Background
In May 2017, our client leased the ground floor of a commercial building in Gyeonggi Province for a restaurant, with a deposit of KRW 70 million and monthly rent of KRW 2.75 million. In the early months, sales were processed through the landlord's card terminal and part of the proceeds was applied to rent, so the money flows between the two became tangled.
The landlord sued for about KRW 8.1 million in unpaid rent, restoration and surrender of the premises, and KRW 2.75 million per month until surrender. Our client counterclaimed KRW 76.9 million, including return of the deposit, and vacated the premises in December 2021 while the case was pending.
What Was at Stake
The landlord argued that the early-period settlement and card-based transactions should all be counted against our client. How much rent was actually unpaid would determine how much of the deposit came back.
How Changchun Helped
The appellate court accepted the following arguments made on the tenant's behalf by Law Firm Changchun.
The first three months were already settled. About KRW 7.34 million in card sales the landlord kept, plus KRW 1.55 million paid by our client, settled the rent and supply costs for May to July 2017.
Costs incurred for the landlord's benefit count as rent. Costs our client bore from card transactions used for the landlord's financing were applied to arrears under an implied agreement.
No separate payment was due. Since the premises had been returned, arrears and use charges simply came out of the deposit.
Outcome
In April 2023, the appellate court found the landlord's claim without merit, dismissed the landlord's appeal, and ordered the landlord to bear the appeal costs. By the appellate court's calculation, about KRW 39.79 million of the deposit remained (KRW 70 million less about KRW 16.46 million in rent unpaid from September 2017 to April 2021 and KRW 13.75 million in rent for May to September 2021). Because only the landlord had appealed, the first-instance judgment was left unchanged.
When money flows between landlord and tenant are intertwined, matching each payment to its agreement can correct the true amount of arrears. (Outcomes depend on the facts of each case.)