Types of Housing Contracts in Korea

Category : Surviving in Korea / Visa/Legal Issues/Tax
Nov 28, 2014

You’re sick of living in the shack you have to call “home” and understandably you want to find your own apartment in Korea.  However, it seems easier to build your own house than find one alone without the help of a native speaker who knows the ropes.  First, you need to understand Korean real estate practices so you can find the perfect place you will love to call “home”.

 

Note: If you don’t find all the information you need in this article to hit the streets house hunting, check out some of these articles. Your answers are bound to be in there somewhere:

  1. Homestay Accommodations in Korea
  2. Moving Within Korea
  3. Types of Housing in Korea
  4. Tips for Finding a House in Korea

 

Just like the rest of the world (surprise!), Korea too has a contract system for renting houses. That means in most cases you are going to need to sign a one year (possibly more) lease to live where you want. There are unique types of contracts in Korea that are unlike the leases you would sign elsewhere in the world, so make sure you fully understand which type of rent agreement you’re signing before you do put pen to paper!

 

Real Estate Agents/ Budongsans (부동산)

When you are searching for a house visit a real estate agent called a budongsan in the neighborhood you wish to live. Specify what kind of house you are looking for and which type of rent agreement you are interested in signing (as listed below). The agent will show you homes in the area. If you’re satisfied with a showing, the landlord, the realtor and you will sign the lease together at the real estate office.

 

You must pay for the services of the Budongsan for finding you a house. The fee is always based on a percentage of the deposit as set forth by the municipal government in your area. In Seoul, for lease agreements less than 50 million KRW, the tenant will pay a maximum of 200,000KRW to the realtor. For sales transactions less than 50 million KRW, the buyer will pay a maximum of 250,000KRW to the Budongsan. Please see The Guide to Real Estate Brokerage Commissions put out by the Seoul City Government for more information.

 

Sample Agreements

Please see the following links for sample housing agreements. Although your lease or purchasing documents may not look exactly as these ones do, they should contain the same information.

  1. Sample Wolse Lease Agreement
  2. Sample Sales Agreement

 

Jeonse /전세

Jeonse is the oldest form of rent agreement. It consists of a large down payment put down for the long-term, based on a two-year contract, but it can be negotiated to be more. Renters have to pay a large portion, between 40% to 70%, of the market property value for the deposit. Deposit amounts vary greatly depending on the location, size and age of the building. Although the down payment is exceedingly large, the resident pays no other monthly rent to the landlord.

 

After the contract finishes, the renter may either renew the contract or move out. If the renter decides to sign again, the landlord may demand to increase the deposit money, which the tenant must pay. When the renter moves out, the landlord must return the full deposit regardless of how much it has increased over the years.

 

Jeonse contracts have seen success because of high interest rates and rising housing prices over the past century. During periods of high interest rates, landlords invest the jeonse lump-sum and within only a few years are able turn a tremendous profit. Renters also enjoy jeonse contracts because they don’t have to throw their money away for monthly rent or pay into a mortgage they may be unable to afford during tough financial periods. As well, their investment is returned to them.

The Benefits as a Tenant

The Downsides as a Tenant

No monthly rent

You need a large upfront down payment.

Your money is “saved” automatically and can be used for another purpose later.

The landlord could go bankrupt and lose your deposit.

Your house is secure for the duration of the contract even if you lose your job.

It requires a long lease.

It’s easy to move once the contract is over.

If the landowner raises the jeonse fee at the end of the contract, you must pay it to re-sign.

You can live in an expensive house without having to buy it.

 

 

Say “Yes” to Jeonse if:

Say “No” to Jeonse if:

You do not want to pay monthly rent and have a large lump-sum.

You would rather invest the deposit in bonds or stocks that could bring a profit.

You plan to stay in Korea for longer than 2 years (ex/ You are married to a Korean).

You do not have enough savings to pay for the deposit.

You want your savings to remain intact.

You plan to stay in Korea less than 2 years.

 

Wolse /월세

Wolse is a newer type of rent agreement used in Korea. It is for short-term, year-long contracts and requires a small down payment called key money, plus monthly rent payments. The key money is much less than the huge lump-sum payment of a jeonse contract. Wolse deposits and the monthly rent price once again depend on the size and location of the apartment. These days monthly rent is often upwards of 400,000KRW per month.

 

The renter and landlord must negotiate the key money and monthly rent payment before the contract is signed. A tenant can offer a larger deposit and in which case, the monthly rent will be slightly less. If the tenant does not have enough key money, he/she will be forced to pay a higher monthly fee. When the contract is finished, the tenant will be required to renegotiate the lease terms with the landowner, who can freely increase the price of the key money or rent. If the renter chooses to move, the key money deposit will be returned in full, but the monthly rent payments are not.

