Экзамен зачет учебный год 2023 / 18 Korea

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The seller must collect from the purchaser a 10 per cent value added tax (‘VAT’) on the purchase price of the building for remittance to the tax authorities. VAT is not charged if the buildings are transferred as part of a comprehensive business transfer.

iv Finance and security

A mortgage over the real estate is the most common form of security used to secure a loan. A mortgage interest must be registered in the applicable title registry in order to be enforceable against third parties. Once registered, the mortgage holder has priority over subsequently registered security interests over the property. A lender may also require a pledge of the borrower’s rights and claims to all revenues generated from the property.

A security-purpose trust is also commonly used in real estate financing transactions. A security-purpose trust must also be registered in the relevant title registry in order to be enforceable. Under the security-purpose trust structure, the borrower actually transfers ownership of the property to a trustee entrusted with the management of the property for the benefit of the trust beneficiaries (lenders, as well as the borrower, as the most subordinate beneficial interest holder) until repayment of the loan. Upon repayment, the trust will be terminated and the entrustment will be deregistered, whereupon title to the property will revert back to the borrower.

VII LEASES OF BUSINESS PREMISES

The following two types of leases are most commonly used in Korea: a regular monthly lease similar to that found in many Anglo-American jurisdictions and a cheonsei, which is a lease form unique to Korea. Under a cheonsei, the tenant gives a fairly large lump sum key money deposit to the landlord at the outset of the lease in exchange for a reduction, or even a complete elimination, of periodic rental payments. At the end of the cheonsei term, the landlord must return the principal amount of the key money deposit (but not periodic rental payments, if any) to the tenant. The landlord is not required to account to the tenant for the use of the key money deposit during the term of the cheonsei and any interest earned thereon belongs to the landlord. The key money is essentially an interestfree loan made to the landlord.

The Civil Code provides default lease terms; however, parties can contractually depart from the default terms, except for certain mandatory provisions designed to protect tenants. In addition, certain small scale commercial leases (‘protected commercial leases’) and residential leases are protected under the Commercial Building Lease Protection Act and the Housing Lease Protection Act, respectively.

There is no legal restriction on rent levels, which are subject to negotiation between the parties. Parties generally agree upon a mechanism for periodic rent adjustment, either based on a fixed rate of increase or by reference to an index such as the consumer price index or rate of inflation. Under the Civil Code, either the landlord or the tenant can request a rent adjustment if existing rent levels become inappropriate due to changes in the amount of public charges or other changes in the economic situation. Protected commercial leases are subject to a 9 per cent cap on annual rent increases.

There is no typical length of lease term. The lease term is subject to negotiation between the parties, although under the Civil Code, other than for certain land leases,

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the initial lease term cannot exceed 20 years and the renewal term cannot exceed 10 years. Unless expressly agreed in the lease, a tenant does not have a unilateral right to renew its lease at the end of the lease term; however, if a tenant under a protected commercial leases requests renewal, the landlord may not refuse unless it has a justifiable reason or the total lease term of such tenant has exceeded five years.

Leasehold interests are created contractually, but a leasehold contract does not, in itself, secure the return of the deposit on expiry or termination of the lease. In addition, the contract does not guarantee the use of the leased premises for the entire lease term if certain adverse events take place (such as the transfer of the property by the landlord). To protect these rights, a tenant may, with the consent of the landlord, register its interests by way of a cheonsei, a leasehold or a kun-mortgage3 in the applicable title registry. Upon registration, these interests will secures the tenant’s right to a return of the deposit or use of the premises for the full lease term, depending on the type of right registered.

VIII OUTLOOK AND CONCLUSIONS

iProposed amendments to the Financial Investment Services and Capital Markets Act

On 27 July 2011, certain proposed amendments to the FSCMA were announced. The proposal, which is currently pending in the National Assembly, includes certain changes affecting the REF structure, including the following:

aUnder the current FSCMA, an REF may have a single investor as long as the investment is offered to two or more investors. Under the proposal, all REFs (new and old) would be required to have at least two investors after 1 January 2015. In addition, starting six months after the adoption of the proposal, any REF with fewer than two investors would need to be dissolved, except in certain cases to be prescribed by the related presidential decrees, which have not yet been announced.

