"Please Include Special Clauses" Real Estate Contract Sites Also Affected by Loan Regulations

Apartment view in Seoul city

#A certified representative, Mr. A, who has been running a real estate agency in Gangseo-gu, Seoul for eight years, has been breaking a sweat at every contract since the banking sector tightened loan regulations recently. This is because most tenants strongly demand special clauses related to loan disapproval. However, when he informs landlords about these clauses, they often reject them outright. Mr. A said, "Conflicts arise due to unresolved positions, and deals frequently fall through."

According to industry sources on the 10th, conflicts at real estate contract sites regarding special clauses related to loans are increasing. During the preparation of sales contracts or lease (jeonse) contracts, clauses such as "If the bank loan is not approved, the contract is null and void, and all paid deposits will be refunded," or "If the tenant's jeonse loan is not executed during the process, the landlord shall return the entire deposit already received to the tenant," are sometimes included. The Seoul Metropolitan Government also recommends these special clauses through its 'Housing Lease Counseling Casebook.' When such clauses are included, if the bank loan is not approved after the contract is signed, the buyer or tenant can receive a full refund of the deposit.

Mr. A said, "Since the recent tightening of bank loan regulations, tenants and buyers have increasingly demanded the inclusion of these clauses." This is to avoid having to pay double damages on the deposit due to unexpected loan disapproval. Typically, when a contract is signed, 10% of the transaction amount is paid as a deposit, and in case of cancellation, the party responsible for the cancellation must pay double damages.

During times when loans were smoothly approved, these special clauses were often included. However, now that the possibility of loan disapproval has increased, the situation has changed. Mr. A said, "From the landlord's perspective, they argue, 'Why should I bear the loss caused by the tenant's loan disapproval?'" and added, "They would rather find another tenant than include such clauses."

However, special clauses related to loan disapproval are not mandatory. A representative from a real estate specialized law firm stated, "If landlords or sellers refuse these clauses, they cannot be punished or disadvantaged," and added, "Whether to include such clauses in the contract is entirely subject to mutual agreement between the contracting parties."