"Let's Just Start"... 'Lease 2 Act' Faces Disputes and Obstacles Everywhere

Guidelines for Specific Situations Still Unclear
Manual to Be Distributed Later... Starting First
Landlord-Tenant Disputes Expected to Increase... Confusion Everywhere

On the 29th, when the "Three Lease Laws" passed the standing committee of the National Assembly, the property listings section at a commercial real estate brokerage office in Songpa-gu, Seoul, was empty. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Concerns are growing that confusion in the rental market will continue for the time being as the government has abruptly pushed forward the enforcement of the amended Housing Lease Protection Act, which includes the right to request contract renewal and the cap on monthly rent increases, without specific education or publicity. Except for some cases, various situation-specific guidelines that may arise during the lease contract renewal process have still not been disclosed.

In particular, unlike the general practice of setting a grace period until the enactment of enforcement ordinances or local government ordinances to reduce confusion when a law is amended, this amendment has been criticized for not following such procedures. As the government hastily tries to contain the surge in jeonse (key money deposit) prices that it caused itself, disputes between landlords and tenants over the skyrocketing monthly rent and jeonse prices are expected to continue.

The major controversies with high potential for disputes during the law enforcement process are summarized below.

◆ When will local governments amend ordinances to handle the cap per region? = According to the government and industry on the 31st, the cap on rent increases during the renewal of jeonse or monthly rent contracts is to be set within 5% by each local government, but until the day the 'Lease 2 Laws' containing the cap on monthly rent and the right to request contract renewal are enforced, local governments have not even started proper discussions.

The cap is set by metropolitan local governments such as Seoul and Gyeonggi Province. There is not even a finalized guideline on whether the application unit will be at the city/province, city/county/district, or neighborhood level depending on the regional monthly rent increase rate.

Landlords and tenants may suffer losses in rent and yield according to this cap, but since the government hastily enforced the law, it is difficult to predict when it will be set. The Ministry of Land, Infrastructure and Transport has only stated that "if local governments do not set it separately, a cap within 5% will be applied."

◆ Landlord’s actual residence, tenant must verify on their own = The amendment stipulates that after the existing 2-year contract period, tenants can renew the contract once for 2 years, and landlords can evict tenants if they intend to reside in the property themselves. If the landlord claims actual residence but rents to another tenant, the evicted tenant can claim damages from the landlord.

The problem is that there is no proper way for the evicted tenant to verify whether the landlord has violated the actual residence rule. It is currently impossible under the law to obtain the resident registration certificate of the property. At present, tenants must confirm with the landlord whether another tenant has been accepted or prove violations through mail or on-site checks.

If the landlord evicts the tenant for actual residence but does not move in and leaves the property vacant, the tenant cannot claim damages. This could be used as a way for landlords to replace tenants they dislike. Of course, landlords must bear losses because they cannot accept other tenants for at least 2 years after evicting the existing tenant.

The partial amendment to the Housing Lease Protection Act passed the National Assembly plenary session on the 30th with 185 votes in favor and 2 abstentions out of 187 members present. Photo by Yoon Dong-ju doso7@

◆ No guidelines on contract content changes = Currently, the government has issued guidelines stating that if the landlord changes the lease type, such as converting a jeonse contract to a monthly rent with deposit at the time of contract renewal, tenant consent is required. Similarly, if the tenant cannot afford the increased deposit and wants to switch to a semi-monthly rent, they must negotiate with the landlord.

Many questions have been posted online asking about the changed regulations after the enforcement of the Lease 2 Laws. One tenant lamented, "The government says it guarantees 2+2 years, but I have to sign a 1-year contract due to circumstances. Later, if I renew, I don't know if 1+1 years or 1+3 years will be guaranteed."

According to the Ministry of Land, Infrastructure and Transport, even if a 1-year contract is signed, tenants are guaranteed up to 2 years of residence, so they can stay for 4 years regardless of the contract period, but the situation may vary depending on negotiations between the parties.

◆ Who bears tenant’s moving costs if landlord moves in? = Disputes may arise when a landlord suddenly decides to move in after a 2-year contract period and evicts the tenant. If considered a normal 'contract termination,' the tenant must find another place helplessly, but if the tenant entered expecting 4 years of residence, it may be regarded as a 'contract cancellation,' allowing the tenant to request moving expenses or brokerage fees according to custom.

The Ministry of Land, Infrastructure and Transport explained, "Even though tenants are guaranteed at least 4 years, if the landlord moves in, the contract should be considered terminated," but added, "Moving costs are usually borne by the party who feels regret, so it may be applied flexibly depending on the situation."

The government plans to increase the number of dispute mediation committees, currently six nationwide, to at least one in cities with populations over 500,000, considering that many disputes between landlords and tenants may occur during contract renewals.

Lee Eunhyung, senior researcher at the Korea Construction Policy Institute, criticized, "It is hard to find a concept of gradually reforming the system while minimizing side effects in the current government," and said, "It is strange to assume there will be no side effects after doing this."

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