One-Year Extension of the Jeonwolse Reporting System Grace Period
The government has decided to extend the grace period for the Jeonwolse reporting system, one of the 'Three Lease Laws,' by one year, but cunning listings with maintenance fees much higher than monthly rent are still rampant.
On the 26th, the Ministry of Land, Infrastructure and Transport announced that considering the promotion for the establishment of the system and the administrative conditions of local governments, the grace period for the Jeonwolse reporting system will be extended until May 31 of next year.
The Jeonwolse reporting system is one of the 'Three Lease Laws' passed on July 31, 2020. It requires landlords and tenants to mandatorily report contract details within 30 days of the contract date if the deposit exceeds 60 million won or the monthly rent exceeds 300,000 won. Failure to comply results in a fine of up to 1 million won.
Initially, when the government implemented the Jeonwolse reporting system on June 1 last year, it decided to operate a one-year grace period until the end of this month without imposing fines.
The Ministry of Land, Infrastructure and Transport explained, "Considering that the typical lease contract period is two years, most citizens have not yet experienced the reporting system due to lack of promotion and the timing of contracts. Therefore, more time is needed for the system to settle, so the grace period will be extended by one year."
In fact, landlords are reluctant to report Jeonwolse transactions due to concerns that reporting will lead to taxation such as rental income tax. Although the number of Jeonwolse reports has steadily increased every month since the system was implemented, the Ministry believes that a significant number of transactions remain unreported compared to the total number of transactions.
In the market, there have even been cases of evasion tactics where monthly rent is lowered to 300,000 won or less to avoid reporting, while maintenance fees are raised to 800,000 to over 1 million won to conclude contracts. Last month, in Jamwon-dong, Seocho-gu, Seoul, a property was listed with a deposit of 30 million won and monthly rent of 280,000 won. The maintenance fee was 320,000 won, higher than the monthly rent. In Songpa-gu, there was a listing with a deposit of 180 million won and monthly rent of 20,000 won, but the maintenance fee reached 250,000 won, more than ten times the monthly rent.
Excessive maintenance fees can be resolved through the Housing Lease Dispute Mediation Committee, but if the landlord refuses to participate in dispute mediation, there is no effective solution. Apartments with more than 150 households or collective buildings with more than 50 households are required to prepare, store, and disclose maintenance fee statements and undergo accounting audits, but buildings with fewer than 50 households have no such obligations, leaving a blind spot for maintenance fee evasion.
Local governments complain of manpower shortages as they must invest enormous administrative effort to identify unreported contracts and impose fines.
The Ministry of Land, Infrastructure and Transport plans to strengthen promotion by starting an 'AlimTalk' notification service next month through the Ministry of the Interior and Safety’s National Secretary service to guide mandatory lease reporting, and by conducting local government tour education sessions.
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