Trick to Evade Legal Net Sparks Landlord-Tenant Conflicts
Monthly Dispute Consultations Rise 1.5 Times to 7,644 Cases
Dispute Mediation Committee Exists but... "Low Effectiveness"
Since the implementation of the new lease law, the apartment jeonse price increase rate in Seoul over the past three months has been found to be seven times higher than the sales price increase rate. The photo shows a commercial real estate agency in Songpa-gu, Seoul. (Photo by Yonhap News)
[Asia Economy Reporter Ryu Tae-min] #Mr. A, whose multi-family housing lease contract is set to expire this July, recently received a baffling message from his landlord after expressing his intention to renew the contract. The landlord demanded a 5% increase in the deposit along with a separate increase in the monthly maintenance fee up to 150,000 KRW. Since the Lease Protection Act limits rent increases to a maximum of 5%, the landlord chose the loophole of raising the maintenance fee by about five times. Feeling wronged, Mr. A applied for dispute mediation at the Housing Lease Dispute Mediation Committee, but was told that if the landlord does not agree, the committee cannot assist.
Although more than nine months have passed since the Lease Protection Act was implemented, side effects have become more prominent than the initially expected benefits. Contrary to the intention of protecting tenants, the rate of rent increase has reached an all-time high, and various loopholes such as drastically raising maintenance fees to avoid the rent cap have caused ongoing friction in the market.
According to the Korea Legal Aid Corporation on the 3rd, consultations related to lease disputes have averaged 7,644 cases per month from August last year to March this year. This is about 1.5 times higher compared to the period before the Lease Protection Act was enforced in January last year (5,298 cases). In particular, consultations regarding changes in rental deposits and rent increased significantly to an average of 221 cases per month after the law’s enforcement, about three times higher than the six months before the law (79 cases).
In fact, real estate communities frequently report cases where landlords demand secret contracts or maintenance fee increases. Especially small business owners, micro-entrepreneurs, as well as relatively financially vulnerable tenants such as university students and young workers, are often targeted by such tactics.
Conflicts between landlords and tenants over rental deposits are increasing, but there is no effective solution to resolve them. Experts explain that although the Housing Lease Dispute Mediation Committee exists, it cannot function properly because dispute mediation cannot be requested without mutual agreement between landlord and tenant.
From June this year, the lease reporting system under the three Lease Acts will be implemented, but maintenance fees are still not subject to reporting, as they are considered building management and maintenance costs. Professor Im Jae-man of the Department of Real Estate at Sejong University said, "For buildings above a certain scale, practical measures should be established to disclose maintenance fee usage details and conduct annual audits."
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