Guide to Preferential Rights to Payment for Commercial Leases

Based on 39 consultation cases · Updated October 4, 2026 · Translated from the Korean original.

As a general rule, for a commercial tenant to receive preferential payment of a deposit in an auction or public sale, the tenant must take delivery of the building, register the business, and have a fixed date on the lease agreement. A small tenant’s right to receive preferential payment of a certain amount ahead of others is subject to separate requirements and statutory limits. Even if the tenant meets the requirements for a right, the tenant must also file a demand for distribution and continue to satisfy the requirements.

Commercial lease parties → Commercial tenant → Other creditors → Tenant seeks deposit payment in an auction or public sale → Have you taken delivery and registered the business? → Yes — Commercial Building Lease Protection Act Article 3(1) → No → Does the lease agreement have a fixed date? → Yes — Commercial Building Lease Protection Act Article 5(2) → Did you keep registration effective and file a distribution demand on time? → Yes — Civil Execution Act Article 88(1) → May receive preferential distribution Right generally takes effect the day after the requirements are met → No payment in this auction if a required step is missing → Check separate small-tenant limits → Small-tenant priority has separate rules Check the applicable deposit range and limit → Check the deposit amount → A stated deposit lower than the actual deposit may limit priority to the stated amount → Check registrati…

Key points

A general preferential right to payment is recognized only if the tenant satisfies both the requirements for enforceability against third parties—taking delivery of the building and registering the business—and the requirement that the lease agreement have a fixed date (Commercial Building Lease Protection Act, Article 3(1) and Article 5(2) (상가건물임대차보호법 제3조 제1항, 제5조 제2항)).
Even if the tenant has registered the business and obtained a fixed date, the preferential right to payment may not take effect immediately if the tenant has not yet taken delivery of the building. The examples explain that the right takes effect from the day after the requirements for enforceability against third parties have been met (Examples 12 and 22).
A small tenant may receive payment ahead of other holders of security interests within the deposit range and up to the amount prescribed by law. The tenant must satisfy the requirements for enforceability against third parties before registration of the application for auction. The specific range and limit must be checked under the laws applicable at the relevant time (Commercial Building Lease Protection Act, Article 14, and Enforcement Decree, Articles 6 and 7 (상가건물임대차보호법 제14조, 시행령 제6조·제7조)).
Business registration is both a requirement for acquiring and a requirement for maintaining the preferential right to payment. It must be properly maintained until the deadline for filing a demand for distribution. If the tenant has actually ceased business or sublet the premises, the requirements may not be met even if the registration remains on file (Examples 7, 19, and 20).
To exercise a preferential right to payment, the tenant must file a demand for distribution by the deadline set in the auction proceedings. If the tenant is excluded from the distribution for failing to file a demand, it is difficult to claim the return of unjust enrichment from a junior creditor (Civil Execution Act, Article 88(1) (민사집행법 제88조 제1항); Examples 13 and 19).
If the description of the leased premises in the agreement attached to the business registration differs from the real estate register, or if the tenant lacks a floor plan of a partially leased space, the business registration may fail to publicize the lease, causing problems with enforceability against third parties and the preferential right to payment (Example 6).
If the lease agreement states a deposit lower than the actual amount and is given a fixed date, the tenant may receive preferential payment based on the amount stated in the agreement, not the full amount actually paid (Example 8).
If the deposit is increased upon renewal, the amount that generally has priority over a mortgagee whose mortgage was established before the increase is limited to the deposit before the mortgage was established. If the tenant enters into a new agreement with the new owner that replaces the former agreement, the preferential right to payment based on the former agreement may also cease to exist (Examples 15 and 21).

Frequently asked questions

Q. What requirements must I meet to receive preferential payment of my commercial lease deposit?

To qualify for the general preferential right to payment, the tenant must satisfy the requirements for enforceability against third parties by taking delivery of the building and applying for business registration, and the lease agreement must have a fixed date. The order of distribution may vary depending on when these requirements are met and when any senior rights arose.

Case 5, Case 10, Case 12, Case 22

Q. Can a small tenant’s deposit be protected even if the lease agreement does not have a fixed date?

The examples explain that a small-tenant’s right to receive preferential payment of a certain amount ahead of others is separate from the general preferential right to payment. A tenant may receive preferential payment of a certain amount if they fall within the statutory definition of a small tenant and satisfy the requirements for enforceability against third parties before registration of the application for auction, but the prescribed scope and limit must be met.

