Types of Residences
In Korea, typical types of residences are detached houses, apartments, studios (called 'officetels' in Korea), multiplex houses, and multi-household houses (etc.). These days Koreans who live in cities prefer to live in multi-unit dwellings, such as apartments, for the sake of convenience. Koreans place great importance on housing. In Korea, the price of housing is very expensive, and houses in metropolitan areas are far more expensive than those in rural areas.
Buying a House and Rental Contracts
Buying a House
When you buy a house, there are many things to consider: the house’s location, the direction it faces, transportation, surrounding environment, etc. Once you decide to buy a house, you must get a certified copy of a real estate register to check ownership, mortgage loans, etc., so there won't be any unpleasant surprises after the contract is finalized. Finally, when you sign a housing contract, you must make sure that everything is written correctly and in detail.
Lease on a Deposit Basis
Korea has a unique housing rental system. Before moving into a house, tenants usually pay a large sum to the landlord. When the rental period ends, the deposit is returned to the tenant in full (minus any damages). Typically, you can rent a whole house, or only part of a house (1 floor, 1-2 rooms, etc.). If you want to rent a whole house, the deposit is usually 40-80% of the value of the house. Rental contracts are usually made for 2 years (for officetels, 1 year), and by law the landlord cannot terminate the contract before the end of the two-year period if the tenant wishes to stay until the end of the contract. In fact, a tenant has the right to stay in a house for 2 years even under a 1-year contract pursuant to the Housing Lease Protection Act.
Banjeonse (Half Deposit System)
With the recession in the housing market and the current trend of lower interest rates, leaseholders in Korea have recently been shifting their lease system from the previous jeonse (deposit system) to one of banjeonse (half deposit system), in which a deposit is combined with a monthly rent to secure profitability for the owner. Today, three out of ten houses are leased under the half deposit system. To calculate the rent for their properties, leaseholders use the average monthly interest (200% of the interest rates at banks) accrued by the deposit. For example, assuming that under higher interest rates, the deposit money would increase from KRW 300 million to KRW 400 million over two years, leaseholders now divide this increase of KRW 100 million into a monthly rent of KRW 400,000 to KRW 600,000, and offer their properties for the deposit money of KRW 300 million and a monthly rent of KRW 400,000 to KRW 600,000.
Security Insurance System of House Rental Security Deposit Return
In case the security deposit is not returned, tenants are advised to take out the Security Insurance System of House Rental Security Deposit Return issued by the Korea Housing & Urban Guarantee Corporation (HUG / www.khug.or.kr).
Wolse (Monthly Rent)
You can also get accommodations on a monthly rent basis. You will still have to pay a small deposit, much smaller than that of a lease, but you will have the advantage of being able to negotiate the deposit depending on the period of your contract. If you can afford a higher monthly rent amount, the deposit can be smaller, and vice versa. Wolse conditions depend on the size and number of rooms, and other facilities.
Neither a lease nor a monthly rent arrangement will include the cost of utilities. You have to prepare furniture and home appliances separately, but many multiplex houses and officetels are equipped with basic home appliances such as a refrigerator, washing machine, etc.
kkalse
There are some landlords that ask foreigners residing in Korea or multicultural families to do "kkalse," which is a lump sum payment of 1-3 years' worth of rent. A rent system called Yeonse, with a payment of a whole year worth of rent, has been common in Jeju area for a long time.
Gisuksa (Dormitory)
A gisuksa is a residence offered by a company or school. For foreign investment technology trainees (D-3), and workers who enter into Korea via the Employment Permit System with non-professional employment visas (E-9), some companies may provide dormitories, but they are not obligated to do so.
Checklist When Looking for Housing
There are many ways to search for a house in Korea. Although using fliers on the street and visiting advertised places in person is one method, the most common method is to use a real estate agency. If you use a real estate agency, an agent will find housing that meets your qualifications and prepare necessary documents for you. By going through a real estate agent, you will be able to make a safer contract and avoid any future legal problems. Real estate agents charge a commission fee based on the house price, so it is advisable to check the brokerage fee on the Internet in advance.
※ Currently, most real estate brokerage fees are based on the value of the transaction. If a real estate agent claims an excessively high fee, you should report it to an illegal brokerage activity report center.
Contracts
Contract Counterpart
Rental contracts must be made with the actual owner of house. In the contract, the lease period, deposit amount, monthly rent amount, and other important information must be specified. In the case of subletting or taking over a contract from a previous tenant, be cautious of giving large deposits. Since you are not making a contract directly with the owners, the owner is not obligated to give you your deposit back if he/she does not agree with the contract.
Before entering into a contract, it is imperative that you check the identity of house owner, and check the required documents of the owner or the owner’s official representative (authentication certificate of one’s seal, letter of delegation). The identity of a house owner can be verified by examining a certified copy of the person’s real estate register, which can be easily obtained on the Internet. It is good to check the real estate register several times throughout the process: before making your down payment, interim payment, and final payment.
Register
Checking the real estate register before entering into a contract is just as important as seeing the house in person. The register contains the address of the house, the name of the landlord, and the total area and other structural details, and also gives information regarding whether the landlord owns the building outright or is paying a mortgage. A certified copy of the register can easily be issued online at www.iros.go.kr without visiting the registry office. Since this is an extremely important part of the house rental process, be sure to ask a Korean friend or colleague for assistance if you are unable to access the register yourself.
