The Korean Supreme Court, in Decision 2022Da233164 (February 13, 2025), significantly limited the extent to which provisions in Korean trust agreements that were attached to trust registrations may be enforced against third parties. This decision clarifies a long-standing uncertainty in Korean trust law and Korean real estate law. This decision has material implications for trustees, landlords, tenants, and investors dealing with trust-held real property in Korea.
Under the Korean Real Estate Registration Act, a trust registration must include a trust register, and in practice, the trust agreement is attached and treated as part of the registration record.
The central issue before the Korean Supreme Court was:
Can provisions in a trust agreement, disclosed through the trust register, be asserted/enforced against third parties?
Korean Trust Law: Enforceability of Korean Trusts Against Third Parties
Facts
A condominium management association sought to collect condo management fees from a trustee. The trustee refused payment, relying on a clause in the trust agreement stating: “Management fees shall be borne by the settlor.” The trustee argued that this clause, being part of the registered trust record, was enforceable against the plaintiff.
Holding of the Korean Supreme Court
The Supreme Court of Korea rejected the trustee’s position and held, in short, that:
“Even if a trust agreement is included in the trust register, its provisions cannot be asserted against third parties, except with respect to matters concerning the composition of trust property.“
The Court emphasized that, under the Trust Act of Korea, the purpose of trust registration is limited. The registration allows third parties to:
- Recognize that property belongs to a trust, and
- Identify the composition of the trust property
However, registration does not provide a legal basis to enforce all provisions of a trust agreement against third parties. Thus, the intent and clear wording of the Korean Trust Act are to recognize only the existence and composition of the trust, not to enforce all provisions of a trust agreement against third parties.
Earlier case law (e.g., Supreme Court Decision 2012Da13590) had, in practice, recognized broader enforceability. The present decision departs from that approach, clarifying that public disclosure alone does not create enforceability and that enforceability must be grounded in statutory law.
Prior to this decision, trust agreements commonly included clauses such as: “the trustee has no obligation to return the lease deposit.” Such clauses were often upheld (see, e.g., 2019Da300095), creating significant risks for tenants. Following this decision, these provisions should be unenforceable against tenants, and thus, trustees remain directly liable for lease-related obligations.
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IPG Legal is an international law firm with offices in Seoul. IPG Legal advises clients on Korean corporate, real estate, labor, and dispute resolution matters, and represents family offices in trust matters. The firm represents foreign and domestic clients in complex, high-stakes matters across Korea.
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