Lawsuit for a declaratory judgment of no obligation to return a lease deposit and cancellation of a mortgage in a large secured financing transaction

The client, which acquired a commercial property after a default on the roughly KRW 105 billion financing transaction it had secured, became involved in a dispute with an existing tenant over the return of the lease deposit and whether a security interest remained in effect. Attorney Jaehoon Lee represented the client in a lawsuit seeking a declaratory judgment that no obligation to return the lease deposit existed and the cancellation of a collateral mortgage (keun-mortgage).

The key issues were the scope of liability to return the lease deposit following the transfer of ownership of the collateral property, whether debts arising from the lease could be deducted from the deposit, and whether the collateral mortgage created to secure the obligation to return the deposit had been extinguished.

Attorney Lee analyzed the structure of the financing and the security trust, how ownership of the property had been acquired, and the existing lease and the creation of the mortgage. He also reviewed the debts to be deducted from the lease deposit and the scope of liability to return the deposit, and litigated a claim for cancellation of the mortgage on the ground that the secured obligation had been extinguished.