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Contentious bills on tenants’ rights passed

Sweeping changes for landlords and tenants, more in the pipeline

Lawmakers pass revision on tenant protection on Thursday. Yonhap
Lawmakers pass revision on tenant protection on Thursday. Yonhap

The ruling Democratic Party of Korea on Thursday pushed through two controversial bills on tenants’ rights, amid strong resistance from opposition lawmakers, landlords and some experts who worry about a sudden spike in residential property rents.

Revisions to the Housing Lease Protection Act and the Commercial Lease Protection Act, which passed through the National Assembly during its full-floor session, are two of the three legislative proposals introduced by the Democratic Party pertaining to home rentals.

Under the revised laws, landlords can increase the rent by no more than 5 percent when renewing a monthly lease or a jeonse lease. In addition, tenants will have the right to extend a lease by up to two years when an initial two-year lease expires. Landlords can refuse only under a limited range of circumstances -- for example, if they or members of their families plan on residing at the property, or if the tenant violates the lease such as by subletting.

Jeonse is a rental system where the tenant hands over a large lump sum to the landlord -- on average, about 65 percent of the value of the property -- and does not pay rent. The deposit is returned to the tenant at the end of the contract.

The changes to the two laws will be reviewed at a Cabinet meeting and go into effect immediately if they gain approval.

The next Cabinet meeting will be held Friday, instead of Aug. 4 as originally scheduled, in an effort to bring the revisions into effect as soon as possible.

The third tenants’ rights bill, of the three proposed by the Democratic Party, would amend the Act on Report on Real Estate Transactions so that rent would have to be reported to the authorities within 30 days of a lease being signed. It is expected to be put to vote Aug. 4 at the next plenary session.

At Thursday’s session, the controversial bills passed with the support of 185 of the 187 lawmakers present. As they had done Wednesday when the Legislation and Judiciary Committee voted on the bills, main opposition United Future Party lawmakers boycotted the vote in protest.

The revisions to the Housing Lease Protection Act were sent to the Legislation and Judiciary Committee on Monday and approved Wednesday.

The opposition party has termed the series of real estate-related regulations proposed by the Democratic Party, which used its majority to push the bills through, as political “violence” and is reportedly planning ways to put brakes on the ruling party.

The changes are already causing a stir in the market -- ranging from concerns about a hike in rents to landlords using fake contracts to bypass the law.

According to a survey of real estate agents, the majority expect jeonse rents to continue rising in the second half. According to the real estate portal site Real Estate 114, the average jeonse rate in Seoul increased from 4.54 million won ($3,800) per square meter in January to 4.67 million won per square meter in July.

However, much higher increases -- as high as 200 million won over the last two months -- have been reported in areas of Seoul that are in high demand.

Of the 614 real estate agents surveyed, 84.1 percent said jeonse prices will continue rising in the second half. Of these, 43.6 percent said they expect prices to increase more than 4 percent.

When asked to explain their predictions, the respondents cited increased housing prices, higher demand for jeonse properties and the higher tax burden facing landlords.

In addition to the tenants’ rights bills, the ruling party has pushed a number of bills through parliamentary committees that would revise regulations concerning the real estate market.

Legislation that is expected to pass in the coming weeks would raise acquisition, capital gains and ownership taxes on owners of multiple homes.

With the ruling party holding a majority in the National Assembly, and holding the chair position on all parliamentary committees, the remaining bills are also expected to be processed and go into effect rapidly.

By Choi He-suk (