Types of Housing Lease Agreements
Jeonse (key money deposit lease)
Jeonse is a type of lease unique to Korea. The tenant pays the homeowner a lump-sum security deposit and lives in the home for a fixed period of time. The whole deposit is returned to the tenant after the lease has ended. The jeonse agreement is usually valid for two years (one year for an officetel, a multi-purpose building with residential and commercial units). The homeowner is legally required to honor the agreement within the two years unless the tenant agrees to a cancellation. Thus, even if a tenant has a one-year agreement, the tenant may remain in the home for two years according to the Housing Lease Protection Act.
Semi-jeonse (combination of jeonse and monthly lease)
Semi-jeonse refers to a type of lease by which a tenant pays a certain amount of deposit in addition to monthly rent payments. In another type of arrangement, the homeowner receives a monthly rent by converting the increased jeonse price to a monthly rent (usually at an interest rate double that of a bank deposit interest rate). For instance, when the jeonse price for a property has risen from KRW 300 million to 400 million over two years, the homeowner receives an additional KRW 400,000 to 600,000 a month, applying the interest rate of a monthly rent for the increased jeonse price of KRW 100 million, in addition to the existing security deposit of KRW 300 million.
The tenant pays a certain amount of deposit and a monthly fee for the use of the property. The amount of deposit for the monthly rent is much smaller than that of jeonse. The guarantee deposits and monthly rents are negotiable with the homeowner before the agreement is made. The tenant must pay utility bills for electricity, water supply, gas, and telecommunications services, including phones, internet connection, and TV since they are excluded from the jeonse or monthly lease agreements. Rental properties do not offer furniture or home appliances, but many multi-family houses and officetels are furnished with basic home appliances, including refrigerators and washing machines.