A landlord who refused to renew a tenant's lease on the grounds of moving in personally must pay damages if the property is later re-leased to a third party without justifiable cause, the Supreme Court has ruled.
The Supreme Court's Second Division, presided over by Justice Kwon Young-joon, recently upheld a lower court ruling in favor of a tenant identified as A in a damages suit against a landlord identified as B, legal sources said on the 12th.
A rented an apartment in Seoul's Seodaemun District from September 2020 to September 2022 under a jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) arrangement with a deposit of 660 million won. In May 2022, ahead of the lease expiration, A notified the landlord of an intention to renew, but B told A to vacate the unit, saying B would move in personally.
B registered residency at the apartment in September 2022, moved in in February 2023, and lived there before moving to another apartment in April 2024. On the same day, B re-leased the original apartment to a third party for a two-year term with a deposit of 820 million won.
A then sought damages under the Housing Lease Protection Act, arguing that B had leased the apartment to a third party without justifiable cause during the period the tenancy would have continued had the lease been renewed.
The Housing Lease Protection Act holds a landlord liable for damages to a former tenant if the landlord forces the tenant out by claiming the landlord will live in the home, then takes in a new tenant without justifiable cause.
B argued that B had in fact lived in the apartment for a considerable period and that six tenants in other properties B owned had simultaneously demanded the return of their deposits due to circumstances that could not have been anticipated at the time of the renewal refusal. With bank lending also difficult to obtain, B said, re-leasing the apartment was unavoidable in order to raise the funds to return those deposits.
The court of first instance sided with B. It found that the deposit-return demands from tenants in B's other properties had been difficult to foresee at the time of the renewal refusal, and that re-leasing the apartment to raise about 690 million won in repayments over a short period had been unavoidable.
The appellate court reached a different conclusion, ordering B to pay A 30,799,992 won plus delayed damages. It held that being placed in financially urgent circumstances does not by itself establish justifiable cause. The obligations to return deposits on the six other units already existed when B declined the renewal, and their expiration dates were already set, the court said, meaning B could have readily anticipated that he would have to return the deposits.
The court also found that changes in property market conditions or lending rules that fell short of B's expectations could not be treated as unforeseeable changes in circumstances. It rejected B's arguments that loans were difficult to obtain and that selling the apartment would have incurred a substantial capital gains tax.
The Supreme Court upheld the lower court's judgment. "For 'justifiable cause' under Article 6-3, Paragraph 5 of the Housing Lease Protection Act to be recognized, the landlord must have leased the subject home to a third party because of circumstances that could not have been foreseen at the time of the renewal refusal, and leasing the subject home to a third party must have been unavoidable," the court said. "The burden of proving that justifiable cause existed rests with the landlord."
A Supreme Court official said the decision marks the first ruling on the meaning of "justifiable cause" under Article 6-3, Paragraph 5 of the Housing Lease Protection Act.