Can Foreign Tenants Recover Key Money or Interior Costs in Korea?

Short Answer

Potentially, yes, but recovery is not automatic.

In Korea, key money is not the same as a refundable lease deposit. A tenant usually recovers key money by introducing a new tenant who is willing to pay key money when taking over the commercial space.

A landlord does not usually have a general duty to “return” key money. However, if the landlord unlawfully interferes with the tenant’s legally protected opportunity to recover key money, the tenant may have a claim for damages.

Interior costs and facility expenses are also not automatically recoverable. Recovery depends on the lease, restoration clause, facility transfer agreement, landlord approval, and evidence.

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Why This Issue Matters

Foreign business owners often spend significant money before opening a business in Korea.

Common upfront costs include key money, interior construction, kitchen equipment, signage, furniture, ventilation work, facility transfer price, and business setup costs.

These costs can be especially high for restaurants, cafés, shops, academies, clinics, studios, and other commercial spaces.

If the lease ends early, renewal is refused, or the business fails, the tenant may want to know whether these amounts can be recovered.

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Is Key Money Refundable?

Usually, key money is not automatically refundable.

A lease deposit is generally returned by the landlord after the lease ends, subject to deductions. Key money is different. It is usually paid for business value, location value, customer traffic, goodwill, or facilities connected to the premises.

In many cases, the tenant recovers key money by finding a new tenant who is willing to pay key money when taking over the space.

This is why the tenant should clearly document who received the key money, what the payment was for, whether facilities were included, and whether the landlord approved the lease.

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When Can the Landlord Be Liable?

A landlord may be liable if the landlord unlawfully interferes with the tenant’s opportunity to recover key money.

In general, key money recovery protection becomes important during the statutory period near the end of the lease, generally from 6 months before the lease ends until the lease ends.

Examples of possible interference may include:

• demanding key money directly from the new tenant;
• preventing the new tenant from paying key money to the outgoing tenant;
• demanding an unreasonably high rent or deposit;
• refusing to sign a lease with a proposed new tenant without a valid reason; or
• interfering with negotiations between the outgoing and incoming tenants.

However, not every refusal by the landlord is unlawful. The landlord may have legitimate reasons, such as serious rent arrears, unsuitable business use, poor financial capacity of the proposed tenant, or other legally recognized grounds.

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Is Introducing a New Tenant Always Required?

Usually, the tenant should try to introduce a suitable new tenant and preserve evidence of that process.

However, if the landlord clearly states that it will refuse any new tenant without a valid reason, a dispute may still arise even if the tenant could not complete the introduction process.

In practice, the tenant should preserve a clear timeline of communications, proposed tenant information, landlord responses, and any refusal or unreasonable condition imposed by the landlord.

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Can Interior Costs Be Recovered?

Sometimes, but this is often difficult.

Interior costs are usually treated differently from key money. If the tenant installed facilities for its own business, the landlord may argue that those costs were the tenant’s business expenses.

Recovery may depend on:

• what the lease says about restoration;
• whether the landlord approved the construction;
• whether the facilities became part of the building;
• whether the landlord agreed to reimburse any costs;
• whether the tenant can remove the facilities;
• whether the next tenant will buy the facilities; and
• whether the tenant waived reimbursement rights in the lease.

If the lease requires full restoration, the tenant may have to spend additional money removing interior work.

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What Is the Difference Between Key Money and Facility Transfer Price?

Key money usually relates to business value or the opportunity to use a commercial space.

A facility transfer price usually relates to physical assets, such as kitchen equipment, furniture, signs, fixtures, machinery, or interior facilities.

They may overlap in practice, but they should be separated in writing.

For example, a payment may include both business goodwill and physical assets. If the agreement does not clearly separate these items, disputes may arise over what was transferred and what can be recovered later.

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What Evidence Is Important?

Evidence is critical in key money and interior cost disputes.

Foreign tenants should preserve:

• lease agreement;
• key money agreement;
• facility transfer agreement;
• payment records;
• bank transfer records;
• tax invoices or receipts;
• facility list and photos;
• landlord approval records;
• communications with the landlord and broker;
• proposed new tenant information; and
• evidence of landlord refusal or interference.

The tenant should also keep records showing the proposed new tenant’s financial ability, business type, and willingness to sign a lease, because these facts may become important in a key money dispute.

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What Should Foreign Tenants Check Before Paying?

Before paying key money, interior costs, or facility transfer price, foreign tenants should check whether:

• the lease will be signed by the landlord;
• the business use is permitted;
• required licenses can be obtained;
• the payment is refundable in any situation;
• facilities are included and properly listed;
• restoration obligations are clear;
• the tenant can remove or sell facilities later;
• the landlord must cooperate with a new tenant; and
• all terms are written.

Foreign tenants should avoid relying only on verbal explanations from the landlord, broker, or outgoing tenant.

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Are There Exceptions?

Yes.

Key money recovery protection may not apply in every situation. For example, serious rent arrears or other statutory default issues may weaken or defeat the tenant’s claim.

Certain types of premises or lease structures may also be excluded from key money protection.

Because exceptions can be important, tenants should confirm whether the lease is actually protected before assuming that key money recovery rights are available.

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What Can the Tenant Do If a Dispute Arises?

If a dispute arises, the tenant may consider negotiation, written demand, settlement, claim for damages, dispute over deposit deductions, provisional attachment if monetary recovery is at risk, or civil lawsuit.

The best strategy depends on the amount at stake, available evidence, remaining lease term, landlord’s financial condition, and whether a suitable new tenant was available.

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Conclusion

Foreign tenants may be able to recover key money or interior-related costs in Korea, but recovery is not automatic.

A landlord usually does not simply return key money. The main legal issue is whether the landlord unlawfully interfered with the tenant’s opportunity to recover key money from a new tenant.

Interior and facility costs depend heavily on the lease terms, restoration clause, landlord approval, facility ownership, and evidence.

For foreign business owners, the safest approach is to document all payments, separate key money from facility transfer price, review restoration obligations, and preserve evidence before investing heavily in the premises.

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