Ministry of Land, Infrastructure and Transport: "Last Year, 7 out of 10 Jeonse and Wolse Renewal Contracts Increased Rent Within 5%"

[Asia Economy Reporter Dongwoo Lee] The Ministry of Land, Infrastructure and Transport announced on the 11th that an analysis of apartment lease reporting information from June to November last year revealed that among the total 24,000 renewal contracts, 77.7% of tenants had their rent increase rates limited to within 5%. The ministry made this clarification in response to criticisms that one in three monthly or yearly lease tenants could not exercise their renewal rights during contract renewal.

Since the implementation of the contract renewal request right (hereinafter referred to as the renewal right) at the end of July 2020, if a tenant uses the renewal right to renew a monthly or yearly lease contract, the deposit can only be increased by 5% compared to the previous contract. However, even in the case of the same renewal contract, if the renewal right is not used and the renewal is agreed upon, the landlord and the existing tenant can negotiate to increase the rent by more than 5%. This measure is intended to guarantee a minimum level of autonomy in the private rental market and to partially protect the rights of landlords along with tenants.

According to the Ministry of Land, Infrastructure and Transport's analysis, among the total 23,705 monthly or yearly lease renewal contracts during this period, about 16,000 contracts, or 67.8%, used the renewal right. However, cases where the overall rent increase rate was limited to within 5% accounted for 77.7% of all renewal contracts. This indicates that some landlords who renewed contracts by agreement without using the renewal right also limited rent increases to within 5%.

The ministry analyzed that the renewal right helps enhance tenants' price negotiation power. Among 18,382 renewal contracts traded as yearly leases during the survey period, 71.9% used the renewal right, and 81.6% had rent increases limited to 5% or less. However, among 5,323 monthly lease contracts, the use of the renewal right was 53.8%, lower than that of yearly leases, and among these, 64.4% had rent increases limited to 5% or less. Thus, the proportion of renewal right usage is higher in yearly leases than in monthly leases.

The Ministry of Land, Infrastructure and Transport plans to strengthen publicity of the lease system, including promoting the 'Lease Notification Talk Service' that informs tenants of their renewal rights six months before the lease contract ends to protect tenants' rights.

Additionally, to alleviate the burden on monthly lease tenants, the ministry will temporarily raise the monthly rent tax credit rate this year and provide tax benefits to protect tenants, such as incentives recognizing actual residence requirements for transfer tax for landlords practicing win-win leasing. To prevent landlords from falsely refusing contract renewals, the ministry will establish related systems so that local governments regularly provide lease information of the relevant housing to tenants whose contract renewals have been rejected.

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