If you’ve been in Korea long enough to rent housing, then you will have encountered the very sizeable deposits that accompany leases.
Whereas in the U.S. a typical rental deposit is one to three months’ rent, a deposit for a wolse lease in Korea ― one that requires monthly rental payments ― can easily run tens of millions of won, the equivalent of tens of thousands of dollars. The other form of lease, jeonse, does not require monthly payments but involves an upfront payment of hundreds of millions of won.
Sure, some landlords who often work with expats offer lower deposits, but most likely you’ll be handing over enough to buy a new car ― maybe even enough for a shiny Ferrari ― to someone you don’t know that well.
Since you need a place to live, how do you protect your deposit?
Before moving in, it is a good idea to check the ownership and credit status of the building. If the person you give your money to doesn’t own the building, or if there are already several creditors on the property, you risk never seeing your deposit again. The information is searchable, in Korean, at www.iros.go.kr or the local residence, or “jumin,” center. Searching and printing combined will cost you less than 2,000 won.
When you move in, you should report your change of address to the county “gu” office or to immigration. Failure to do so can result in a fine.
For wolse tenants, after you have reported your new address, you can visit the residence center to receive a “hakjeong ilja” on your lease, which gives you the status of a secured creditor.
If you have opted for a jeonse lease, then you also have status as a secured creditor ― again, provided that you report it to the appropriate authorities.
So what is a secured creditor and why does it matter so much? A secured creditor is a person who has a “security interest” in some property. If the debt is not paid, the creditor can take the secured property, just as a bank can repossess a mortgaged house. More importantly, in disaster scenarios where there is insufficient money to pay all the creditors, secured creditors have higher priority than unsecured creditors, meaning that secured creditors are paid first.
The rules of creditor priority and apportionment are detailed and involve the intersection of several different bodies of law, but we can say this: register your rights. Whether you have jeonse or wolse, it’s worth the time to do the paperwork.
The other protection you get by registering your lease is that your lease will be honored even if the building changes owners. So if your landlord sells the building the new owner cannot kick you out and the new owner must follow the terms of the contract you and the former landlord agreed to.
We should mention, however, that the protection on wolse deposits is limited to a certain maximum value set by presidential decree. At the time of writing, the limit was 32 million won in Seoul, 20 million won in other major cities, and 15 million won outside those areas. So be careful when trying to cut back on your monthly payment by giving a larger upfront deposit: Exceeding certain amounts in a wolse lease exposes you to greater risk.
If the landlord does not return your deposit when the lease expires, you have the right to continue to live in the housing. But of course that’s little consolation if you want to move. Some people have said that they’ve had luck reporting the money as stolen to the police. If that doesn’t work, then you can request seizure of the landlord’s account or real estate, even before the suit is filed, but to do so you will need to place a deposit with the court.
Alternatively, there are three different civil proceedings that might help you. There is a highly expedited “order to pay” that has a ceiling value of 20 million won, a small claims suit with a maximum of 100 million won, or if your deposit was more than that, the full civil suit is still available to you.
Upon winning, the court can also order the other side to pay you reasonable attorney’s fees and costs, so for larger amounts it may be better not to do everything yourself. In the next column we will discuss some of the different types of legal professionals in Korea and how they can, or cannot, help you with different areas of law.
By Darren Bean and Yuna Lee
Yuna Lee is a Korean attorney at Seowoo & Minyul Law Firm in Seoul. You can read her blog at askakoreanlawyer.blogspot.com or if there is a legal issue you would like to be addressed, email firstname.lastname@example.org. ― Ed.
This column is not intended as legal advice. No action should be taken or avoided based on this column, no attorney-client relationship is formed by reading this column or contacting the authors, and the authors expressly disclaim any liability for the content of this column. Those with legal problems in Korea should seek advice from an attorney.