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I’d like to introduce the articles of Housing Lease Protection Act (hereinafter referred to as the “Act”) and its Presidential Decree that are essentially for a lessee to know. As the tile of the Act shows, the Act is to protect lessees and secure stability of their residential lives.
First of all, if it is less than two years on a house lease contract, the term shall be regarded as two years. Or if the lessee wants to continue the contract for only one year, it is possible to fixed for one year. In a word, in case the term is less than two years, the lessee will have options on the term. The relevant Article of the Act is as follows;
Article 4 (Term of Lease)
(1) With respect to a lease whose term is not fixed or is fixed for less than two years, the term of such lease shall be deemed to be two years: Provided, That the lessee may claim that the term fixed for less than two years shall be valid.
(2) Even though the period for lease has expired, the relations of lease shall be deemed to continue until a deposit is repaid to a lessee.
Second, the Act and its Presidential Decree restrict on the increase of the rent by a lessor’s discretionary decision. Please refer to the following Articles of the Act and its Presidential Decree;
[The Act]
Article 7 (Requests for Increase or Decrease of Rents)
If the stipulated rent or deposit becomes unreasonable due to increase or decrease of taxes, public dues, and other charges on the leased house, or a change in economic circumstances, the party concerned may demand any increase or decrease thereof prospectively: Provided, That no increase shall exceed the rate set according to the criteria prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 8923, Mar. 21, 2008]
Article 7-2 (Limits on Computation Rates in Cases of Conversion into Monthly Rents)
When the deposit is fully or partially converted into a monthly rent, it shall not exceed the limit of the monthly rent calculated by multiplying the relevant converted amount by either of the following rates, whichever is the lower: <Amended by Act No. 10303, May 17, 2010; Act No. 12043, Aug. 13, 2013; Act No. 14175, May 29, 2016>
1. The rate set by Presidential Decree, considering the loan interest rates applied by banks under the Banking Act, and the economic conditions of the relevant region;
2. The rate calculated by aggregating the interest rate set by Presidential Decree and the standard interest rate publicly announced by the Bank of Korea.
[This Article Wholly Amended by Act No. 8923, Mar. 21, 2008]
[The Presidential Decree]
Article 8 (Standards for Request for Increase in Rent, etc.)
(1) No request for increase in rent or deposit (hereinafter referred to as “rent, etc.”) under Article 7 of the Act shall exceed the amount equivalent to 1/20 of any rent, etc. agreed upon.
(2) No request for increase under paragraph (1) shall be made within one year after a lease contract is concluded or rent, etc. agreed upon is increased.
[This Article Wholly Amended by Presidential Decree No. 20971, Aug. 21, 2008]
Article 9 (Computation Ratio in Conversion into Monthly Rent)
(1) “Ratio prescribed by Presidential Decree” in subparagraph 1 of Article 7-2 of the Act means 10 percent per annum.
(2) “Interest rate prescribed by Presidential Decree” in subparagraph 2 of Article 7-2 of the Act means 3.5 percent per annum. <Amended by Presidential Decree No. 27614, Nov. 29, 2016>
[This Article Wholly Amended by Presidential Decree No. 25035, Dec. 30, 2013]
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27 Comments
In the case where a 2 year lease goes past the end date on the contract, I have been told that the lease period is automatically extended for another 2 years, unless the house is to be demolished. Is this correct? Thanks.
Yes, you’re right. Please refer to the following article of Housing Protection Act.
Article 6 (Renewal of Contract)
(1) If the lessor fails to notify the lessee of a refusal of the renewal, or to give notification to the lessee to the effect that he/she would not renew the contract without any change in the condition, six months to one month before the term of the lease expires, the lease shall be deemed to have been renewed under the same conditions as the former one at the time the term expires. The same shall apply to cases where the lessee has not notified by one month before the term of the lease expires.
(2) In cases of paragraph (1), the term of the lease shall be deemed to be two years.
(3) With respect to a lessee who has failed to pay the rent by up to two installments thereof, or who seriously violates obligations under the lease contract, the provisions of paragraph (1) shall not be applicable.
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