[Q&A] One-Year Lease Trick by Rental Business Owners... "Not Valid" Under the Lease Protection Act

Even a 1-Year Jeonse Contract Can Be Maintained for 2 Years Under the Lease Protection Act
Rent Increase Limited to 5% Every 2 Years Based on Minimum Lease Period
Extending a 1-Year Jeonse Contract to 2 Years Does Not Constitute Use of the Renewal Request Right

[Asia Economy Reporter Hwang Seoyul] #Recently, Mr. A, who is looking for a Jeonse house, heard from a licensed real estate agent that “there is a good property available under a 1-year Jeonse contract.” The agent added, “I heard that the landlord, who is a rental business operator, increases the deposit by 5% each time the contract is renewed annually.” When Mr. A asked, “Isn't the basic Jeonse period 2 years?” the agent replied, “It is possible if both parties agree.” Mr. A, who wanted a 2-year contract for housing stability, was conflicted about whether to accept a 1-year contract since there were no Jeonse properties available.

The reason the private rental business operator in the above case offered a 1-year Jeonse contract is because the Special Act on Private Rental Housing (hereinafter referred to as the Private Rental Act) does not specify the contract period. The Private Rental Act can be interpreted to allow rent to be increased by 5% annually upon contract renewal if the tenant agrees. Meanwhile, the Housing Lease Protection Act (hereinafter referred to as the Lease Act) considers the minimum lease contract period to be 2 years.

In a situation where the two laws differ, if Mr. A accepts the landlord’s proposal and signs the contract, can the Jeonse period be maintained at 2 years under the same conditions according to the Lease Act?

Yes, it can be maintained. Article 3 of the Private Rental Act states that “matters not stipulated in this Act shall follow the provisions of the Lease Act,” so the minimum lease period of 2 years under the Lease Act must be followed. Also, even if the tenant signed the contract as a form of consent at the time of contracting, any agreement unfavorable to the tenant is invalid under the mandatory provisions of Article 10 of the Lease Act. Mandatory provisions refer to laws that are applied compulsorily regardless of the parties’ intentions. However, if the tenant wishes, the Jeonse period can be set to 1 year.

If Mr. A extends the Jeonse contract to 2 years, is it possible to increase the deposit by 5% annually?

Even if the lease contract is on a 1-year basis, the lease period is applied as 2 years. Therefore, rent increases are limited to within 5% of the previous rent every 2 years. However, if the tenant agrees to the increase, it is possible to raise the deposit annually.

If Mr. A set the contract period to 2 years at the time of contracting but included a special clause to increase the deposit by 5% every year, Mr. A can still claim to maintain the initial deposit. According to Article 10 of the Lease Act, if the special clause is unfavorable to the tenant and beyond the scope of the law, it may lose its effect.

If Mr. A extends the Jeonse contract by 1 year to live for 2 years, does this count as using the right to request contract renewal once?

It is difficult to consider that the right to request contract renewal has been used. According to Article 4 of the Lease Act, leases without a fixed period or with a period less than 2 years are regarded as 2 years. Therefore, even if a 1-year Jeonse contract is signed, if the tenant wishes to live for 2 years, they can extend the contract up to 2 years without using the right to request contract renewal.