 

Today, wolse contracts are becoming ever more popular. Landlords are struggling to make returns on Jeonse investments because interest rates are low. They are forced to switch the contracts over to wolse agreements, so that they too at least have monthly income. As well, individuals like students and new grads, cannot afford rising jeonse payments, so they are forced to choose wolse contracts to better accommodate their financial situations.

The Benefits as a Tenant

The Downsides as a Tenant

Short-term lease

Monthly rent

Low lump-sum deposit

The key money deposit may still be unaffordable.

It’s easier to break the contract and move out early than in a Jeonse agreement.

The landlord could go bankrupt and lose your key money.

You may find apartments that come fully or partially furnished.

Not considered a permanent housing solution.

 

Say “Yes” to Wolse if:

Say “No” to Wolse if:

You don’t have much in savings for a large down payment.

You have enough money for a jeonse payment.

You will only be in Korea for 1 year or your plans to stay are undecided.

Your job situation is unstable and you may not be able to make monthly payments.

You want flexibility.

You will stay in Korea for the long-term.

You want a one-room apartment to live alone.

You want a large apartment for a family.

 

Dangiimdae /단기임대

This type of rent contract might be more familiar to you. It is a month-to-month housing agreement similar to rent leases in western countries. The renter must pay first and last month’s rent upfront but no other deposits are required. When the tenant decides to move out he/she does not need to pay the final month as long as 30 days prior notice is given. The last month’s rent payment is taken as a security deposit for damages and in case the tenant bails out on the contract. As this contract payment is a month-to-month rent fee none of the money is returned to the tenant at the end of the contract.

 

Although they are possible to find, Dangiimdae contracts are not customary in Korea. They are most commonly provided for one-room officetels or short-term types of accommodations, like hasuks and gosiwons. These kinds of rent agreements are never used for long-term leases and are usually only one year or a predetermined number of months.

The Benefits as a Tenant

The Downsides as a Tenant

Short-term lease

Monthly rent

No key money deposit

Not considered a permanent housing solution.

Easy lease to sign and break

Little housing security if you are unable to pay the monthly rent

You may find apartments that come fully or partially furnished.

Not usually provided for large apartments or condos.

 

Say “Yes” to Dangiimdae if:

Say “No” to Dangiimdae if:

You don’t have much in savings for any key money.

You have enough money for a jeonse or wolse payment.

You are planning to stay in Korea for a short-time.

Your job situation is unstable and you may not be able to make monthly payments.

You want a one-room apartment.

You will stay in Korea for the long-term.

You want a furnished apartment.

You want a large apartment for a family.

 

Kalse /깔세

This is very unique type of rent agreement only offered to foreigners. It requires advance payment of the entire contract which could be a few months or years. In other words if you sign a 12 month kalse agreement you pay 12 months worth of rent right when you sign the contract, and unlike with a jeonse deal, you don’t get a cent of it back.

 

This type is agreement is also not easily negotiable. It’s unlikely the resident can bargain the price down or negotiate better terms, like with wolse contracts. This lease benefits the landowner who may worry that a foreign tenant will skip out on rent or leave the country without notice. Kalse contracts are rare and certainly should not be a first option.

 

Kalse payments are often used for university dormitory payments. The student pays the dorm fee for the entire semester at once. In this case, the student is guaranteed a place on campus and the rent period is only a few months. In all other cases, renters should be weary to sign a kalse agreement.

The Benefits as a Tenant

The Downsides as a Tenant

Short-term lease

Requires a large lump sum payment that is not returned.

You don’t have to worry about saving for rent over the course of your stay.

If you must leave the country before your housing contract is finished, your money is lost.

Your accommodations will most likely be furnished.

Not considered a permanent housing solution.

 

Restricted in terms on where you can live as it is for foreigners only.

 

Say “Yes” to Kalse if:

Say “No” to Kalse:

You are a student and want to live on campus.

In most cases you should be able to find a much better agreement that fits you.

It is your only option because of other criteria.

 

 

 

Tags : Housing. Contract.

Lindsey lived and worked in Seoul, South Korea for over 5 years. While there, she dabbled in different areas of work and explored the culture. She spent time teaching elementary students, business English to adults and high school students about college preparation. She also studied Korean, wrote blogs and tasted as many foods as she possibly could including fermented skate fish. Over the years, Lindsey developed a love for Korea and the culture. She is keen to share her knowledge of Korea with others and she will always consider Korea a second home.

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