Seoul City Expands Support for Rent Reduction Adjustment by Proposing 'Fair Rent'

[Asia Economy Reporter Choi Dong-hyun] Merchant A, who had been struggling with reduced sales due to the novel coronavirus infection (COVID-19), recently realized that they were paying somewhat higher rent compared to surrounding stores. Accordingly, A applied to the Seoul Metropolitan Government for a rent reduction adjustment, but the landlord refused the adjustment, so the dispute mediation committee could not even be convened, and a rent reduction proposal was never made.

On the 13th, Seoul announced that for rent reduction adjustment applications, which had been impossible to mediate if the landlord refused despite the tenant's request, it will now provide the 'Seoul-type Fair Rent' based on surrounding store market prices and big data if the tenant wishes. By presenting the Seoul-type Fair Rent to both parties, the city aims to create an opportunity to continue negotiations and provide evidentiary grounds in case the dispute escalates to litigation.

Until now, when a rent reduction adjustment application led to a dispute mediation committee meeting and an agreement was reached, it had the same enforceability as a court ruling for both landlords and tenants. However, if the landlord refused mediation itself, the tenant had no means of relief.

Therefore, since April, Seoul has been expanding support so that more citizens can use rent reduction adjustments and the Seoul-type Fair Rent by presenting rent even with a single application from either landlord or tenant. To enhance the credibility of rent calculation, Seoul also signed a Memorandum of Understanding (MOU) with the Korea Association of Property Appraisers, an expert group. Even if the rent reduction adjustment procedure is ongoing, appropriate rent can be calculated and utilized if necessary for mediation.

The Seoul-type Fair Rent, which serves as the standard for rent reduction adjustment, is estimated based on key information such as rent and key money for 15,000 stores on 150 main streets in Seoul’s major commercial districts, calculated by expert committee members including property appraisers. By providing average rent information for the relevant area, it aims to prevent unfair lease contracts and adjust relatively high rents to help resolve and prevent disputes.

The calculation method is as follows: first, 20 dedicated expert committee members of the Seoul-type Fair Rent, including property appraisers affiliated with the Korea Association of Property Appraisers, analyze surrounding lease cases, rights relations, value formation factors, and sales fluctuations to estimate rent. Second, the Seoul Commercial Building Lease Dispute Mediation Committee, consisting of 30 members including lawyers, licensed real estate agents, and property appraisers, makes the final decision on the fair rent for individual stores.

For applications agreed upon by both landlord and tenant, rent calculation begins immediately. For single applications by either landlord or tenant, the Seoul-type Fair Rent is provided unless there are special reasons such as improper intent after reviewing the application purpose.

Landlords and tenants who want rent reduction adjustment or Seoul-type Fair Rent can submit their application forms by visiting the Seoul Dispute Mediation Committee or by email (jinjin4407@seoul.go.kr). The service is free of charge.

In addition, the city is accepting the second round of applications for the 'Seoul-type Good Landlord' support project for landlords who voluntarily reduce rent until the 29th. Seoul-type Good Landlords can apply if landlords and tenants of stores with a converted deposit amount (monthly rent × 100 + deposit) of 900 million KRW or less sign a win-win agreement and decide on a rent reduction.

If selected as a Seoul-type Good Landlord, support is provided for building maintenance and electrical safety inspection costs up to 30% of the total reduction amount during the agreement period, with a maximum of 5 million KRW, as well as weekly commercial area disinfection and promotional support. Applications should be submitted to the local district office where the commercial building is located.

Seo Seong-man, Director of Labor and Livelihood Policy at Seoul City, said, "Support for Seoul-type Fair Rent and rent reduction adjustment will provide objective rent information to landlords and tenants, offering practical help to tenants and contributing to lease stability. In a reality where rent disputes between landlords and tenants often proceed to costly lawsuits, this will serve as a substantial alternative."

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