Park Joo-min’s’Naero Nambul’ re-examines the regulation on the rent to cheonsei ratio… “It’s been 6 months since it was implemented, but it doesn’t work.”

Input 2021.04.02 06:00

In addition, as it was belatedly known that Democratic Party lawmaker Park Joo-min received a significant increase in monthly rent a month before the passage of the revised bill of the Housing Lease Protection Act.

In particular, in some of the real estate industry, it is reported that Rep. Park Joo-min also raised the rent to a level that greatly exceeded the rent to cheonsei ratio at the time. The government strengthened regulations to lower the rent to cheonsei ratio in September of last year, but it is still showing no effect after six months of implementation.

According to the real estate industry on the 2nd, Congressman Park Ju-min decided to lease an 84.95m2 apartment in Sindang-dong, Jung-gu, Seoul, for a deposit of 100 million won and a monthly rent of 1.85 million won on July 3 of last year. The previous contract was a deposit of 300 million won and a monthly rent of 1 million won.

The contract is a contract prior to the enactment of the monthly rent ceiling system, and it is a new contract and is not a contract that violates the law. However, in the real estate market, Rep. Park, who had proposed various bills, saying,’We need to protect tenants’, is cynical, saying,’I’m sorry.’

Rep. Park first clarified with the intention of’I signed a contract according to the explanation of the official brokerage office’, and then criticized public opinion, saying, “I never meant that. What happened to me was my fault, whether I did well or not.”

As the case of Rep. Park Ju-min is re-examined, the industry has pointed out that it is a’virtually helpless regulation’ not only for the second law on leases, which has caused unrest in the rental market, but also for the regulation of the conversion rate of rent to jeon and rent in a new court that has been in effect for 6 months. .

The jeon-to-month conversion rate is a standard that tells how much to use when converting cheonsei into monthly rent. For example, if the monthly rent is converted from 100 million won to cheonsei, the annual total of monthly rent is 5 million won if the conversion rate is 5%.

The government and ruling party revised the Enforcement Decree of the Lease Protection Act on September 29, saying that it is a measure to slow the acceleration of monthly rent for jeonse due to the enforcement of the jeonse and monthly rent cap system and the right to apply for contract renewal last year. The existing legal conversion rate was changed from adding 3.5% to the base rate to add 2.0% to the base rate. As the current base rate is 0.5%, the legal conversion rate per day is 2.5%.
If lawmaker Park Joo-min’s rental contract applied 4% of the legal jeon-to-month conversion rate at the time, the rent was increased by 9.1%. Applying the 2.5% conversion rate implemented in September last year, the rent increase rate reaches a whopping 26.6%. Under current laws, one of the jeon/month ceiling system or the statutory jeon/month conversion rate is unconditionally violated.

However, even with the Korea Real Estate Agency statistics, the official real estate statistics of the government, the ‘2.5% conversion rate’ runs counter to the market. As of last January, the last statistic, the conversion rate to jeon and monthly rent for comprehensive housing nationwide was 5.6%, more than twice the legal conversion rate. It is only 0.01 percentage points lower than 5.7% when it was implemented in September. During the same period, the conversion rate of apartments decreased from 4.6% to 4.5%, which is also 1.8 times the legal conversion rate.

Among apartments by city and province, the conversion rate in Jeonnam was the highest at 6.6%, and in Seoul the lowest at 4%. In Seoul, there was a slight variation in the Gangbuk area and 3.8% in the Gangnam area. Dongjak-gu and Gangdong-gu had the lowest at 3.6%, and Eunpyeong-gu and Geumcheon-gu had the highest at 4.5%.

Contrary to the government’s intention, the share of monthly rent among the total lease contracts is also increasing. According to the Seoul Real Estate Information Plaza, the ratio of monthly rent contracts out of all rental contracts in Seoul increased from 37.11% in August last year, just before 2.5% application, to 41.90% in January. In particular, in the case of apartments, the rate of monthly rent contracts rose by 4.87 percentage points from 30.73% to 35.60% over the same period.

At the time of implementation, there was an expectation that the upper limit on the conversion rate would be linked to the upper limit on cheonsei and monthly rent, so that some policy effect would be secured, but it was not effective in preventing the actual conversion rate or acceleration of monthly rent. The reasons for having no effect are that the scope of application of the rent to cheonsei ratio is limited and there is no provision for coercive security.

Since the rent to cheonsei ratio is applied when all or part of the existing cheonsei is changed to monthly rent, it does not apply to ▲newly concluded contracts ▲contracts in which the tenant changes ▲to jeonse from monthly rent. This means that the effectiveness of the regulation is limited in certain cases. An official from Gangseo-gu’s A brokerage firm said, “Even though there were occasional inquiries regarding the conversion rate to jeon and monthly rent, we did not actually apply it.”

In addition, since the Housing Lease Protection Act is a special law of the civil law, the fact that it is not subject to administrative or criminal penalties such as fines for negligence even if it does not comply with the statutory jeon-to-month conversion rate is one cause of the lack of effectiveness. The government also announced amendments to the enforcement decree last year, explaining that “the lease is a contractual relationship between individuals, so administrative sanctions such as fines are impossible” and “Therefore, there is no plan to prepare additional mandatory regulations such as fines for negligence.”

Eventually, the parties must apply for mediation to the Housing Lease Dispute Mediation Committee or go through civil proceedings for civil settlement. However, in the case of the subcommittee, mediation is established only when the parties accept it, and there is no coercion even if the result of dispute mediation comes out, so if one party rejects it, it has no effect. In the end, the only compelling solution is a civil lawsuit for the return of unfair gains, but it is said that it is a solution that is not realistic in the field.

Jeong Hyang, a lawyer at Law Firm Kim Ye-rim, who specializes in real estate, said, “In most cases with regard to the conversion rate of rent to jeon, it is not common to go to lawsuits because the small amount is too small.” Even as a tenant, it is difficult to see it as a realistic method.”