Certified Administrative Agents Act | Analysis of a Supreme Court Decision Holding That a Licensed Real Estate Agent's Preparation of a Key Money (Premium) Contract Is Unlawful

The plaintiff who brought this litigation was A, a licensed real estate agent.

In 2020, A brokered a lease agreement for a local daycare center.

In the course of this, A prepared a key money (premium) contract between the former tenant and the new tenant and received 2.5 million won by way of a fee.

Key money (premium) refers to money that a new tenant pays to the landlord apart from the security deposit and the monthly rent.

It can be understood as money that a new tenant provides in exchange for receiving intangible asset value, such as the premium of the commercial unit's location or business know-how, from the landlord.

The Commercial Building Lease Protection Act also treats such key money (premium) transactions as lawful.

The problem is that the party permitted to broker ‘key money (premium)’ is a certified administrative agent, not a licensed real estate agent.

Accordingly, A was sent to trial on charges of violating the Certified Administrative Agents Act.

First, the court of first instance found that A was guilty and suspended the sentencing of a fine of 1 million won.

The court found that the contract in this case constituted a ‘key money (premium) contract’ arising from the transfer of the business rights in the daycare center.

For this reason, the court explained that A's act of brokering the key money (premium) contract and preparing the key money (premium) contract was equivalent to preparing a ‘document concerning rights and obligations or the certification of facts’ as prescribed by the Certified Administrative Agents Act.

The court added that A had titled this key money (premium) contract a ‘consulting contract,’ and that A appeared to have taken this measure out of awareness that an issue of violating the Certified Administrative Agents Act could arise for A as well.

A appealed, but the determination of the appellate court was the same.

The appellate court likewise stated, as the reason for its judgment, that the contract in this case was a transfer of the business rights in the daycare center and a key money (premium) contract arising therefrom, and that it was a clear fact that a key money (premium) contract is not an object of brokerage under the Licensed Real Estate Agents Act.

The Supreme Court also reached the same determination as the lower courts.

The Supreme Court explained that the lower judgment was not erroneous in violating the rules of logic and experience or in misapprehending the legal principles concerning, among other things, the crime of violating the Certified Administrative Agents Act.

It then stated that A's final appeal was dismissed.

Immediately after the Supreme Court's decision was handed down, the real estate brokerage market was stirred.

This is because, until now, licensed real estate agents had in most field practice also handled the brokerage of commercial key money (premium).

However, now that such conduct has been clearly defined as unlawful, changes appear likely in the work of licensed real estate agents and certified administrative agents.

In the meantime, the Korea Association of Realtors objected to the Supreme Court's decision and even filed a constitutional complaint with the Constitutional Court.

It remains to be seen what decision the Constitutional Court will make on this matter.

Daeryun Law Firm LLP operates a Construction and Real Estate Group composed of attorneys experienced in various real estate disputes, including construction, leases, and ownership.

It provides legal services across a range of matters, from administrative regulation surrounding construction and real estate to related criminal litigation.

If you have any inquiries regarding real estate, you are welcome to reach out to Daeryun Law Firm LLP at any time.