Korea's 5% Renewal Cap: 20 Million Won on a 400M Jeonse

When a tenant exercises the contract renewal right, any deposit increase is capped at 5% of the previous amount. On a 400 million won jeonse (a lump-sum deposit lease with no monthly rent) that is 20 million won; on 600 million won it is 30 million. A landlord asking for more has no legal basis. The requirements of Article 6-3 of the Housing Lease Protection Act, as summarised by Korea's Easy Law portal, are specific: the request must be made between six and two months before expiry, it can be used once, and it secures another two years.

Disputes rarely turn on the 5% itself. They turn on the form the increase takes — added to the deposit, or converted into monthly rent — because the tenant's actual outlay differs, and a second statutory ceiling applies to that conversion.

What 5% actually comes to

The arithmetic is simple but lands differently at each price level. Multiply the previous deposit by 0.05 for the cap; to express that increase as monthly rent instead, multiply by the statutory conversion rate and divide by twelve.

On a 400 million won jeonse that is 83,333 won a month, or one million won a year. Which option costs less depends on where the extra 20 million comes from. If a credit loan would carry more than 5% interest, converting to rent is cheaper; if savings cover it, raising the deposit costs less in total.

Five percent is a ceiling, not a baseline. The law sets a line that cannot be crossed — it does not say the rent has to rise at all.

How much monthly rent can a conversion produce?

Article 7-2 of the Housing Lease Protection Act sets the ceiling for converting a deposit into monthly rent. Under the article and Article 9 of its Enforcement Decree, published on the National Law Information Center, the applicable rate is the lower of two figures: 10% per year as fixed by the decree, or the Bank of Korea base rate plus 2 percentage points.

The base rate stands at 3.00% as of September 2026, the level assumed in the Bank of Korea's Monetary Policy Report. Since 3.00% + 2% = 5.00% is below 10%, the statutory conversion rate today is 5.00% per year.

That rate tracks the base rate. Converting a 20 million won increase into rent produces these figures across scenarios.

Every 0.25 point rise in the base rate adds 4,167 won a month to a 20 million won conversion. Above a base rate of 8%, the 10% ceiling binds first and the figure stops climbing.

The sequence matters, though. Guidance from the Ministry of Land, Infrastructure and Transport, summarised by Korea Policy Briefing, holds that a renewed lease is treated as re-signed on the same terms, so switching from jeonse to monthly rent is not possible without the tenant's consent. The conversion rate is a ceiling that applies after the tenant agrees — not a basis for the landlord to convert unilaterally.

Converting part of the deposit

Partial conversion uses the same formula. Renew a 400 million won jeonse with the full 5% increase to 420 million, then cut the deposit to 200 million, and the amount subject to conversion is 220 million won.

Each 100 million won cut from the deposit adds 416,667 won of monthly rent. A smaller deposit also changes the coverage calculation for deposit-return guarantee insurance, and the appearance of monthly rent brings the rental tax credit into play. Monthly rent above 300,000 won also triggers the lease reporting requirement.

The ten grounds for refusing renewal

A landlord cannot refuse a renewal request without just cause. The statute lists ten grounds.

• The tenant has fallen behind by an amount equal to two months' rent
• The tenant obtained the lease by false or improper means
• The landlord has provided substantial compensation by mutual agreement
• The tenant sublet all or part of the property without consent
• The tenant damaged the property intentionally or through gross negligence
• All or part of the property has been destroyed, making the lease purpose unattainable
• Demolition or reconstruction is necessary
• The landlord, or a lineal ascendant or descendant, intends to live there
• The tenant has substantially breached tenant obligations
• Any other serious reason making continuation of the lease difficult

The eighth ground — the landlord's own occupancy — is the one invoked most often in practice. A landlord who refuses on that basis and then leases to a third party instead becomes liable for damages, and courts have placed the burden of substantiating genuine intent on the landlord.

How implied renewal differs

A lease can also extend without the renewal right being used at all. If the landlord gives no notice of refusal or changed terms between six and two months before expiry, the lease continues on the same terms. That is implied renewal.

Implied renewal is often the better outcome for a tenant: rent stays put and the one-time renewal right remains available for the following term. But it fails to arise if the landlord gives notice of changed terms by the two-month mark, which makes that date the real dividing line.

What to check

• The window running from six months to two months before expiry — a request outside it has no effect
• Send the request in a form that leaves a dated record, such as certified mail or text message; verbal notice is hard to prove later
• What 5% of the previous deposit actually equals — it is a ceiling, not a starting point
• If offered a conversion to monthly rent, check the Bank of Korea base rate and apply the lower of (base rate + 2%) and 10% yourself
• Whether the renewal right has already been used once — it is available one time, and implied renewal does not consume it
• If refused on owner-occupancy grounds, the subsequent tenancy history of the unit — damages are available if no one moved in
• Whether a new fixed-date stamp is needed after a deposit change; priority on the increased portion runs from the new date

Sources

• Easy Law — Renewal of a housing lease contract
• National Law Information Center — Housing Lease Protection Act
• Korea Policy Briefing — Can jeonse be converted to monthly rent when the renewal right is exercised?
• Bank of Korea — Monetary Policy Report (September 2026)