Law Firm Cheongchul (Responsible Attorneys: Bae Gi-hyung, Lee Young-gyeong) has recently led to the first Supreme Court ruling stating that small businesses that rent high-value residential properties cannot exercise the right to request renewal of the lease.

This case is the first Supreme Court ruling clarifying the meaning of 'affiliated employee,' a necessary requirement for the exceptional protection of small businesses under the Housing Lease Protection Act, which applies to corporations rather than individuals.

• The plaintiff entered into a lease agreement regarding the property Hanam The Hill with the defendant (corporation) around December 2019. After the defendant's CEO A received the property and completed the move-in registration, he lived there as his newlywed home, but as the lease period expired, he did not respond to the plaintiff's eviction request while exercising the right to request renewal of the lease, leading the plaintiff to file an eviction lawsuit.

• In the first instance, it was ruled that 'employees' refer to all individuals working at a certain workplace, making it difficult to exclude 'officers,' and if CEO A completed the move-in registration for the property, the small business lessee can exercise the right to request lease renewal under Article 6-3 of the Housing Lease Protection Act. Therefore, the defendant (lessee)'s right to request renewal of the lease was recognized, and the plaintiff's claims were dismissed.

• In the appealed ruling, Cheongchul reasserted that A, who signed the lease agreement and registered the move-in on behalf of the defendant, does not meet the definition of an 'employee' under the third paragraph of Article 3 of the Housing Lease Protection Act, considering the intent of the amendment to the Housing Lease Protection Act. Consequently, the defendant's right to request renewal of the lease was denied and the plaintiff's claims were accepted.

• The Supreme Court stated that the term 'employee' in the third paragraph of Article 3 of the Housing Lease Protection Act should be interpreted to mean individuals employed by the corporation unless they are recorded as CEO or in-house directors in the corporate registration certificate if the corporation is a stock company. As a result, the defendant (lessee)'s appeal was dismissed.

The Supreme Court accepted Cheongchul's argument and clarified the meaning of the requirement of 'affiliated employee' for the Housing Lease Protection Act to apply to corporate lessees, confirming whether corporate lessees can exercise their right to request lease renewal, a situation where practical views have been divided.

In reality, cases exist where small businesses rent residential properties owned by the CEO, and the ruling confirms that the Housing Lease Protection Act does not apply in such cases, establishing a criterion for resolving various disputes and serving as an important standard for operating company housing for affiliated employees.

Law Firm Cheongchul promises to continue to do its best for the benefit of its clients.