Successive Tenant Protection Measures... Increasing Jeonse and Wolse Burden on Landlords

Passage of Lease Protection Act in National Assembly
Renewal refusal must be notified at least two months before expiration

Jeonse and monthly rent reporting system to be introduced by the end of next year
To detect false or unreported actual transactions

Rent ceiling system and renewal claim rights also being pursued

[Asia Economy Reporter Lee Chun-hee] The system related to housing jeon-wolse (monthly rent and deposit) transactions will undergo major changes starting at the end of this year. From November, both landlords and tenants must notify the other party of their refusal to renew the jeon-wolse contract at least two months before the contract expires. Registration of rental housing on the official registry will also become mandatory.

In particular, the government plans to introduce a jeon-wolse reporting system by the end of next year and aims to enforce the '3 Lease Protection Laws' including the jeon-wolse rent ceiling system and the right to request contract renewal. Most of the system reforms strengthen landlords' obligations to protect tenants, which is expected to significantly increase the burden on homeowners.

◆ Renewal refusal must be notified two months before lease expiration= The first regulation to change is the mandatory notification period for refusing lease renewal. The amendment to the 'Housing Lease Protection Act' passed the National Assembly plenary session on the 20th and will be applied from November after a grace period. Until now, landlords had to notify between 6 to 1 month before contract expiration, and tenants had to notify at least 1 month before, but this period has been changed to 2 months for both parties. If this is not done, the existing contract will be automatically extended under the same conditions, known as 'tacit contract renewal.' This change reflects concerns that a one-month notice before contract termination was too short.

On the same day, the amendment to the 'Special Act on Private Rental Housing' also passed. Private rental housing registered by rental business operators will be required to have a supplementary registration on the official registry indicating that it is registered rental housing. Registered rental housing has many tenant-friendly conditions, such as a fixed rental obligation period and a ban on rent increases exceeding 5%, but there were concerns that tenants found it difficult to verify whether a property was registered rental housing, prompting this amendment. Additionally, if a registered rental housing contract has not yet expired, deregistration within 3 months of registration requires tenant consent.

In front of a university in Heukseok-dong, Dongjak-gu, Seoul, flyers advertising one-room and boarding rooms are densely posted. Photo by Mun Ho-nam munonam@

◆ Jeon-wolse reporting system to be introduced by the end of next year= Changes to the jeon-wolse related system are expected to continue. The Ministry of Land, Infrastructure and Transport announced on the 20th in the '2020 Comprehensive Housing Plan' that it will amend the 'Real Estate Transaction Reporting Act' within the year to implement a jeon-wolse lease reporting system by the end of next year. The ministry recently commissioned a study to establish standards regarding the scope of mandatory rent reporting, implementation areas, and penalties, aiming to complete it by September.

Once the jeon-wolse transaction reporting system is introduced, landlords and tenants will be required to report the transaction to the relevant local government within 30 days of the contract, similar to sales contracts. The obligation to report lies with the intermediary agent or the landlord. Failure to report within the period or false reporting may result in fines.

Currently, registered rental and public housing operators have reporting obligations, but other lease contracts are not subject to mandatory real transaction reporting. Tenants only report transactions to obtain a fixed date for rights protection purposes. As of September 2018, real transaction information was confirmed for 1.87 million households, which is only 27% of the estimated 6.92 million jeon-wolse households nationwide. The remaining 73% (5.05 million households) have no reporting obligation and are not included in the real transaction investigation conducted by the Ministry of Land, Infrastructure and Transport.

With the introduction of the lease reporting system, the ministry plans to establish a management and verification system for reported information to detect unreported or false reports, thereby reducing the verification and investigation burden on local governments.

Furthermore, there is a possibility that the push for the jeon-wolse rent ceiling system and the right to request contract renewal will become more visible. The ruling party, the Democratic Party of Korea, previously proposed a bill in August last year to introduce a jeon-wolse rent ceiling system with an annual increase limit of around 5% for all rental housing, not just registered rental housing, and has continued related discussions, but it did not pass the 20th National Assembly.

Since the government has shown strong determination, a strong drive through the 177-seat 'super ruling party' in the 21st National Assembly is expected. However, the industry is concerned about side effects, such as preemptively reflecting housing price increases that occur over 1 to 2 years.

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