Hello, I am Attorney Bae Gi-hyung from Cheongchul Law Firm.

A real estate broker is a person who handles tasks on behalf of a client after receiving a delegation, and generally, the broker has an obligation to investigate and confirm the ownership status of the subject property with the duty of a diligent manager, explaining it to the client.

Specifically, Article 25 (1) of the Licensed Real Estate Agents Act states that “When a licensed real estate agent is entrusted with a brokerage, they are required to verify the following matters before the completion of the brokerage and to explain them sincerely and accurately to the client who intends to acquire rights to the subject property, and must present supporting materials such as land ledger copies or comprehensive real estate certificates, or verification of registration details.” This imposes the obligation to verify and explain the subject property on the licensed agent.

Additionally, Article 30 of the Licensed Real Estate Agents Act explicitly states that brokers are liable for damages resulting from violations of such verification and explanation obligations.

However, in practice, the brokerage conducted by licensed agents often only involves a description of the condition and status of the subject property, making it difficult to fully understand the complex legal relationships and potential risks hidden within real estate sales or lease contracts.

Thus, it is often unclear to what extent the verification and explanation obligations of licensed agents, as specified in paragraph 1 of Article 25, should be recognized, and whether brokers can always be held liable for damages when incidents occur in brokerage contracts.

[Question]

What is the scope of the verification and explanation obligations recognized for licensed real estate agents?

[Answer]

According to the Supreme Court ruling on September 12, 2024 (2024Da239364), "According to the provisions of Articles 2(1) and 3 of the Licensed Real Estate Agents Act, the brokerage activities that are the subject of real estate brokerage involve facilitating transactions of sales, exchanges, leases, and other rights between parties over the subject property, merely assisting and arranging factual acts that enable the legal acts such as sales between the parties to occur easily, and are distinct from the legal affairs defined in Article 3 of the Attorney-at-Law Act." It concludes that the verification of the legal nature of the obligation to assume debts, such as the return of the deposit when a real estate buyer agrees to take on the obligation, is not something the broker can easily investigate and explain. Therefore, unless there are special circumstances such as transmitting incorrect information during the brokerage process, it cannot be concluded that failing to investigate, verify, and explain the legal nature of the assumption of debt violates the obligation to act in good faith with the duty of a diligent manager.

In other words, when entering into a real estate sales contract involving the assumption of the obligation to return a lease deposit, it cannot be concluded that there is an obligation to investigate, verify, and explain whether the legal nature of the assumption of obligations is 'exemptive' or 'consolidative.'

The above ruling concerns "a case where the tenant is not a tenant with counterclaim rights under the Housing Lease Protection Act, and the landlord agreed to sell the building owned while the buyer agreed to assume the obligation to return the lease deposit, without obtaining the tenant's consent for the assumption of the obligation separately."

From a legal perspective, it is not difficult to conclude that the tenant's consent is necessary for the validity of the assumption; however, this aspect corresponds to 'legal affairs' and cannot be viewed simply as brokerage activities facilitating transactions such as sales.

The significance of the above Supreme Court ruling lies in its clear declaration that the verification and explanation obligations of licensed agents are recognized only within the scope of their brokerage activities. Even when the subject of brokerage relates to legal relationships such as sales, analyzing the effects of legal acts falls beyond the scope of brokerage activities and thus does not constitute the subject of verification and explanation obligations.

In recent years, with the explosive rise in real estate prices, brokerage fees have also increased significantly, and as a result, there has been a surge in lawsuits against brokers who claim to have suffered losses due to insufficient explanations. It is expected that the above Supreme Court ruling will significantly impact lawsuits involving legal affairs against licensed agents.

Attorney Bae Gi-hyung has accumulated extensive experience in civil litigation and enforcement while working in the construction/real estate team at the Defense Acquisition Program Administration and major law firms, strategically solving cases by exploring multiple options for debt recovery from the pre-litigation phase.

Cheongchul Law Firm comprises attorneys from the top four law firms in Korea: Kim & Chang, Gongjang, Taepyeongyang, and Sejong, who are not just individual attorneys but collaborate in teams of specialized attorneys related to each case. Cheongchul provides comprehensive solutions across overall business needs, ultimately focusing on achieving what the client desires. If you need assistance in achieving your goals, please feel free to contact Cheongchul.