Definition and Type of Key Money: Focusing on the Determinants for Three Types of Key Money

Mi-Sun Kim and Jun-Hyung Kim (2023. 12), "Definition and Type of Key Money: Focusing on the Determinants for Three Types of Key Money," Journal of the Korea Real Estate Analysts Association, 29(4): 79-99.
김미선·김준형 (2023. 12), “상가권리금의 개념과 유형: 유형별 권리금의 결정요인을 중심으로”, 「부동산학연구」29(4): 79-99.

Abstract

In commercial building leases, the larger amount of money paid over security deposits is key money. This study examines the definitions and the factors determining each type of key money based on the data from the Seoul Commercial Building Lease Survey focusing on three types of key money: facility premium, operation premium and location premium. 

This analysis shows that the highest proportion of the types of key money is location premium. It covers three-quarters of the responses in the single questionnaire, and 86% of the responses in the multiple questionnaires. For location premium, various location factors were identified as empirical factors and can be interpreted that it is a sufficient basis for increasing the amount of location premium. Operation premium increases statistically significant with higher sales and net income, as the theoretical hypothesis states. However, it is found facility premium is paid in the purpose of maintaining the current field. It is difficult to theoretically explain the result that the acquisition of a facility is unrelated to the amount of facility premium. The facility investment cost has a statistically significant positive indicator for all types of premium as well as total key money. 

It is not desirable to have a lack of clarity on the valuation standards and a link between the theory and practice of key money. This would raise various controversies about the volume and adequacy of key money when claiming compensations for damages. It suggests that if socially, opportunities to retrieve key money are to be protected, it should be operated as a separate law, rather than recognizing every premium in the name of 'commercial practice'. 

Keywords

Key money, Facility premium, Operating premium, Location premium, Commercial real estate market
상가권리금, 시설권리금, 영업권리금, 바닥권리금, 상업용부동산시장