Commercial lease · Guide
Key Money in Korea (권리금): Is It Refundable, and How Does the Law Protect It?
What “key money” means in Korea, how commercial key money differs from a rental deposit, who pays it to whom, and how the law protects a business tenant’s chance to recover it from the next tenant.
What “key money” can mean in Korea
In discussions of Korean property, “key money” can mean commercial key money or a rental deposit, including jeonse. It is also used for the Japanese reikin payment. Which one you are dealing with decides whether the money comes back to you, and from whom.
If you were asked for “key money” on an apartment, it almost always means the deposit or jeonse. This guide covers the commercial key money paid when a shop, restaurant, bar, café, clinic or other business premises changes hands.
| What people call it | Korean term | Who pays whom | Returned at the end? | Main law |
|---|---|---|---|---|
| Commercial key money | 권리금 (gwolligeum); “premium” in the official English translation of the Act | The incoming business operator pays the outgoing tenant (occasionally the landlord) | Not by the landlord as a rule; a tenant usually tries to recover it from the next tenant | Commercial Building Lease Protection Act, Articles 10-3 to 10-7 |
| Security deposit on a monthly-rent lease | 보증금 (bojeunggeum) | Tenant pays landlord | Yes: the balance after proper deductions, normally against handing back the premises | Civil Act; Housing Lease Protection Act or Commercial Building Lease Protection Act |
| Jeonse deposit | 전세보증금 | Tenant pays landlord a large lump sum instead of monthly rent | Yes, as above | As above |
| Japanese “key money” (reikin) | — | Tenant gives landlord a non-refundable sum | Not a Korean legal category | — |
What commercial key money pays for
The Act defines key money as money or other consideration, separate from the deposit and rent, paid by a person who runs or intends to run a business in the leased building, to the landlord or the tenant, in return for the transfer or use of tangible and intangible value: business facilities and equipment, customers, goodwill, business know-how and the commercial advantage of the location (Article 10-3(1)). A “key money contract” is the contract by which a person who wants to become the new tenant agrees to pay key money to the existing tenant (Article 10-3(2)).
The Supreme Court treats key money as separate from the lease: it is the price for transferring, or using for a period, the value attached to the premises, not part of the rent bargain with the landlord (2000Da59050, 10 April 2001).
- Fit-out and equipment: interior works, kitchen, bar, signage, furniture.
- Business value: the customer base, reputation and operating know-how of a going concern.
- Location value: footfall and visibility of the unit, often a large part of the price on busy streets.
How much is key money?
There is no official price list. The amount depends on location, trade, the remaining lease term and renewal position, the rent and the condition of the fit-out, and an empty unit may command none. In a dispute, the value is usually established by a certified appraiser; the Minister of Land, Infrastructure and Transport may publish appraisal standards for key money (Article 10-7).
Do you get key money back?
- From the landlord: generally no. Key money you paid to the previous tenant is not the landlord’s debt. Even key money paid directly to a landlord is, as a rule, not refundable once you have received the value it paid for. The Supreme Court has recognised a full or partial refund only in special circumstances, for example where the landlord agreed to keep the lease running for a period and it ended early for reasons on the landlord’s side (2000Da59050).
- From the next tenant: this is how tenants usually try to recover it. You find someone to take over the premises who agrees to pay you key money and signs a new lease with the landlord. The law protects your opportunity to do this; it does not guarantee a buyer, a price, or that you recover what you originally paid.
- Your deposit is separate. The landlord’s obligation to return the remaining deposit, after proper deductions, does not depend on whether any key money changes hands.
How the law protects your chance to recover it
In the last six months of the lease period, the landlord must not obstruct you from receiving key money from a prospective new tenant you introduce, for example by demanding key money from that person, demanding remarkably excessive rent, or refusing to sign with them without good cause (Article 10-4(1)). Where the statutory conditions are met, a landlord who causes you loss this way is liable in damages, within a statutory cap and a three-year limitation period (Article 10-4(3)–(4)).
