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South Korea’s finance minister lauded the success of property laws that took effect in July last year for increasing lease contract renewals and protecting tenants.
Finance Minister and Deputy Prime Minister Hong Nam-ki said that the laws pushed the average annual lease contract renewal rate of 100 apartment complexes in Seoul from 57.2 percent to 77.7 percent
Hong was referring to the Housing Lease Protection Act and the Commercial Lease Protection Act.
An amendment on the Act on Report on Real Estate Transactions, which mandated a reporting of the rent to the authorities within 30 days of a lease being signed, took effect on June 5.
The revised laws limit the amount that landlords can increase in renewing a monthly lease or a jeonse lease by no more than 5 percent.
Additionally, tenants are given the right to extend a lease by up to two years after an initial two-year lease expires.
Landlords are given a limited range of reasons to refuse lease renewals.
Examples are when direct family members plan on residing at the property, or if the tenant violates the terms by subletting.
Hong noted that the “5 percent rule” was adopted in 8 out of 10 lease renewal contracts, and the period of average tenancy has risen from roughly 3 years to 5 years since last year, proving that the laws provided more stability for tenants.
The laws have been criticized for fueling a spike in disputes between homeowners and tenants and creating a price gap between leases that have adopted the 5 percent rule and those that have yet to, disrupting the market as a result, they added.
