The statutory ceiling for converting a jeonse (lump-sum deposit lease) into monthly rent stands at 4.75% a year as of August 2026. The Bank of Korea base rate history shows the rate rising from 2.50% to 2.75% on July 16, 2026; adding the 2% set by presidential decree gives 4.75%. That is 0.25 percentage points above the 4.5% that applied until then.
The rent conversion calculator run by the Korea Real Estate Board and LH's lease dispute mediation committee uses the same formula: the capped conversion rate under Article 7-2 of the Housing Lease Protection Act plus the Bank of Korea base rate. In August 2022 that was 2.5% + 2.0% = 4.5%; from July 16, 2026 it is 2.75% + 2.0% = 4.75%.
How 4.5% became 4.75%
Article 7-2 of the Housing Lease Protection Act sets two ceilings on the rate used when part or all of a deposit is converted into monthly rent. One is a flat 10% a year. The other is the Bank of Korea base rate plus a figure fixed by enforcement decree, currently 2%. Whichever comes out lower is the binding cap.
With the base rate at 2.75%, the second test yields 4.75% — far below the 10% ceiling. In practice, therefore, the operative number is always the base-rate-plus-2% figure. The 10% clause would only bind if the base rate climbed above 8%.
Because of that structure, the statutory cap moves automatically with monetary policy decisions. Whatever a landlord and tenant wrote into the contract, the ceiling shifts the moment the base rate does. When the rate fell to 2.50% on May 29, 2025 the cap sat at 4.5%; the July 16, 2026 hike carried it back to 4.75%.
The statutory rate is not a formula for setting rent. It is a ceiling that cannot be crossed — when the base rate rises, the ceiling rises, not the rent itself.
What converting 100 million won of deposit actually costs
The arithmetic is simple: monthly rent = converted deposit × rate ÷ 12. Reducing a 300 million won jeonse to a 100 million won deposit leaves 200 million won converted; at 4.75% that is 9.5 million won a year, or 791,667 won a month at the cap. The table below runs the new ceiling against the old 4.5% figure across deposit brackets.
| Deposit converted (won) | Rent cap at 4.75% (won) | Old cap at 4.5% (won) | Monthly difference (won) | Over 2 years (won) |
|---|---|---|---|---|
| 50M | 197,917 | 187,500 | 10,417 | 250,000 |
| 100M | 395,833 | 375,000 | 20,833 | 500,000 |
| 200M | 791,667 | 750,000 | 41,667 | 1,000,000 |
| 300M | 1,187,500 | 1,125,000 | 62,500 | 1,500,000 |
One rule of thumb falls out of the table. Every 0.25 percentage point on the base rate lifts the monthly ceiling by exactly 20,833 won per 100 million won converted — that is 100,000,000 × 0.25% divided by twelve. Convert 200 million and it is 41,667 won; convert 300 million and it is 62,500 won. If the next rate decision moves another quarter point, add or subtract the same amount.
Across a standard two-year lease, a contract converting 200 million won differs by one million won depending on whether it was signed before or after July 16. That said, this is movement in the ceiling, not in actual rents. Agreeing on anything below the cap remains entirely possible.
Which contracts the cap actually binds
The statutory rate bites in a narrow range of situations: converting deposit to rent while an existing lease continues, and conversions carried out when a tenant exercises the statutory renewal right. A brand-new lease with a different tenant is not bound and can be priced at market. So a 5–6% conversion rate on new contracts in the same complex and unit size is not, by itself, unlawful.
Consent is the other point. Switching a live lease from jeonse to monthly rent changes the contract terms, so a landlord cannot impose it by notice alone; at renewal the same requirement for agreement applies. Staying under the cap does not by itself create grounds to force the conversion.
Before arguing about renewal terms, establish how the lease actually rolled over. Which rules apply turns on the line between implied renewal and exercising the statutory renewal right. Whether the amended contract needs to be filed is a separate question — worth checking alongside the 60-million-won deposit and 300,000-won rent thresholds that define the lease reporting requirement.
What to check
- The base rate on the date of conversion in your contract — 4.5% before July 16, 2026, 4.75% after
- The converted amount — the basis is the original deposit minus the remaining deposit, not the full deposit
- Proposed rent × 12 ÷ converted deposit — work backwards and see whether it exceeds 4.75%
- Whether this is a new lease or a change of terms on an existing one — new leases are not bound by the cap
- Actual conversion rates for your area and housing type, via the Korea Real Estate Board's R-ONE statistics portal
- The Monetary Policy Board's next decision date — the ceiling moves whenever the base rate does