The lease renewal right (gyeyak-gaengshin cheonggukkwon) and rent ceiling system (jeonwolse sanghanjeul) introduced by the July 2020 amendment to the Housing Lease Protection Act give tenants the right to demand a two-year extension once, and cap rent increases at no more than 5% of the prior contract. The statutory text looks simple, but real dispute points — from "how exactly is the 5% calculated?" to "what grounds allow the landlord to refuse?" — are scattered throughout the actual contracting process. This article walks through the commonly contested points by the numbers and the legal text.
The Structure of the 5% Cap Calculation
The 5% ceiling under the rent control system is calculated based on the prior rent. For monthly rent, it is 5% of the prior monthly amount; for a lump-sum deposit (jeonse, chonsei), it is 5% of the prior deposit. The first dispute starts here. In a hybrid "semi-jeonse" contract (bujeonse, deposit-plus-monthly-rent), the deposit and monthly rent must be converted to a single benchmark — and the conversion uses the statutory jeonse-to-monthly conversion rate. That rate is derived by adding a rate set by presidential decree to the Bank of Korea base rate. Because the statutory conversion rate moves with the base rate, both tenants and landlords are confused by the need to verify the applicable figure at the time of each contract.
The calculation steps are summarized below.
| Contract Type | Cap Calculation Basis | Key Notes |
|---|---|---|
| Pure jeonse (lump-sum deposit) | Prior deposit × 1.05 | Based on the prior contract amount, regardless of current market rent |
| Pure monthly rent | Prior monthly rent × 1.05 (if deposit unchanged) | Conversion required if deposit changes |
| Semi-jeonse (deposit + monthly rent) | Combined conversion of deposit and monthly rent × 1.05 | Must apply the statutory jeonse-to-monthly conversion rate |
Another issue is local government ordinances. The 5% ceiling under the Housing Lease Protection Act is a maximum, not a default. Where a local ordinance sets a lower rate, that lower rate takes precedence. Assuming "5% is always fine" is therefore risky. End-users must separately verify the rate set by the ordinance of the relevant local government (si/gun/gu).
Grounds on Which a Landlord May Refuse Renewal — The Contested Points
The area generating the most disputes under the lease renewal right is the grounds for refusal. The Housing Lease Protection Act enumerates the grounds on which a landlord may refuse a renewal request, and the most frequently invoked is "owner occupancy" — the landlord or a direct lineal relative intends to actually live in the property.
The core of lease renewal disputes is not "calculating the 5%" — it is how to prove the genuineness of the stated refusal ground.
The problem is that the tenant cannot verify the sincerity of the stated intention to occupy in advance. Cases have been reported where landlords re-rented the unit after the tenant vacated, and a provision exists allowing the tenant to claim damages equivalent to three months' rent in such cases. However, the realistic burden remains that the tenant must independently confirm the fact of re-renting and substantiate the claim.
Other grounds for refusal include: the tenant has delayed rent payment two or more times, the tenant has sublet without the landlord's consent, or the landlord intends to demolish or reconstruct the property. As Yonhap News reported in the Jeonju mechanical room noise case, courts have also found contract rescission justified where the landlord concealed a defect that existed before the contract was signed — that is a ruling on the initial contracting stage, not a renewal, but it illustrates how broadly courts are interpreting the landlord's duty to disclose.
The New Contract After Renewal — The Context Created by the "Market Recovery" Window
The lease renewal right may only be exercised once. When the two-year renewal period ends, the landlord may enter a new contract at market rates. The possibility of sharp price corrections in the jeonse market at this juncture has been a point of controversy since the system was introduced. If market jeonse prices have risen sharply during the renewal period, the deposit increase a tenant faces at the new contract feels as though four years of price increases have landed all at once.
Conversely, in the current market environment where Seoul apartment transactions have declined as wait-and-see sentiment has deepened following the capital gains tax surcharge, the direction in which jeonse supply itself shrinks or grows directly affects tenants' negotiating leverage. More landlords choosing to hold off on selling could temporarily increase jeonse supply; conversely, shifts toward gifting or adding space could reduce it. The combination of the renewal expiry date and market trends governs the negotiating conditions for end-users.
One thing commonly overlooked when drafting a renewal contract is explicitly stating that the renewal right has been exercised. If the renewal contract does not include language such as "this contract is entered into pursuant to the exercise of the lease renewal right," whether the contract used the renewal right can itself become a point of dispute later. That single line determines the legal standing for the next two years.
Checklist
- Confirm that the current lease contract clearly states the deposit and monthly rent amounts, and if it is a semi-jeonse contract, that both items appear.
- Before applying the 5% cap, check whether the relevant local government's ordinance sets a ceiling lower than 5%.
- For a semi-jeonse contract, verify the statutory jeonse-to-monthly conversion rate at the time of renewal from the Ministry of Land, Infrastructure and Transport or the Bank of Korea's public figures.
- Confirm that the renewal contract states that "this contract is entered into pursuant to the exercise of the lease renewal right."
- If the landlord has refused renewal on grounds of owner occupancy, consider whether it is possible to verify subsequent re-renting through address registration inquiries (lease contract disclosure check).
- Calculate in advance when the post-renewal new contract negotiation will occur, and verify the surrounding jeonse market trends at that time through the Ministry of Land, Infrastructure and Transport's real transaction disclosure system.