[HOAM Foreign Law Column] Key Money (Gwonligum): How to Get it Back When Closing a Business

'Key Money' (Gwonligum) is a unique and often expensive aspect of the Korean commercial real estate market. For many foreign business owners, recovering this premium when closing or moving their business is essential. The law provides specific protections to ensure landlords do not unfairly block your recovery of this money.

1. What Exactly is Gwonligum?

Key money is a premium paid to the outgoing tenant for:

• Location/Customer Base: The value of the business's location and existing reputation.
• Facilities/Equipment: Interior decorations, kitchen equipment, or specialized tools left behind.
• Know-how: Proprietary business methods or exclusive supplier contacts.

2. The Landlord’s 'Duty to Cooperate'

Under the Commercial Building Lease Protection Act, a landlord cannot unfairly interfere with a tenant’s attempt to collect key money from a new successor tenant. This protection applies from 6 months before the lease ends until the actual termination date.

3. Common Forms of Illegal Interference

Landlords are prohibited from:

• Demanding the key money from the new tenant for themselves.
• Preventing the current tenant from receiving key money.
• Asking for an excessively high rent or deposit from the new tenant, making the transfer impossible.
• Refusing to sign a contract with the new tenant without a 'justifiable reason.'

4. Claiming Damages (Gwonligum Damage Claim)

If the landlord violates these rules and you lose your chance to collect key money, you can file a Damage Claim Lawsuit against the landlord. The amount of damages is usually determined by an appraisal of the business's value at the time the lease ended.

5. Why Hoam Law Firm?

Gwonligum disputes are notorious for complex evidentiary requirements. You must prove that you provided a suitable successor and that the landlord’s refusal was truly 'unjustifiable.' Hoam Law Firm helps foreign entrepreneurs document the entire successor introduction process and provides the litigation expertise needed to hold landlords accountable for your financial loss.

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