Korean Job Discussion Forums

[wylies99]

Falling jeonse prices hurt apt. owners
http://joongangdaily.joins.com/article/view.asp?aid=2899025

December 24, 2008
Han Joon-soo, 32, lives in a 99-square-meter (1,066-square-foot) apartment in Jamsil under a lease system commonly known as jeonse, where a tenant pays a lump-sum deposit to reside in a housing unit for a contracted period.

With five months left on his contract, Han signed another jeonse contract for a 132-square-meter apartment nearby. He paid 5 million won ($3,739) out of the total 280 million won as a down payment.

But his hopes of moving to a larger apartment vanished along with the 5 million won after his previous landlord delayed the return of the deposit. Han couldn�t make the rest of the payment for the new apartment.

In the past, an apartment owner would use jeonse money from a new tenant to repay the one that�s leaving. But falling real estate values have made that more difficult. Landlords are also scrabbling to cover deposit returns for residents whose contracts are coming to an end.

Recently, homeowners are frequenting visiting banks, not to take out loans to buy new apartments but to get loans to repay jeonse money to their tenants. Inquiries about such loans have shot up since September, said Kim Gang-tae, who works at Kookmin Bank in Bundang, Gyeonggi.

Some of the landlords and residents have even gone to court to settle their disputes.

�In the past, there were just one or two cases but nowadays we get five to six calls a day asking about lawsuits regarding deposit returns,� said Lee Jong-seon, a judicial scrivener.

Falling jeonse prices are also affecting the Seoul metropolitan government�s ambitious policy of providing long-term jeonse apartments.

To ease the burden of Seoul residents who in the past had to move every few years and come up with lease deposits, the Seoul government offered an opportunity for residents to live up to 20 years with a deposit that is at most 80 percent of the jeonse leases offered in neighboring areas.

For example, the Seoul government offered 109-square-meter apartments in Seongbuk, northern Seoul, for a jeonse deposit of 145 million won. However, due to falling jeonse prices, the jeonse deposit of neighboring houses was 140 million won.

�We came up with the price after studying the neighborhood for a month,� said a Seoul government official. �The neighboring jeonse deposit fell further in such a short period.�

Landlords are employing various methods in trying to attract new residents.

�There are landlords who renew contracts or find new residents under the condition that the owners make improvements to the apartments,� said Seo Jae-pil, who owns Eulji Realtor in Junggye, Seoul. Fearing that the jeonse prices could fall further, some of the landlords have chosen to reduce the contract period from two years to one year to attract new residents. Some experts say the worsening jeonse market will only contribute to the further stagnation of the real estate transaction market despite government efforts including the easing of real estate regulations.

�The jeonse situation is hindering the real estate market,� said Cho Man, a professor at the Korea Development Institute.



By Hwang Jeong-il, Im Jeong-ok JoongAng Ilbo [[email protected]]

[wylies99]

[flakfizer]

Scrabbling?

[bassexpander]

If they don't return your month within a certain period, it is my understanding that you can take them to court easily through a special office for this. The owner can be forced to sell it to pay you.

Of course, this does little good for a teacher leaving at the end of a contract.

[jdog2050]

so wait then...Jeonse is just a big ponzi scheme?

[mises]

[sobriquet]

[marlow]

[marlow]

[sobriquet]

[JongnoGuru]

[Donghae]

My wife and I have a property in Korea which is let out with jeonse. My understanding has always been that whilst, of course, at the end of the contract if the tenant wants to move out and asks for their money back, then the landlord MUST return it immediately. But if the tenant wants to move out and get their money back before the end of the contract, then that is subject to a replacement tenant being found. As I understood it, the landlord's legal duty is to promptly return the money at the end of the contract, not at some earlier stage when the tenant doesn't want to be there any more.

So I think the above joongang article is a little misleading. The tenant referred to may have been unlucky that in the present economic climate, no replacement tenant could be found to match the sum they paid in jeonse. But that's a risk he should have been aware of when he put money down for his new place with 5 months left on his existing contract and I don't think the landlord in that particular case has done anything wrong.

[bassexpander]

I'm no expert, but I do know my wife mentioned that there is some office where you can find out if the current owner of your place owes on the home you're renting from him/her. It may also tell you other things about that owner (like if they own other properties), although I'm not 100 percent sure what.

That way, you can at least learn if the person renting your place is in some financial difficulty (although I'm sure this isn't fulproof).

[Beej]

[Bondrock]