If Rental Business Operators Do Not Subscribe to Guarantee Insurance, They Face a Fine of Up to 30 Million Won

Amendment to the Special Act on Private Rental Housing Passed by the Land, Infrastructure and Transport Committee
Little Disagreement Between Ruling and Opposition Parties, Expected to Pass the Plenary Session
Local Governments Can Cancel Registration Ex Officio if Guarantee Insurance Is Not Subscribed

On the morning of the 13th, at the National Assembly in Yeouido, Seoul, Jin Sun-mi, the chairperson of the Land, Infrastructure and Transport Committee, is striking the gavel to announce the opening of the full committee meeting.
[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] If a registered rental housing business operator does not subscribe to the deposit return guarantee for rental housing, they must pay a fine of 10% of the deposit, up to a limit of 30 million KRW.

According to the National Assembly and the Ministry of Land, Infrastructure and Transport on the 14th, the amendment to the "Special Act on Private Rental Housing" containing this provision was revised and passed by the Land, Infrastructure and Transport Committee the day before. Both ruling and opposition parties have few disagreements on the bill, so it is expected to pass smoothly through the Legislation and Judiciary Committee and the plenary session.

The government mandated subscription to rental deposit guarantees for all registered rentals through the July 10 real estate measures last year. Previously, violations were punishable by imprisonment of up to 2 years or a fine of up to 20 million KRW. However, there were many criticisms that applying the same maximum fine regardless of the number of houses rented by the rental business operator and including imprisonment was inappropriate.

Therefore, a proposal was promoted to impose a fine of up to 10% of the rental deposit, and during the National Assembly discussions, a ceiling of 30 million KRW was set.

The amendment also includes a provision allowing the head of the local government to cancel the business registration ex officio if the rental business operator does not subscribe to the guarantee.

However, the obligation for the business operator to subscribe to the guarantee is exempted if the deposit is below the priority repayment amount under the Housing Lease Protection Act and the tenant agrees to the non-subscription, or if the tenant separately subscribes to a jeonse deposit return guarantee and the rental business operator pays the entire guarantee fee.

Additionally, the period during which the rental business operator cannot refuse the tenant's renewal request is extended from the mandatory rental period to the period during which the operator is registered as a rental business operator. This is based on the intention that since rental business operators receive tax benefits such as income tax and corporate tax reductions when maintaining rentals after the mandatory rental period ends, the obligations should also apply for the same period.

The subscription period for the rental deposit guarantee by the rental business operator is also extended from the end of the mandatory rental period to the day the rental business registration is canceled. This reflects the concern that if the rental business operator continues the rental business after the mandatory rental period ends without mandatory guarantee subscription, tenants may face issues in recovering their deposits. Along with this, if the rental business operator fails to report or change the rental contract report and the local government reports it but the operator falsely reports or refuses more than three times, the rental business registration can be canceled.