On July 30, 2020, at the plenary session of the National Assembly of Korea, the “Third Tenancy Law” (the amendment to the Housing Tenancy Protection Act) promoted by the government was passed. This amendment aims to promote the establishment of a balanced relationship of rights between landlords and tenants and stabilize the rental market for houses in South Korea. According to this, important changes have taken place in South Korea’s rental laws, the core of which is the changes to the terms and conditions of the renewal of the rental contract when the rental contract expires, including “2+2 year contract renewal” and “rent up to 5%. rise”. Today, Ziptoss will explain to you the impact and effect of this amendment on tenants.
1. The term of the renewed rental contract has changed from “+2 years” to “+4 years”
In the previous article, Ziptoss has introduced the default update (묵시적갱신) of the Korean rental contract to everyone. In the period from 6 months to 1 month before the end of the contract period, if neither the landlord nor the tenant tells you to refuse, renew, or change the terms of the contract, then the lease contract will be charged with the same rent and security deposit. Once the contract is renewed, the new lease period will become valid for 2 years.
In the past two years before expiring, if the landlord asked not to renew, then rent the user must check out. However, after the revision, the tenant update a claim (갱신 요구권 or renewal rights)are strengthened, there is a second chance to use. In other words, after the housing contract is automatically renewed for 2 years, the tenant can request another renewal. If it is not that the unused house is not rented out, nor is the landlord or his immediate family living in it, the landlord cannot refuse the tenant’s request for renewal, which makes the contract renewal period extendable from 2 years to 4 years.
However, when the 4-year contract is about to expire, the landlord can refuse to renew the contract. If the landlord falsely claims to be idle to change the house or live by himself or an immediate family member but has formed another tenant, the original tenant can claim damages from the landlord.
*This amendment is effective from July 30, 2020. If the homeowner has notified the tenant not to renew the contract beforehand, and more than 6 months before the end of the contract, then the tenant cannot use the update of this amendment to claim his/her right.
2. Rent increase up to 5%(5% 상한)
Aside from the need for default updates, many contracts are required to be changed and signed(most of the changes are rent increases). That is, regardless of the monthly rent or full rent, as long as the landlord and the tenant reach a negotiation, the landlord can increase the rentals and house prices in Korea. However, after this amendment, the rent increase cannot exceed 5% for the renewed contract.
This 5% is only the standard maximum increase. The South Korean government is planning to negotiate with each city to determine the maximum increase according to the economic level of each region. This revision is very important to foreigners living in Korea. You can consult Ziptoss to know more about it. In addition to the contract renewal, there are also many cases of checking out halfway, so we will review the two things that you need to pay attention to when you’re checking out.
Checking out halfway
Before the contract expires, the tenant should cancel the rental contract in advance, which is a breach of contract by the tenant. When the tenant tells the landlord that they want to check out halfway, the tenant needs to bear the corresponding responsibilities, including these 3 points:
① Find the next tenant by yourself. Existing tenants need to continue to pay the monthly rent until a new tenant is found. If the new tenant moves in, the landlord can continue to collect rent, and the landlord will agree to terminate the contract and return the security deposit.
② Bear the intermediary fee. For normal leases, the landlord has to bear the processing fee for finding a tenant. However, in the case of a halfway check-out, the current tenant needs to actively bear this part of the handling fee to fight for the landlord to get the contract cancellation.
③ Good and active negotiation. If the tenant is checking out early, this is a breach of contract, and it is also the party who “justified the loss”. Therefore, it is necessary to negotiate with the landlord, show a good and positive attitude, and appropriately provide compensation or other concessions to facilitate the termination of the contract.
Check out after expiry
The contract expires, can you leave immediately? It’s not quite possible. In the 6 months to a month before the end of your rental contract, the tenant needs to inform the landlord that his/her contract will no longer be renewed, otherwise the contract will be updated by default without mutual notice between the two parties.
Ziptoss recommends informing landlords that you will no longer continue to rent at least one month in advance. When giving notice, it is also better to use text messages, emails, or written forms to leave evidence and to avoid the landlord’s refusal to stop the contract.