Down Payment and Deposit
A down payment is not required by law, but people typically pay 10% of the total deposit as a type of placeholder to prevent someone else from claiming the house. For example, if the total deposit is 2 million won, then the down payment would be 200 thousand won. The remainder of the deposit, 1.8 million won, would then be paid on an agreed date before moving in. Full payment must be made before or on the move-in date. Make sure to keep all receipts.
Items to be included in a rental contract
- Address of the rental unit
(The address on the contract should match the one on the register.)
- Contract payment (Deposit and monthly rent)
- Due dates for the down payment and the balance payment(s)
(It is safe to pay up to 10% of the deposit as a down payment.)
- Term
- Signatures or thumbmarks of the landlord and the tenant
Termination of Contract and Deposit Refund
If a tenant decides to move out before the contract period ends, the house owner can deduct the amount of the upcoming monthly rents (up until the expiration date) from the total deposit and then return the rest.
For example, let’s say that you live in a room with a KRW 2 million deposit and a monthly rent of KRW 150,000 and you decide to move to another place 3 months before the end of your housing contract. If another tenant moves in right away, the landlord would not subtract any money from your deposit. If the landlord is not able to find a new tenant, it is completely legal for the house owner to return only KRW 1.55 million to you, subtracting 3 months’ rent of KRW 450,000 (150,000 x 3 months) from your deposit.
If you do not wish to renew your contract, you should give notice (to your landlord) at least one month before the end of your contract. If you have given advanced notice, it is illegal for your landlord to withhold your deposit. If your landlord wrongfully withholds your deposit, you can seek redress through a civil action. This may take some time and requires some complex procedures. Should such a situation occur, there are various support centers from which you can seek help.before the end of your contract. If you have given advanced notice, it is illegal for your landlord to withhold your deposit. If your landlord wrongfully withholds your deposit, you can seek redress through a civil action. However, this may take some time and requires some complex procedures. Should such a situation occur, it is advisable to seek legal assistance by contacting the Korea Legal Aid Corporation (KLAC) / www.klac.or.kr).
Things to do a month prior to moving out
At least one month before your contract expires, you must tell your landlord whether you intend to leave on the date your contract expires, or wish to stay longer. If you do not discuss this with your landlord, your contract is automatically renewed, and you may lose the chance to move out when you want to. Many people forget and make this mistake.
Advantages and Disadvantages of Real Estate Direct Transactions
What to know when engaging in direct transaction
There are some multicultural families who favor real estate direct transaction to save cost. Although this transaction can save cost, there are various risks. In general, the person releasing an article for sale reveals personal information including address and phone number. Still, it is best for a woman living alone not to reveal her personal information. Persons who visit the real estate do not come with a licensed real estate agent or a broker, so the person releasing the article for sale may be exposed to unexpected crimes. When trading through a real estate broker, the broker is required to inspect damages in the house and explain this to the prospective tenant. In contrast, the prospective tenant must check for flaws on his/her own during a direct transaction. Thorough inspection is required to make sure that there are no issues with equipment or finishing material of the house. Even for a direct transaction, a person may generally entrust a broker with designing a contract for around KRW 100,000. Still, this does not mean that real estate brokerage has taken place. It is a form of a "scrivener service,” so the broker is not responsible for the trade at all.
Use a brokerage agency as a safer alternative to direct transaction
Although there were only 50 direct transaction cafes in 2009, there are now over 100 direct transaction cafes and 1.1 million members. The number increased by more than two-fold amid the depression of the real estate market. The real estate industry estimates that there are more than 100,000 real estate offerings per month, with information distributed through Internet channels such as cafes and direct transaction websites. Direct transaction of leases on a deposit basis and monthly rent has become popular because there is now ample information on real estate offerings that can be searched on the Internet. In the past, real estate offerings posted on the Internet's direct transaction market were limited to studios and officetels. Most users were college students or office workers living alone. Recently, however, articles for direct transactions have significantly expanded to 2-3 room multifamily houses, detached houses, and apartments for rent and even to officetels, urban living homes, shopping centers, and offices. Although real estate direct transaction may provide cost reduction and convenience, it may pose risks for those who are socially inexperienced or inexperienced with contracts. Therefore, utilizing a licensed brokerage agency is recommended because the range of damage pattern is gradually becoming more diverse, i.e., houses that were put up for auctions have been offered as direct transaction articles, and some tenants have fraudulently offered secondary leases (double contracts). In particular, direct transaction for monthly leases and leases on a deposit basis is a direct contract between two trading parties without a certified broker; therefore, a person may incur significant loss if he/she does not thoroughly check all clauses and procedures. A large proportion of victims are social rookies or those unfamiliar with real estate procedures. A person who is familiar with Internet open market trade but lacks basic knowledge of real estate trade often searches for cheap offerings and engages in direct transaction. As a result, he/she may sign a contract with a person who claims to be a landlord or experience difficulty with clear repair when moving out later. Moreover, many sign the contract without knowing the exact market price of the rent, so they may sign the contract at a price higher than the market price. Therefore, all things considered, the safest thing is to utilize a licensed brokerage agency. In this case, even if a person is victimized with a double contract, he/she may be protected under fraternal insurance. In addition, there are other advantages of trading through a licensed brokerage agency. Keep in mind that although direct transaction may save on the cost of brokerage fees, it may require more time and money later due to unfavorable outcomes.
