If a landlord kept collecting rent for a long time even after knowing a tenant had expanded a building without a permit, the landlord may have to buy the building after the lease ends, the Supreme Court ruled. Even if the tenant converted a livestock shed into dwellings and a warehouse and expanded it to more than twice the floor area listed on the building register, a tenant's right to demand that the landlord purchase the building cannot be rejected lightly if the landlord knew this and maintained the lease relationship.
According to legal sources on the 1st, the Supreme Court's First Division (Presiding Justice Shin Sook-hee) on May 29 overturned a lower court that had denied A's right to demand the purchase of a building in a lawsuit between a lineage association and former tenant A over a forested land parcel in Paju, Gyeonggi, and sent the case back to the Uijeongbu District Court.
The case centers on whether a landlord must buy a building that a tenant expanded or remodeled without a permit after the land lease ended. Under the Civil Act, a tenant who leased land for the purpose of owning a building may demand that the landlord purchase a building remaining on the land when the lease ends. This is called the right to demand purchase of a building or the right to demand purchase of a superstructure.
According to the judgment and other documents, A in 2002 leased 36,000 square meters of forestland in Paju, Gyeonggi, owned by a lineage association. On this land stood an 82.32-square-meter livestock shed built by a previous tenant with the lineage association's permission. After buying this livestock shed from the previous tenant, A leased and used the land.
The problem arose during later expansion and remodeling. Around 2007, A increased the livestock shed to 177 square meters and changed its use from a livestock shed to dwellings and a warehouse. The unpermitted expansion more than doubled the area on the building register. A also built five additional structures nearby, occupying and using a total of 748 square meters.
The lease relationship between the lineage association and A ended in 2021. The lineage association proposed raising the annual rent from 1.08 million won to 6 million won, and when A did not agree, the lease was terminated. Afterward, the lineage association demanded demolition of the building and delivery of the land, while A countered by invoking the right to demand purchase of the building.
The lower court sided with the lineage association. It cited A's unpermitted expansion beyond the area on the building register and the conversion of the livestock shed into dwellings and a warehouse. The lower court found that recognizing the right to demand purchase for such a building would make it difficult for the lineage association to use or dispose of the building and site freely and would unduly restrict the exercise of property rights.
The Supreme Court, however, disagreed. It found that around 2014 the lineage association already knew the building had been expanded without a permit and still leased the land on the premise that A owned the building. It also considered that A faithfully paid rent for about eight years until the 2021 termination and that the building still had economic value when the contract was terminated.
Attorney Byun Seon-bo of Law Firm Jium said, "In principle, once a lease ends, a building expanded or remodeled illegally may be subject to restoration to its original state," but noted, "In this case, it appears important that the landlord knew about the unpermitted expansion, kept receiving rent for a long time, and maintained the lease relationship."
Supreme Court spokesperson Lee Do-haeng (senior judge) said, "Under existing legal principles, even an unpermitted building may allow a tenant to exercise the right to demand purchase if certain requirements are met," and added, "In this case, the landlord leased while knowing the expansion was illegal and continued to receive rent, so the court reached this decision."