Temporary Allowance for Lease Business Operators with Debt Ratio Over 100% to Subscribe to Guarantee Insurance

On August 1, 2020, in Yeouido, Seoul, members of real estate-related organizations, including the Lease Business Association Approval Committee, held a rally opposing the government's real estate regulations and performed a shoe-throwing demonstration. [Image source=Yonhap News]

A plan has been devised to assist rental business operators who were unable to subscribe to guarantee insurance because the ratio of secured amounts such as bank loans and rental deposits to housing prices exceeded 100%.

The Housing and Urban Guarantee Corporation (HUG) announced on the 5th that it will operate a Rental Deposit Guarantee (hereinafter referred to as Special Guarantee) from the 15th of this month until January 14, 2024, to support rental business operators who have been unable to subscribe to guarantee insurance due to a debt ratio exceeding 100% since the mandatory guarantee subscription for rental business operators was implemented on August 18, 2020.

The Special Guarantee applies to existing rental housing owned by individual rental business operators registered at the time the mandatory guarantee subscription was enforced. Construction rental housing, large-scale purchased rental housing (100 or more units in the same complex or complexes where all units are purchased from sale housing), and corporations, which have been subject to mandatory guarantee subscription previously, are excluded from the target.

However, to ensure sound management of the rental market, guarantee subscription is only allowed for rental deposits that do not exceed the housing price.

The guarantee fee rate is applied higher than that for guarantees with a debt ratio within 100%, reflecting the tendency for accident rates to increase sharply when the debt ratio exceeds 100%, and no discount on guarantee fees is provided. While the existing guarantee fee rate ranges from 0.099% to 0.796%, the Special Guarantee fee rate ranges from 0.259% to 1.752%.

Additionally, guarantee subscription is allowed for cases where the tenant consents to subscribing to the guarantee for only part of the rental deposit, and to encourage debt adjustment by rental business operators during the Special Guarantee operation period, a 'Debt Ratio Reduction Plan' must also be submitted when applying for the guarantee.

Kwon Hyung-taek, President of HUG, stated, "We will operate the Special Guarantee system thoroughly to manage risks in the rental market, and faithfully fulfill our role as a public institution by supporting rental business operators and protecting tenants."

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