"Pay More Maintenance Fees Instead of Rent"... 9 Months After Lease Contract Enforcement, Tricks Still Rampant

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"

[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 the rent increase to a maximum of 5%, the landlord resorted to the trick of raising the maintenance fee by about five times. Feeling unfairly treated, 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 enacted, side effects have become more prominent than the initially expected benefits. Contrary to the intention to protect tenants, the rate of increase in jeonse (key money deposit) prices has reached an all-time high, and various tricks such as drastically raising maintenance fees to evade the rent cap system are rampant, causing 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 from January last year (5,298 cases). In particular, consultations regarding changes in lease deposits and rent have tripled, averaging 221 cases per month after the law’s enforcement compared to 79 cases in the six months prior.

In fact, real estate communities frequently report cases where landlords demand side agreements or increased maintenance fees. Especially, tenants with relatively tight budgets such as small business owners, micro-entrepreneurs, university students, and young workers are often targeted by these tricks.

Conflicts between landlords and tenants over lease deposits are increasing, but there is no effective solution. Although the Housing Lease Dispute Mediation Committee exists, experts explain that it is practically ineffective 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 laws will be implemented, but maintenance fees are still not subject to reporting as they are considered costs for building management and maintenance. Professor Im Jae-man of the Department of Real Estate at Sejong University said, "For buildings above a certain scale, practical measures such as disclosing maintenance fee usage details and conducting annual audits should be established."