Lease Business Operators with Debt Ratio Over 100% Also Allowed to Subscribe to Guarantee Insurance

Temporary for 2 Years from January 15 Next Year to January 14, 2024
"About 16,000 Rental Business Owners Expected to Be Rescued"

Starting from the 15th of next month, registered rental business operators with a debt ratio exceeding 100% will also be allowed to subscribe to rental deposit insurance. By easing subscription requirements for two years, about 16,000 rental business operators are expected to be relieved.

According to the office of Hong Gi-won, a member of the Democratic Party of Korea, on the 30th, the Ministry of Land, Infrastructure and Transport and the Housing and Urban Guarantee Corporation (HUG) have agreed on such a plan. Discussions have been ongoing since May following concerns raised by rental business operators who could not subscribe to deposit insurance due to not meeting certain requirements.

Until now, only rental business operators with a 'debt ratio of 100% or less' were eligible for deposit insurance subscription, but going forward, those exceeding this will also be allowed to subscribe. This means that rental business operators whose combined amount of secured claims such as bank loans and rental deposits exceeds the housing price will also be able to subscribe to deposit insurance.

However, guarantee institutions such as HUG will not guarantee the return of deposits exceeding the debt ratio of 100%.

This easing of subscription requirements will be implemented temporarily for two years from January 15, 2024, to January 14, 2026. It applies to existing registered rental business operators who were included in the mandatory deposit insurance subscription as of last August.

Existing mandatory deposit insurance subjects such as construction rental housing and large-scale purchased rental housing are excluded. However, insurance fees will be somewhat surcharged compared to housing with a debt ratio below 100%, depending on the debt ratio.

Rental business operators with a high debt ratio must submit a plan to reduce their debt ratio when applying for deposit insurance subscription. If they fail to adjust the debt ratio to 100% or less, they will not be able to subscribe to deposit insurance from January 15, 2026, when this measure ends.

Additionally, rental business operators must explain matters related to deposit insurance subscription to tenants and obtain their consent.

The government previously abolished the apartment private rental business system and the 4-year private short-term rental business system in the '7·10 Measures' last year and made deposit insurance subscription mandatory for all registered rental business operators. Accordingly, existing registered rental business operators must subscribe to deposit insurance from guarantee institutions such as HUG when signing rental contracts starting August 18.

However, some rental business operators could not subscribe due to not meeting subscription requirements. Under current standards, if the combined amount of secured claims such as bank loans and rental deposits exceeds the housing price, resulting in a debt ratio over 100%, or if the senior claim ratio exceeds 60% of the housing price, subscription to deposit insurance is not possible.

As a result, rental business operators who have not subscribed to deposit insurance are subject to penalties such as fines up to 10% of the deposit (maximum 30 million KRW). Since accumulated fines can lead to cancellation of rental business registration, causing harm to both rental business operators and tenants, there have been continuous calls for relief measures.

Representative Hong said, "Starting with this easing measure, we plan to continuously supplement and improve the overall registered rental housing system in consultation with the Ministry of Land, Infrastructure and Transport."

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