10/04/2007

Leery of lousy leases, landlords? Get a lien

Leery of lousy leases, landlords? Get a lien

The Korean Herald , July 4, 2003
By Sean Hayes

Dear Sean, I am considering renting an apartment, but the landlord wants a large deposit. Is there any way for me to protect myself against bad landlords that don't return deposits?- sUneasy in Taejon.

Dear Uneasy, there are two main types of residential rental agreements. The most common is Chonse. The Chonse rental system requires a tenant to put approximately 50 percent of the market value of the apartment down as a deposit (key money) and then the deposit is returned at the end of the lease term.

The second most popular rental agreement is the Wolse system. The Wolse system is gaining strength in Korea because of low bank interest rates. The Wolse system also usually requires a sizeable deposit and requires the tenant to pay monthly rent.
The problem with both systems is that you need to trust the integrity and financial stability of the landlord. How do we protect ourselves against landlords that are unwilling or unable to return rental deposits?

The House Lease Protection Act and the Civil Code provide protection for your deposit if you create a security lien (Chonsegwon Seoljung) on the real property in the amount of your deposit. If yous execute the lien, you can move out of the rental property and still be sure you will get back your deposit after the rent expires, since you have a legally enforceable ownership interest in that part of the property under the lien. It also is a simple procedure to enforce a lien through the court system.

A tenant before obtaining the lien should check the real property registration document to make sure there are no other lien holders that have priority over your lien. It costs a little money to execute the lien, but it is money well spent. Any reputable real estate agent should be able to assist you in executing the lien.

You should note that to register the lien a tenant has to obtain the landlord's approval and sometimes the landlord might not agree to give the tenant approval. If you are giving a sizeable deposit to a landlord it is highly advisable to obtain the lien and prospective tenant should be a little leary of any landlord that will not grant the right to a lien.

Even though you don't have a lien on the property or a landlord will not grant a lien the law does provide protection if you register your place of residence (foreigners register with immigration) and you personally occupy the residence. In the Seoul metropolitan area the law grants a 16 million won (slightly lesser amount in other areas) quasi-lien on the property. The quasi-lien is also easily enforceable in court.

The procedure seems complicated, but Korea recently adopted a small claims court system that drastically reduces the burden of filing suit. A landlord in a small claims court action can be sued for no more than 20 million won. In such proceedings, the plaintiff can institute an action by making an oral statement to the court clerk instead of filing a written petition to the court. Additionally, strict rules of evidence and procedure are waived.

To file suit at small claims courts, which are referred to as either Branch or Municipal courts, view the Supreme Court webpage for the court that handles your area of residence. The website court search page can be viewed at www.scourt.go.kr/kg_p_address.html

The webpage does not provide an English language search and if you need to file suit it is advisable, if your Korean-speaking friend along with you when you give your statement to the court clerk. If you need to file suit for a sum greater than 20 million won it is advisable to visit a local legal professional.

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SeanHayes@ipglegal.com