[Q&A] Rent Payment After Leasing an Illegal Building
2024. 12. 13
Question: If one rents an illegal building, does one have to pay rent for the actual rental period after the lease contract is terminated?
Answer: Company A rented a warehouse from Company B, and both parties signed a "House Lease Contract." However, part of the leased property was an illegal construction built by Company B itself. This resulted in Company A being unable to obtain fire safety approval during the renovation process, thus rendering the warehouse unusable. Consequently, a dispute arose between the parties. Company A refused to pay the rent, and Company B filed a lawsuit requesting that Company A pay the rent as agreed. During the trial, the court discovered that the leased property was an illegal construction. Therefore, based on Article 2 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Urban House Lease Contract Disputes" (hereinafter referred to as the "House Lease Judicial Interpretation"), the court ruled that the "House Lease Contract" between the parties was invalid. Since the contract was invalid, the court also ruled, based on Article 4 of the "House Lease Judicial Interpretation," that "if the house lease contract is invalid and one party requests the payment of the house occupation fee based on the rental standard agreed in the contract, the people's court shall generally support it." Therefore, the court ruled that Company A should pay Company B the house occupation fee for the actual period of occupation based on the rental amount agreed in the contract.
It is important to note that since the contract was deemed invalid from the beginning, the house occupation fee in this case does not arise from the contract. Furthermore, the house occupation fee does not fall under any claim for contractual negligence, return of property, management expenses without a cause, or tort compensation. Therefore, from a legal standpoint, it can only be understood that, although the lease contract was invalid from the beginning, the lessee obtained corresponding benefits during the period of actual occupation and use of the house without legal grounds; while the lessor suffered dual losses due to the contract being invalid from the beginning, namely, the inability to occupy and use the house, as well as the refund of rent. Therefore, the lessor can exercise a claim for the return of unjust enrichment according to Article 985 of the Civil Code.
Regarding the specific determination of the amount of the house occupation fee after the contract is declared invalid, according to the "House Lease Judicial Interpretation," it should "refer to" the rental standard agreed in the original lease contract. It should be noted that the term "refer to" grants the judge a certain degree of discretion. This means that the house occupation fee could be equal to the rental standard agreed in the original lease contract or be subject to appropriate adjustments based on it. However, in practice, many courts, considering various factors, choose to apply the rental standard agreed in the original lease contract without any adjustment.
Courts often reason that when the parties agreed on the rent as the consideration for the lease, the lessee had already acknowledged that the value of the rented house benefits equaled the rent, meaning that the value of the unjust enrichment is equivalent to the rent. Therefore, to restore the parties to their pre-unjust enrichment state, determining the amount of the house occupation fee based on the rent standard is reasonable.
However, there are also opinions suggesting that if the subject matter of the house lease contract is an illegal building, the lessee confirmed the rent based on the state of a non-illegal building. Therefore, if the lessee becomes aware that the subject matter is an illegal building, they would clearly not rent it at the rent standard for a non-illegal building. Consequently, the rent determined in the lease contract does not truly reflect the value of the benefits obtained by the lessee, and the house occupation fee should be less than the rent standard.
Therefore, we recommend that in handling similar cases, although the court might ultimately determine the house occupation fee directly according to the rent agreed in the original lease contract, there is still a possibility to persuade the court to recognize that the house occupation fee should be less than the rent standard through communication.