bUnder the current FSCMA, at least 50 per cent of the investors must be present at an investors’ meeting in order to establish a quorum. The proposal would eliminate any quorum requirements and also change certain minimum voting requirements for REF investors’ meetings.

cUnder the current FSCMA, a change in the term of a trust-type REF requires the approval of investors. Under the proposal, if a term change is expressly contemplated in the initial trust agreement, subsequent investor approval would not be required.

dThe proposal would permit the establishment of REFs using limited liability companies (yuhan chaekim hoesa in Korean) and limited liability partnerships (hapja johap in Korean), starting on 15 April 2012. These are two corporate entity types newly recognised under the amended Korean Commercial Code, which will become effective on 15 April 2012.

3A kun-mortgage is a distinctive type of mortgage in Korea that can be used to secure debt up to a certain maximum amount without regard to intermediate increases or decreases in the debt, as long as the amount remains below such predetermined maximum amount.

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ii General investment trends

Real estate investors are increasingly diversifying their portfolios. In addition to acquiring commercial office buildings in the central business districts of Korea, investors are expanding their portfolios to include retail properties, warehouses, logistics centres and mixed-use properties. Long-term core investors are also increasing their interest in the Korean real estate market.

The trend towards increased investment flexibility is expected to continue as the government tries to further promote the use of REITs.

There are currently six free economic zones in Korea. The local authorities of the free economic zones have been actively promoting foreign investment in their zones by, inter alia, granting special tax benefits. This trend is expected to continue in 2012.

iii Election year

Two major elections are scheduled to occur in 2012: the National Assembly election in April and the presidential election in November. The identity of the next Korean president may have an impact on foreign investment policies in general.

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Appendix 1

About the Authors

Yon Kyun Oh

Kim & Chang

Yon Kyun Oh is a partner at Kim & Chang. He practises in a wide range of corporate and finance law areas, with a focus on merger and acquisitions, private equity and joint ventures, real property and construction law, energy and natural resources law, privatisation, asset-backed securitisation and structured financing, project financing, and offshore investment.

As the chair of the firm’s real estate practice group and energy practice group, Mr Oh advises diverse investors, specialising in the acquisition, sale and lease of assets, indirect investment vehicles, including related licensing or permit issues, the development of real properties, zoning issues, oil and gas E&P projects, and mergers and acquisitions in the energy and construction sectors. Mr Oh has also developed special expertise in the area of PPP and infrastructure.

Mr Oh received his LLB from Seoul National University in 1980 and his LLM from Columbia University School of Law in 1991. He is admitted to practise in Korea and New York.

Ann Seung-Eun Lee

Kim & Chang

Ann Seung-Eun Lee is a foreign attorney at Kim & Chang’s corporate department and real estate practice group.

Ms Lee has extensive experience advising a wide variety of major US, Korean and international companies, financial institutions and investment funds in a broad range of complex cross-border, US and Korean corporate and finance transactions, with a particular focus on real estate, including M&A, joint ventures, purchase and sales, multilevel bridge, mortgage, mezzanine and bond financing, loan syndications, asset-backed and structured financings, loan restructurings and dispute resolution.

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About the Authors

Before joining Kim & Chang, Ms Lee practised law in New York at Cleary Gottlieb Steen & Hamilton.

Ms Lee graduated from Yale University with BA in 1999 and received her JD from Yale Law School in 2002. She was admitted to the New York Bar in 2003.

Heung Suk Oh

Kim & Chang

Heung Suk Oh is an attorney in the firm’s real estate, construction, mergers and acquisitions and foreign direct investment practice groups.

Mr Oh advises diverse real property investors in the acquisition, sale and lease of assets, investment in development projects, and investment through indirect investment vehicles and joint-venture structures. He also advises construction companies regarding various matters relating to construction project including disputes.

Mr Oh received his LLB from Seoul National University in 1998 and his LLM from the University of California Davis School of Law in 2011. He was admitted to practise in Korea in 2004.

Kim & Chang

39 Sajik-ro 8-gil (Seyang Bldg, Naeja-dong)

Jongno-gu, Seoul 110-720 Korea

Tel: +82 2 3703 1114

Fax: +82 2 737 9091 3 ykoh@kimchang.com aslee@kimchang.com hsoh@kimchang.com www.kimchang.com

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