. It was argued that it was unfair to agree to pay rent at once on a ‘yearly basis’ and then calculate the contract termination conditions ‘on a monthly basis.’ Ultimately, Company A filed a lawsuit to confirm that the lease agreement was still valid.

The court ruled in Company A’s favor. The court pointed out, "While the contract stipulated to pay rent on a yearly basis, the standard for termination in case of late payment was set at 3 months, which in itself is disadvantageous to the lessee." “Therefore, the provision for cancellation of late payment is not effective, so it cannot be said that the lease contract was legally terminated due to the certificate of contents sent by the construction company,” the ruling continued.

Attorney Kim Seong-chan of Daeryun Law Firm, who represented Company A, explained, "The reason for termination of the contract only stated that 'according to the Commercial Building Lease Protection Act, the arrears of rent amount to three periods'. During the trial, we actively argued that 'if rent is to be paid on a yearly basis, three periods of rent is equivalent to three years', so we were able to win the case after being recognized as an unfavorable contract to the lessee."

Reporter Hwang Jeong-won (jwhwang@mt.co.kr)

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"I am behind on rent by 3 months, so please vacate the store"... When I looked at the contract, it was ‘invalid’ (Shortcut)