LH Extends Rent Reduction for Commercial and Industrial Complexes Until Year-End

Extension of Rent Reduction for LH Rental Shops and Industrial Complexes Until Year-End to Support Small Business Owners
New Introduction of 50% Reduction in Demolition Performance Deposit for Rental-Only Industrial Complexes to Ease Financial Burden on Tenant Companies

[Asia Economy Reporter Jo Gang-wook] Korea Land and Housing Corporation (LH) announced on the 19th that it will participate in sharing the pain to overcome COVID-19 by extending the rent reduction for LH rental stores and industrial complexes until the end of the year.

Since the first half of last year, when COVID-19 first emerged, LH has established the "LH Economic Revitalization Measures in Response to COVID-19," implementing various measures such as △economic revitalization through expanded public works and service orders and early fiscal execution, △participation in the "Good Landlord" campaign through rent payment deferrals and reductions, and △support for the construction industry by lowering bid and contract deposits and shortening payment periods for advance and subcontract payments.

In addition, this year LH will continue support for small business owners and residents by extending rent reductions for rental stores and rental industrial complexes and newly introducing a 50% reduction in demolition performance bonds for rental-only industrial complexes.

First, LH has extended the rent reduction for LH rental stores, which started in March last year and was scheduled to end in June this year, until the end of this year.

“LH rental stores” are stores located in rental housing complexes, mainly occupied by small business owners and small and medium-sized enterprises (SMEs), who have suffered significant sales declines due to COVID-19. Accordingly, LH first implemented a 25% rent reduction and rent condition freeze in March last year. Although the rent reduction period was extended twice thereafter, the COVID-19 damage conditions have not improved, so the rent reduction will continue until the end of this year. The target and discount rate for rent reduction remain the same as before (applicable to small business owners, SMEs, non-profit organizations, and social welfare corporations, with a 25% reduction in monthly rent).

Tenants of LH rental stores received a total rent reduction of 3.7 billion KRW in the first half of this year, and with this measure, 1,833 tenants (2,241 stores) will receive an additional rent reduction of 1.56 billion KRW.

The rent reduction period for all LH rental industrial complex tenants, which was scheduled to end in June this year, will also be extended until the end of this year. Since July last year, LH has reduced rent by 25% for all rental industrial complex tenants, supporting a total of 134 companies with 3.45 billion KRW. With this measure, 128 companies will be able to receive an additional rent reduction of 1.5 billion KRW. Furthermore, the rent charging period for tenants of “rental-only industrial complexes (Rental-only I and II)” will be changed from the original 6 months (prepaid, twice a year) to 3 months (prepaid, four times a year) to reduce the economic burden on tenants.

Along with this, LH will newly implement a reduction in the “demolition performance bond” to ease the financial burden on tenants of 22 “rental-only industrial complexes.”

The “rental-only industrial complexes,” which can be leased at low rent for 50 years in 5-year increments and can be converted to sale after 5 years, require tenants to pay a “demolition performance bond” to guarantee the restoration of the land after the lease period ends. Currently, the demolition performance bond is applied uniformly to all buildings, but going forward, if the usage period is 50% or less of the building’s useful life, the demolition performance bond will be reduced by 50%.

This measure is based on the fact that newly constructed buildings have a low possibility of demolition and a high possibility of transaction. It will apply from the 20th of this month to companies paying the demolition performance bond for the first time or recalculating the bond upon contract renewal, provided there are no reasons such as rent arrears or contract termination.

An LH official said, "Due to the resurgence of COVID-19, the entire nation, including small business owners, is going through a difficult time, so we have prepared additional support measures as part of sharing the pain," adding, "We will continue to provide customized support by closely monitoring the COVID-19 damage situation in LH-related sectors."

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