Ms. Kim, a tenant living in Apartment A (101㎡) in Songdo-dong, Yeonsu-gu, Incheon, has been feeling anxious lately as she is facing the expiration of her global medication. A few days ago, she called her landlord to say, “Thank you for everything. I’m moving out in three months, so please make arrangements to return the deposit,” but she received a vague reply saying, “I’ll try my best to return it.
Two years ago, in April 2021, Kim signed a lease for 500 million won. Now, the rental price has dropped to 380 million won (based on March transactions). “They said they would return the money, but I’m worried about their response,” Kim said, adding, “I’m about to move into a new apartment, so if I don’t get my money back, I’ll literally be blown away.”
An apartment in downtown Seoul. Not for publication/News1
With rental prices peaking and falling, the backlash is likely to intensify in neighborhoods where a large amount of new construction is planned. The high supply has pushed down rental prices, making it difficult for landlords to return deposits to tenants. In particular, in the Incheon area, where rental prices rose the most two years ago, there are many places where rental prices have fallen to the 100-200 million won range, mainly in large areas. What should I do if I were a tenant in this situation?
According to the real estate industry and legal circles on the 28th, the response should be different depending on the situation of the landlord and tenant. If you’re a renter, you want to get your money back if the rental price drops. Especially if it’s a loan, you’ll save on interest payments. If the rental price drops, they have no choice but to ask for their deposit back.
On the other hand, it’s not common for a landlord to keep the security deposit that you received when you signed the lease. You can add more money to the deposit to buy your own place, or you can use it to make a gap investment. There are also cases of gap investing with a loan, as well as gap investing with no capital.
As a landlord, you’re in a tough spot if your tenant wants their security deposit back. You might try to come up with the money, but if the rent drops too much for you to handle, you could end up with a “worst case scenario” where you can’t give it back.
In the event of a reversal, the tenant should make it clear that they will not renew the lease under the same terms at least two months before the lease expires. The tenant should leave evidence such as a KakaoTalk message, text message, or phone recording to prove it.
If the tenant has a rental guarantee insurance policy, you can file a claim with the Housing and Urban Guarantee Corporation (HUG) (although you won’t get your deposit back immediately), but if they don’t, you’ll have a headache. There are a lot of landlords who are actively lowering the rental price to find a new tenant and make up the difference, but there are a lot of landlords who don’t lower the deposit and say that they can’t find a new tenant. In that case, the tenant should actively exercise their rights, such as filing a lawsuit.
If the tenant is able to move elsewhere, you can maintain the right of defense and priority defense through a lease registration order and actively claim the security deposit and delayed interest from the landlord. Delayed interest, in particular, can be quite burdensome for landlords.
“If you file a lawsuit against the landlord for the return of the deposit and win the case, you can claim delayed interest of 5% from the day after the tenant moves out of the sublet house to the time of service of the lawsuit, and 12% per year from the day after that,” said Kim Yong-woo, a lawyer at Barun Law Firm specializing in real estate, “and if you win, you can auction the property먹튀검증.”
Of course, the lawyer’s fees can be burdensome for the tenant, but if you win, you can claim a portion of the lawyer’s fees from the landlord. For the first trial, the deposit is 100 million won ($77.4 million), 10 million won for 200 million won, and 13.4 million won for 500 million won. However, you must go through a separate legal fee reimbursement procedure to get the actual legal fees back from the landlord.
If there is a bank mortgage in priority, it is difficult to get back the entire rental deposit through the current system, even through an auction. Therefore, the government is improving the system by giving the tenant the right of first refusal and supporting long-term low-interest loans.
What if the tenant is unable to move elsewhere, and cannot claim delayed interest without moving out, then a lawsuit is virtually pointless. “The only realistic option is to negotiate with your landlord and get back rent,” says Kim. Reverse rent is a method in which a landlord who cannot afford to return the deposit when the market price of the previous month’s rent falls from the original contract pays interest to the tenant on the difference in the deposit.
“You can put it up for auction through enforcement, but even that is difficult if there is a senior mortgage,” said Seo Jin-hyung, professor of product planning and business at MD Kyungin University (co-chairman of the Fair Housing Forum). “In reality, it seems that you have no choice but to pay interest to the landlord through reverse rent and hold on until you have the money.”