If the Deposit Exceeds 60 Million Won and Monthly Rent Exceeds 300,000 Won, 'Lease Reporting' Becomes Mandatory from June

Full Implementation of Lease Reporting System from June 1
Pilot Operation in Daejeon, Sejong, etc. from April 19
Subordinate Legislation Public Notice... Procedures Take Shape
Fines up to 1 Million KRW for Non-Reporting or False Reporting
Government "Reported Information Will Not Be Used for Taxation"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] The outline of the 'Housing Lease Reporting System,' the final piece of the 'Three Lease Laws,' has been established. Starting June 1, when lease contracts are made in Seoul, the metropolitan area, metropolitan cities, Sejong City, and city areas of provinces, both landlords and tenants must report details such as rent and contract period. The reporting requirement applies to lease contracts where the deposit exceeds 60 million KRW or the monthly rent exceeds 300,000 KRW.

The Ministry of Land, Infrastructure and Transport announced on the 15th that it will publicly notify the amendment to the subordinate legislation of the 'Real Estate Transaction Reporting Act,' which includes specific details such as the subjects of reporting, contents, and procedures, to implement the lease reporting system from June 1.

Reporting Obligation for Deposits Over 60 Million KRW... Includes Renewals

According to the amendment, the areas subject to the lease reporting system include all of the metropolitan area such as Seoul, Gyeonggi-do, and Incheon, metropolitan cities, Sejong City, and city areas of provinces. County (gun) areas in provinces, where lease transaction volumes are low and small-amount lease contracts are prevalent, are excluded due to the low necessity for reporting.

Considering that the minimum deposit amount for tenants to receive priority repayment without a fixed date is 60 million KRW, the reporting applies to lease contracts where the deposit exceeds 60 million KRW or the monthly rent exceeds 300,000 KRW.

Both new and renewal contracts must be reported, but renewal contracts without changes in contract amounts are excluded from reporting.

The reporting items include personal information of the landlord and tenant, address and area (number of rooms) of the leased property, rent, contract period, and contract date. For renewal contracts, the previous rent and whether the tenant exercised the right to renew the contract must also be reported. Reporting the previous rent aims to monitor rent increase rates.

Reporting is primarily done by both the landlord and tenant jointly signing or sealing the lease contract report. For convenience, one party may submit the contract with signatures of both parties. Lease reporting can be done by visiting the local town, township, or neighborhood community service center responsible for the leased housing, but non-face-to-face online reporting is also possible.

When either the landlord or tenant submits the report, the other party is notified via text message.

[Image source=Yonhap News]

Fines Up to 1 Million KRW for Non-Reporting or False Reporting

Submitting the lease contract when registering a change of residence is considered as having reported the lease contract. If the contract is submitted during lease reporting, a fixed date under the Housing Lease Protection Act is also granted. Authorized agents such as licensed real estate agents may prepare and submit the lease contract report on behalf of the contracting parties.

If the lease contract is not reported within 30 days after signing or is falsely reported, a fine of up to 1 million KRW will be imposed. False reporting incurs a fine of 1 million KRW, while non-reporting fines range from a minimum of 40,000 KRW to a maximum of 1 million KRW, depending on the contract amount and the delay period.

However, considering the public's adaptation period to the new system, a grace period without fines will be operated for one year until May 31 of next year.

Pilot Operation from the 19th in Daejeon, Sejong, and Yongin

Before the full-scale implementation in June, to check whether the work procedures and IT systems operate normally, the lease reporting system will be piloted from the 19th at five community service centers in Wolpyeong 1, 2, and 3-dong in Seo-gu, Daejeon; Boram-dong in Sejong; and Bojeong-dong in Giheung-gu, Yongin. The pilot areas were selected through prior applications by local governments.

The Ministry of Land, Infrastructure and Transport expects that tenant protection will be significantly strengthened once the lease reporting system is implemented, as fixed dates will be automatically granted. Small-amount contracts, short-term contracts, and renewal contracts, which previously often did not receive fixed dates, will now automatically be granted fixed dates upon lease reporting, legally protecting tenants' deposits.

Especially, enabling online lease reporting is expected to greatly reduce the inconvenience of tenants having to visit community centers during working hours to obtain fixed dates. The fee (600 KRW) charged when granting fixed dates at community centers will also be waived if the fixed date is granted through lease reporting.

[Image source=Yonhap News]

Will Lease Prices Fluctuate After Reporting System Implementation? Ministry of Land, Infrastructure and Transport Says "No Relation"

Some in the industry express concerns that the lease market might become unstable after the lease reporting system is implemented. This is because landlords' rental income will be fully disclosed to the government, potentially increasing their tax burden. There are also concerns that landlords might withdraw Jeonse (long-term deposit lease) contracts due to tax burdens, reducing the supply of Jeonse.

However, the Ministry of Land, Infrastructure and Transport explained, "The lease reporting system is completely unrelated to rental income taxation," and "There are no plans to use the reporting information for tax purposes."

The Ministry also denied claims that the lease reporting initiative is a preparatory step for introducing rent regulations such as standard rent. The Ministry stated, "The system is designed to provide transparent market information and strengthen tenant deposit protection through linkage with fixed dates," and "There have been no considerations to introduce new rent regulations such as standard rent."

Kim Susang, Director of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, said, "We will strive to integrate the reported contract details with existing fund loans and guarantee products to improve administrative services and ensure this system becomes an essential service for the public."