Case 1, Case 2, Case 11

Q. Do I have to file a demand for distribution once an auction begins?

Yes. Even if you have a preferential right to payment, you must file a demand for distribution by the deadline set in the auction proceedings in order to receive a distribution. If you miss the deadline, it is difficult to claim the amount distributed to a junior creditor as unjust enrichment and demand its return.

Case 13, Case 19

Q. Will I retain my preferential right to payment if I keep my business registration but stop operating my business?

According to the examples, business registration must be properly maintained as a means of publicizing the actual lease. If the tenant has effectively ceased business or sublet the premises and no longer operates a business there, the requirements may no longer be met even if the registration remains on file. In some cases, the subtenant who directly occupies the premises and operates the business must have business registration.

Case 7, Case 20

Q. Can I receive preferential payment of the actual amount if the lease agreement states a lower deposit?

The examples explain that if the lease agreement bearing a fixed date states a deposit lower than the actual amount, the distribution may be based on the lower amount stated in the agreement. To protect the actual deposit, the lease agreement and business registration must accurately reflect the relevant details.

Case 8

Q. If I increase the deposit when renewing my lease, does the increased amount also rank ahead of an existing mortgage?

If a mortgage was established before the deposit was increased, the amount that generally has priority over the mortgagee is limited to the deposit before the increase. If the increased portion is given a new fixed date, you may assert a preferential right to payment against security holders and general creditors whose rights rank below it.

Case 21

Q. Could there be a problem with my preferential right to payment if the shop description in the lease agreement differs from the real estate register?

It may cause a problem. If the business registration does not serve as a means of publicizing the lease to third parties, it may be difficult to assert enforceability against third parties and the preferential right to payment that depends on it. If only part of a building is leased, you should also check that a floor plan identifying the leased area is available.

Case 6

Q. Will my existing preferential right to payment remain in effect if I sign a new lease agreement with the new building owner?

As a general rule, the new owner succeeds to the former landlord’s position. However, if the new owner and tenant agree to end the former agreement and establish their legal relationship under a separate agreement, the preferential right to payment based on the former agreement may cease to exist. The terms of the new agreement and the circumstances in which it was made should be examined.

Case 15, Case 17

Relevant laws

Commercial Building Lease Protection Act, Article 3 (상가건물임대차보호법 제3조)
Commercial Building Lease Protection Act, Article 4 (상가건물임대차보호법 제4조)
Commercial Building Lease Protection Act, Article 5 (상가건물임대차보호법 제5조)
Commercial Building Lease Protection Act, Article 6 (상가건물임대차보호법 제6조)
Commercial Building Lease Protection Act, Article 8 (상가건물임대차보호법 제8조)
Commercial Building Lease Protection Act, Article 14 (상가건물임대차보호법 제14조)
Commercial Building Lease Protection Act, Article 15 (상가건물임대차보호법 제15조)
Enforcement Decree of the Commercial Building Lease Protection Act, Article 3 (상가건물임대차보호법 시행령 제3조)
Enforcement Decree of the Commercial Building Lease Protection Act, Article 6 (상가건물임대차보호법 시행령 제6조)
Enforcement Decree of the Commercial Building Lease Protection Act, Article 7 (상가건물임대차보호법 시행령 제7조)
Civil Execution Act, Article 88 (민사집행법 제88조)
Framework Act on National Taxes, Article 35 (국세기본법 제35조)

Watch out for

The regional deposit thresholds and preferential payment limits for small tenants may differ between the historical criteria described in the examples and the current criteria. Check the laws in force at the relevant time and the criteria for the applicable region.
The requirements, including business registration, must remain satisfied until the deadline for filing a demand for distribution, and a demand for distribution must also be filed separately. Take care not to miss the deadline or the required filing procedure in the auction proceedings.
An increase in the deposit, a change of landlord, execution of a new agreement, subletting, or cessation of business may affect the scope or continued validity of the preferential right to payment. Check the lease agreement and business registration together.

Source cases

This guide was compiled by AI from the following Korea Legal Aid Corporation consultation cases (in Korean).

This guide is general legal information about Korean law, not legal advice for your situation. For a specific case, consult a lawyer or the Korea Legal Aid Corporation (call 132 in Korea).