The protection does not depend on the size of the deposit (Article 2(3)) and continues after your statutory renewal period has run out (2017Da225312, 16 May 2019). It does not apply to units in large stores or quasi-large stores (traditional markets excepted) or to state or public property (Article 10-5), and it is lost if the landlord has a ground to refuse renewal, such as unpaid rent that has reached three periods’ rent or a sublet without consent (Article 10-4(1), proviso). How to introduce a tenant, the grounds a landlord can rely on, and how damages are capped and proved are explained in a separate guide.
If you are the landlord
Foreign owners of Korean retail units are bound by the same rules. When your tenant introduces a replacement in the last six months, answer in writing, ask for the information the tenant is obliged to give about the candidate’s means and willingness to perform as a tenant (Article 10-4(5)), and record your reasons at the time you give them. Good cause to refuse includes a candidate who cannot afford the deposit or rent (Article 10-4(2)), but a plan to run your own business in the unit is not, by itself, good cause (2024Da305605, 20 November 2025), and a firm statement that you will not deal with anyone the tenant introduces can itself count as a refusal.
Before you pay key money for an existing business
- Make the key money contract conditional on the landlord signing your lease on terms you have seen, and agree what happens to any down payment if the landlord refuses.
- Check the seller’s lease: remaining term, renewal history, rent arrears and any dispute with the landlord.
- Ask who must remove the fit-out at the end. A tenant who takes over a business can be bound by a restoration clause to remove fixtures installed by an earlier tenant (2017Da268142, 30 August 2019).
- Tax: confirm before payment whether you must withhold tax on the key money, whether VAT applies and whether the price includes it. The answer differs for individuals, companies, non-residents and transfers of a whole business. The recipient may also be taxed, for example as “other income” where a business right including a shop leasehold right is transferred (Income Tax Act, Article 21(1)7).
Frequently asked questions
Do you get key money back in Korea?
Not from the landlord, as a rule. Commercial key money is usually recovered, if at all, from the next tenant who takes over the premises. A deposit (보증금) is different: the landlord returns the balance after proper deductions when the lease ends.
How much is key money in Korea?
There is no official rate. It depends on location, trade, fit-out, rent and remaining lease term, and an empty unit may have none. In a dispute, the value at the end of the lease is normally established by appraisal.
Is key money legal in Korea?
Yes. Key money between tenants has been recognised in the Commercial Building Lease Protection Act since 2015. What the Act forbids, in the last six months of the lease, is a landlord obstructing your recovery, for example by demanding key money from the new tenant you introduced.
Is key money the same as a deposit?
No. A deposit is security held by the landlord and returned, less proper deductions, at the end. Commercial key money is paid between business operators for the value of the premises and the business.
Does the protection apply to a foreign tenant?
The Act has no nationality condition. The same requirements apply: a building subject to business registration, used mainly for business, and not within the exclusions. Whether you may run the business is a separate immigration question.
Does it apply to an office lease?
It can, if the premises are in a building subject to business registration and used mainly for profit-making business, judged by actual use rather than the register’s description. Units forming part of a large store or quasi-large store (traditional markets excepted) and state or public property are excluded from key money protection (Article 10-5), and a lease clearly for temporary use is outside the Act (Article 16).
How the initial review works
- Send a short description, your current country and time zone, and any deadline. Please wait for document-transfer instructions before sending identity documents.
- The attorney checks the requested scope and any conflict of interest, then proposes the review, fee and expected delivery date by email. A video consultation in English can be arranged by appointment.
- The agreed initial review includes an English summary of the issues, missing documents and recommended next steps. Depending on the scope, it may also include a document checklist or a list of steps to take with each authority.
- Fees depend on the records and questions to be reviewed. Any filing, translation, certification, government charges or continuing work is identified separately in the proposal. Sending an inquiry does not start a paid engagement.
What this office can do
A legal review in English can assess a key money contract and lease before you sign and analyse whether a landlord’s conduct may amount to obstruction. The office can also prepare a Korean notice introducing a new tenant or responding to a refusal, and represent you in negotiation, conciliation or a damages claim. In-person meetings are available by appointment at the office near Samgakji Station in Yongsan, a short trip from Itaewon and Haebangchon.
General information on Korean law as at the date shown. Advice requires a review of your documents and an agreed engagement.
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General information on Korean law. Advice for a particular matter requires a separate review and agreed engagement.