Liability of Korean Real Estate Agents for Acts & Omissions

Korean Lessors’ rights to compensation from negligent and dishonest Korean real estate agents are expanding in South Korea based on recent holdings by district and appeals courts in Korea. Recent holdings at the Seoul Central District Court and an appellate court held a Korean real estate brokerage firm and the representative of the Korean real estate brokerage firm jointly liable for damages caused by the gross negligence of the broker working for a real estate agent.

See: Korean Real Estate Acquisition Taxes for an article on taxes related to Korean real estate and search IPG Legal’s Real Estate archive for more articles on Korean real estate law.

Korean Real Estate Agent
Liability for Gross Negligence

Facts

1. Tenant in Korea entered into a Korean lease agreement with a KRW 100,000,000 deposit with a Korean Landlord
2. The Representative of the Korean Real Estate Agency noted that the Tenant shall “Have no issue getting the deposit back.”
3. Bank and a First Priority Lessor foreclosed on the rented property. Bank with the mortgage and the first priority Lessor collected the remaining equity in foreclosure. No additional equity was left in the property for the Tenant (property was upside down).
4. The House was registered as an “illegal” dwelling in the Korean building land registry.
5. In the description of the rental unit made by the Real Estate Agency, a box was checked noting no “violations on the building register.”
6. At the court of first instance, the Tenant prevailed and was awarded KRW 100,000,000 in damages plus interest against the Defendants. The decision was upheld in appeal.

Seoul Central District Court Judgment on Liability of Korean Real Estate Agents

“While brokering the rental contract, [Representative of the Real Estate Agency] failed to properly fulfill his duty to confirm and explain the brokerage property as stipulated in the Certified Real Estate Brokers Act to [Tenant] and was negligent in providing incorrect information about the status of the brokerage property . . .. As a result, [Tenant] entered into the rental contract without fully recognizing the risks of the contract and suffered the loss of not being able to receive a full refund of the 100 million won deposit. . . [Representative of the Real Estate Agency] as a director of the Agency is jointly liable to compensate for damages to Tenant based on Article 401, Paragraph 1 of the Korean Commercial Act, which is applied mutatis mutandis to Article 567 of the Commercial Act, which is a provision on limited companies.”

Article 401, Paragraph 1 of the Commercial Act of Korea stipulates that if a director neglects his or her duties intentionally or due to gross negligence, he or she shall be jointly liable for damages to a third party. The appellate court summarily dismissed the appeals.

IPG Legal advises, in all cases with a real estate deposit that you can’t afford or want to lose, to have a well-respected Korean lawyer retained to assist in reviewing and negotiating all. We have seen too many issues with less-than-scrupulous and diligent Korean real estate agents and assistants to real estate agents in Korea. Additionally, the Korean real estate market is in flux and many apartments are upside and sideways. Without significant experience in Korean real estate, it is easy to be taken to the cleaners.

Sean Hayes is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as a Top Attorney by AsiaLaw, and IPG Legal is consistently ranked Top Dispute Resolution Law Firm for our litigation services.

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