Rent and Deposits

Information on renting accommodation and paying a deposit when renting property in South Korea...

There are three systems of rent and deposit payment (or "key money") in the South Korean rental market: jeonsei and two wolse systems.

Jeonsei

Jeonsei (or jeonse) translates as money in full, but is also referred to as key money. It is a uniquely Korean system where a large deposit is paid up front and no monthly rent paid. It is typical for a tenant to give the landlord key money to a value of between 25 percent and 80 percent of the property's value. The tenant does not then pay monthly rent, but does pay for utilities.

When the agreed period of tenancy, which by law is two years, comes to an end, the key money is returned to the tenant without interest. The tenant must then move out. A landlord may keep some of the key money to cover the cost of damages and repair work to the property. If the landlord is unable to return the key money, the tenant can remain in the property until they receive it. In this system, the landlord's income is the investment returned on the deposit during the tenancy period.

The wolse or sageulse system

The wolse or sageulse system is based on the payment of monthly rent and a deposit, which is generally two to three times the monthly rent. A smaller monthly rent is charged if a larger deposit is paid. Tenancy agreements are typically two years long and if tenants have to wait for their deposit to be returned, they can remain in the property for free.

A variant on the wolse system

The third system is a variant on the wolse system where landlords have all of the rent, for the full lease period, paid before the tenant moves in. No deposit is paid in this system. Unless it is specifically stated in the rental contract, no money is returned if the tenant moves out early.

It is common for large deposits to be paid when renting property in South Korea. It is therefore advisable to establish a legally binding agreement as a security to make that the money is returned. In this case, the House Lease Protection Act covers the return of a tenant's deposit. A landlord's approval is needed to establish the agreement, which should be for the amount of the deposit paid. Estate agents should be able to provide assistance in establishing the agreement.