Seoul City Selects Good Landlords to Support Repair Work

[Asia Economy Reporter Onyu Lim] Seoul City is supporting benevolent landlords. On the 31st, Seoul City announced that it will select 'Seoul-type Benevolent Landlords' who voluntarily reduce rent for tenants suffering from a sharp decline in sales and rent burdens due to the novel coronavirus infection (COVID-19), and provide various supports such as building maintenance, disinfection, and promotion.

Seoul City will also launch the nation’s first ‘Seoul-type Fair Rent’ calculation service, which objectively suggests rent by reflecting big data and surrounding market prices. The city plans to spread a social atmosphere of coexistence between landlords and tenants to overcome the difficult current situation together.

◆ Selecting Seoul-type Benevolent Landlords and Supporting Building Maintenance = Seoul City will first select Seoul-type Benevolent Landlords and support up to 5 million KRW for building maintenance and electrical safety inspection costs, as well as conduct disinfection of commercial buildings and promote stores using real estate apps.

If landlords and tenants of stores with a converted deposit (monthly rent × 100 + deposit) of 900 million KRW or less sign a coexistence agreement and decide to reduce rent, the city will support up to 30% of the total reduction amount during the agreement period, with a maximum of 5 million KRW, for building maintenance and electrical safety inspection costs. This applies only to repair work that improves building durability such as waterproofing, insulation, and carpentry, and does not cover interior decoration.

In addition, disinfection of commercial buildings will be conducted once a week. The scope of disinfection will be determined according to the amount of rent reduction, and new public workers from the local area will be recruited and deployed as disinfection personnel. This creates a win-win effect by safely managing local stores and creating jobs.

Furthermore, an icon labeled ‘Benevolent Landlord Building’ will be added to smartphone real estate applications to instill pride in landlords and a positive image of the stores to tenants and local residents. At the same time, awareness of the benevolent rent reduction movement will be increased.

This support can be applied for by landlords and tenants who have signed a coexistence agreement on rent reduction by submitting application documents (tenant’s business registration certificate, copy of lease contract, estimate (when applying for building maintenance cost support)) to the district office where the building is located starting from April.

◆ Nationwide First Objective Indicator ‘Seoul-type Fair Rent’ Pilot Operation = To support tenants struggling due to COVID-19, Seoul City will start the nation’s first service that suggests ‘Seoul-type Fair Rent’ upon request by landlords and tenants. Based on big data on rent, key money, etc. of 15,000 stores on 150 key streets in major commercial districts in Seoul, as well as recent surrounding market prices, the service calculates the appropriate rent for the store.

When landlords and tenants request fair rent calculation, nine ‘Seoul-type Fair Rent Dedicated Expert Committee’ members, including appraisers, analyze surrounding rental cases, rights relations, value formation factors, sales fluctuations, etc., to initially calculate the rent. Then, the ‘Seoul Commercial Building Lease Dispute Mediation Committee’ (hereinafter referred to as the Mediation Committee), a group of 30 experts including lawyers, licensed real estate agents, and appraisers, makes the final decision on the fair rent for each store.

In this process, the Mediation Committee supports tenants struggling due to COVID-19 to request rent reduction. The Seoul-type Fair Rent can be used as an objective indicator for dispute resolution, and especially, the Mediation Committee’s agreement has the same enforceability as a court ruling for both landlords and tenants, ensuring high effectiveness.

A Seoul City official said, "The Seoul-type Fair Rent and the rent reduction request mediation support using it are expected to prevent unfair lease contracts caused by lack of rent-related information and resolve rent-related disputes, providing practical help to tenants suffering from the prolonged COVID-19 crisis."