Is Rent Payment Deferral Possible Until the End of COVID-19? ... Policy-Driven Conflicts Escalate

Landlord-Tenant 'Divide and Rule' Bill Competition
Tenant Protection Needed but Should Not Force Sacrifice
Experts "Landlord Protection Measures Should Also Be Fully Considered"

[Asia Economy Reporter Moon Jiwon] "Commercial landlords also pay taxes and bank interest while running their businesses. If tenants are allowed to delay rent payments until the COVID-19 situation improves, are landlords supposed to just die?"

As the economic downturn in major commercial districts continues for an extended period due to COVID-19, conflicts between landlords and tenants are also intensifying. In particular, there are criticisms that bills infringing on landlords' property rights are being proposed mainly by the ruling party to help tenants hit hard by COVID-19, thereby fostering division between landlords and tenants.

According to the National Assembly and real estate industry on the 1st, Min Hyung-bae, a member of the Democratic Party of Korea, introduced a bill on the 22nd of last month to amend the Commercial Building Lease Protection Act so that landlords cannot terminate contracts even if tenants delay rent payments until the infectious disease crisis alert level is lifted from ‘caution’ or ‘serious’ stages. Previously, the ruling party and government had implemented a temporary special measure with similar content from September last year to March this year. Under the existing Commercial Building Lease Protection Act, if a tenant delays rent payments for three periods, the landlord can terminate the contract or refuse renewal on that basis. However, due to the increase in tenants unable to pay rent because of COVID-19, this period was extended by six months.

Min explained the amendment by saying, "Although the temporary special measure expired on March 29, tenants' difficulties have not been resolved due to the resurgence and prolongation of COVID-19," adding, "Therefore, we intend to stipulate that the application period of the law will last until the alert level under Article 38 of the Framework Act on Disaster and Safety Management is lifted from ‘caution’ or ‘serious’."

The government raised the infectious disease crisis level to ‘serious’ in February last year, and considering that there are still around 700 confirmed COVID-19 cases recently, if this bill is applied, tenants will effectively be allowed to delay rent payments until COVID-19 is resolved.

Among landlords, dissatisfaction is growing. While protection measures are necessary given the heavy burden on small business owners due to the economic downturn, simply allowing unlimited rent delays by tenants cannot solve the problem. A landlord who left a comment on the legislative notice of the amendment said, "If the law is to be improved, it should include measures such as reductions in comprehensive income tax and property tax, and deferrals of building loan interest so that the pain is shared. Allowing rent delays until the economy improves means telling both tenants and landlords to die."

In addition, many bills have been proposed in the National Assembly that unilaterally infringe on landlords' rights to protect tenants. Democratic Party member Lee Dong-joo proposed an amendment granting a special exception so that rent delays will not be grounds for contract termination until December 31 this year, and Jeon Yong-gi proposed an amendment allowing tenants to terminate lease contracts if small business owners close due to economic difficulties. Lee Dong-joo also proposed an amendment to establish a legal basis to make tenants' rights to request rent reductions more effective.

The government is expanding the scope of the ‘Good Landlord Tax Benefit,’ which offers tax cuts to landlords who reduce rent, but this is considered insufficient. There are also many criticisms that policy support for small-scale landlords who purchased commercial buildings with loans and rely on rent for their livelihood is lacking. Landlord A said, "The tenant has not paid three months' rent from last September to March this year, and is currently two months overdue, possibly because they know about the amended law," adding, "It is very difficult because I have to bear comprehensive income tax and still cannot collect rent." Many such complaints are found in online communities of landlords.

Experts explain that measures should be prepared that can reduce conflicts between landlords and tenants while providing practical help. According to the National Assembly Library’s 2022 ‘Latest Foreign Legislation Information (No. 141),’ Canada operates a complementary policy that grants landlords tax reductions and loan repayment deferrals while providing rent reductions of more than 75% for a certain period. The report states, "Everyone is suffering due to COVID-19," and "Protection measures for landlords should also be fully considered when preparing solutions."

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