Court Orders CGV to Pay 15.3 Billion Won in Rent Despite Claim of Theater Closure Due to COVID-19

Yeonsu CGV Terminates Contract by Exercising Right of Termination

Court: "Closure in 2025 Unrelated to Pandemic Measures"

The court has ruled that CGV, which closed its branch operations citing business difficulties caused by COVID-19 and other factors, must pay damages, including rent for the remaining contract period.

According to Yonhap News and legal circles on the 29th, Civil Settlement Division 33 of the Seoul Central District Court (Presiding Judge Choi Jongjin) recently ruled in favor of the plaintiff in part in a "rent and other claims" lawsuit filed by Industrial Bank of Korea against CGV, ordering CGV to pay 15,322,000,000 won. The total amount claimed was approximately 22,000,000,000 won.

A CGV in Seoul. Photo by Yonhap News

Previously, CGV had closed the operations of its Yeonsu CGV theater in Yeonsu-gu, Incheon in March last year, citing the economic downturn caused by COVID-19. CGV began operating at the site in 2017, with the lease agreement specifying a 20-year lease period from the start of operations. Although a significant portion of the lease term remained, CGV terminated the contract by exercising its statutory termination right under the Commercial Building Lease Protection Act. This act allows tenants who have closed their business after experiencing a management downturn due to pandemic control measures for more than three months to terminate the contract. Afterwards, Industrial Bank of Korea, which acquired the landlord's position, filed a lawsuit against CGV claiming the remaining lease payments and other costs.

The court ruled in favor of Industrial Bank of Korea, stating that it was difficult to recognize a causal link between pandemic control measures and the theater's closure, given that CGV shut down operations roughly three years after the COVID-19 restrictions ended in May 2022. The court acknowledged, "It is recognized that there were business losses, such as a decrease in visitors following COVID-19 measures, leading to the suspension of theater operations from October 2020 to February 2022 and a sharp drop in average monthly revenue." However, it explained, "These circumstances alone do not amount to a significant change in economic conditions that would justify the closure of the theater." The court pointed out that the annual revenue for 2023 and 2024 increased after the COVID-19 restrictions were lifted, and that factors such as the continued growth of the online video service (OTT) industry and a pre-existing slump in the movie theater industry also contributed to the decline in attendance and sales.

The court concluded that CGV's lease contract termination was not legitimate and recognized its liability for damages for the remaining contract period. Damages were calculated based on monthly rent and management fees for the period from July 2025, when the contract was effectively terminated, to July 2037. The initially calculated damages amounted to about 20,800,000,000 won. However, considering that the remaining lease period exceeds 11 years, the court reduced the amount to 75% of the calculated damages. After further deducting the deposit and other credits, the final payable amount was set at 15,322,000,000 won.

Nevertheless, the court also ruled, "Although the situation was not serious enough to permit contract termination due to COVID-19, it is acknowledged that CGV faced difficulties in running the theater," adding, "To impose the entire amount of the scheduled damages due to the lease termination would be unreasonable."

This content was produced with the assistance of AI translation services.