Customary Lease (관행 임대차)

A lease relationship established and maintained through long-standing practice and implicit agreement without an explicit contract, appearing widely in commercial buildings, markets, and housing.

Customary Lease (관행 임대차)

Overview

A customary lease (관행 임대차) refers to a lease relationship established and maintained through long-standing transaction practices and implicit agreement between the parties, without a written contract. It appears widely in traditional market stalls, small commercial buildings, farmland, and company housing, and gives rise to issues surrounding legal stability and proof. Under the Civil Act, a lease does not necessarily require a written document, so a valid contract may be formed by practice alone.

Key Details

Concept and Formation

According to Article 618 of the Civil Act, a lease takes effect when one party agrees to allow the other party to use and profit from the object, and the other party agrees to pay rent for it. Even without a contract, if factual circumstances such as payment of rent, delivery of the object, and long-term possession and use accumulate, an implicit agreement is recognized and a lease is formed. Here, "customs that are matters of fact" under Article 106 of the Civil Act and "customary commercial law" under Article 1 of the Commercial Act serve to supplement the content of the contract.

Legal Nature

A customary lease is in principle also governed by the Civil Act's rules on lease. If no duration is agreed, the parties may give notice of termination at any time (Article 635 of the Civil Act), and it takes effect six months after the other party receives the notice. However, where the Housing Lease Protection Act or the Commercial Building Lease Protection Act applies, mandatory protective provisions such as opposing power, the right of preferential payment, and the right to request contract renewal take precedence over practice.

Main Types

Oral lease: A form in which rent and duration are set only verbally, often with receipts or bank transfer records as the only evidence.
Renewal-by-practice lease: A lease of a commercial or market stall that has been implicitly renewed for decades.
Farmland customary lease: Cases carried out as village-level practice despite restrictions on leases under the Farmland Act.
Company housing / employee lease: A form in which the employer provides housing to a worker and deducts rent from wages.

Rights and Obligations

The lessor has a duty to maintain the object in a condition suitable for use and profit, and the lessee has a duty to pay rent and preserve the object. If the Commercial Building Lease Protection Act applies, the lessee may assert the right to request contract renewal (Article 10) and protection of the opportunity to recover key money (Article 10-3). Even in a customary lease, these statutory rights are not excluded on grounds of practice.

Disputes and Remedies

Typical disputes involve rent increases, eviction, recovery of key money, and return of unjust enrichment. Because a customary lease lacks a written document, the allocation of the burden of proof regarding contract terms and duration becomes a key issue. Rent receipts, bank transaction records, tax filing data, witness statements, and maintenance fee assessment records are used as materials proving the existence and content of the practice. Disputes are resolved in the order of certified mail, mediation, payment order, and civil litigation; for commercial disputes, mediation by the Korea Legal Aid Corporation or the Commercial Building Lease Dispute Mediation Committee may be used.

Recent Trends

Since 2024–2025, as disputes over commercial and market leases have steadily increased, case law addressing the standard of proof for customary leases has been accumulating. Interpretation surrounding the period for exercising the right to request contract renewal and the scope of protection of the opportunity to recover key money has become more refined, and review of legitimate grounds on which a lessor may refuse renewal has become stricter. The government and local governments are recommending the distribution of standard lease contracts and conversion to written contracts to protect traditional market merchants, and as electronic contracts and mobile lease management services spread, transactions that relied on practice are gradually becoming documented. Meanwhile, institutional changes in the housing market following the "Lease 3 Acts" (임대차 3법) are having an indirect impact on the commercial sector as well, and discussions on key money protection and rent caps continue. AI-based rental price analysis and contract risk assessment services have also appeared, contributing to reducing the uncertainty of customary leases.