The Newest Housing Lease Protection Act -Can it Protect Tenants from Housing Dispalcements?

The Newest Housing Lease Protection Act

-Can it Protect Tenants from Housing Dispalcements?

Abstract

Nowadays, urban problems threaten residents from their residential area. One of the biggest problems of urban life in South Korean is gentrification, which is a phenomenon where lower-income residents are forced to move out from the nucleus city because of rising prices. To prevent minorities being pushed out, the government has come up with many solutions. The Korean government’s housing policies have been striving to curb runaway housing prices and establish a formal housing market where residents could be protected from involuntary displacement. One of the strongest, most common method to defend the rights of residents is the Housing Lease Protection Act. This essay will first clarify the definition of gentrification and then explain the purpose of the Housing Lease Protection Act concentrating on Article 6-3, which was recently made to understand the latest interest reflected.

 

. Necessity of Solving the Problem of Housing Lease

Today city problems are quite common throughout Korean cities. These city problems not only threaten the freedom of residence and the right to move but also affects citizens’ quality of life. Especially, as rent prices in nucleus districts skyrocket, finding housings with rational rents is one of the hottest issues. Nowadays, gentrification is a critical factor that cause city problems in South Korea. As these problems arise, both the legislative branch and the judicial branch work hard to establish rational rent prices and protect citizens from unwilling displacement. However, despite this endeavor, rents are again rising, and people are moving in search for lower rent prices that are more affordable. This type of problem can only be solved on a policy and legal as it needs support from the whole country and city.

To provide better policies and laws that improve citizens’ quality of life and protect their right of residence, the country should clarify the cause of gentrification and seek a better solution, such as strengthening regulatory laws.

This essay will clarify the concept of gentrification and find a more probable solution to this problem, especially in regard of the Housing Lease Protection Act.

Ⅱ. What is Gentrification?

Traditionally, ‘Gentrification’ is a phenomenon caused by lack of amount of land and overcrowding of cities. Changing the usage of land and high-density developing of an area can cause rent prices to rise, which leads to tenants having to move out. Tenants lose their former housings and must move to areas with lower rent prices. Eventually, it’s close to impossible for them to move back to where they originally lived since rent prices have skyrocketed even more since they moved out, due to further urban development in that neighborhood.

Originally the term ‘Gentrification’ was first used by Ruth Glass to explain the economic, unwilling movement of poor Londoners. Middle-class people displaced lower-class residents in urban neighborhoods by moving into the area and changing their lifestyles. The lower-class people cannot afford the increase in rent prices, mortgages, and property taxes of their neighborhood and therefore must move out. Ruth Glass named this phenomenon as ‘Gentrification’, using the traditional English word ‘gentry’.

In South Korea the term is used similarly, but also has another meaning that better represents the problems unique to South Korea. It indicates the displacement of tenants who cannot afford the increase in rent which rises caused by redevelopment and reconstruction of the area. Not only do rent prices rise by redevelopment and reconstruction of the neighborhood, but also increase in housing rent caused by skyrocketing rent prices of commercial buildings.[1]

Ⅲ. Housing Lease Protection Act

  1. What is Housing Lease Protection Act?

The Housing Lease Protection Act is one of the Civil Special Law to secure stability in the residential life of citizens with respect to the lease of buildings for residence. The supreme court decisions and amendments show that this act aims to eliminate the underlying causes of eviction and involuntary displacement and secure residence status of all citizens.

There are more than 30 provisions in the Housing Lease Protection Act. Therefore, because the newest provision reflects the increase in awareness of housing problems, this essay will focus on the newest provision made in 2020. 7. 31. Furthermore, this essay will also assess the effectiveness of the provision by looking at the range of protection the provision offers and the mainstream argument about its range of protection.

  1. Article 6-3 (Request for Renewal of Contract, etc.)
(1) Notwithstanding Article 6, where a lessee requests the renewal of a contract within the period prescribed in the former part of Article 6 (1), a lessor shall not refuse the request without good reason: Provided, That the same shall not apply to any of the following cases:

 

(2) A lessee may exercise the right to request the renewal of a contract under paragraph (1) only once. In such cases, the term of a renewed lease shall be deemed two years.
(3) A renewed lease shall be deemed entered into under the same conditions as those of the former lease: Provided, that a rent and deposit may be increased or decreased within the extent under Article 7.
(4) Article 6-2 shall apply mutatis mutandis to the termination of a lease to be renewed pursuant to paragraph (1).
(5)  Where a lessor leases the intended house to a third person without good reason before the expiry of the term which would have been renewed if the request for renewal had not been refused, despite of the refusal of renewal on the ground prescribed in paragraph (1) 8, he/she shall compensate for the loss suffered by the lessee due to such refusal.
(6)  The amount of compensation for loss referred to in paragraph (5) shall be the greater of the following amounts, unless an agreement is reached between the parties concerned on the scheduled amount of compensation at the time of refusal:

(The rest omitted)

[This Article Newly Inserted on Jul. 31, 2020]

  1. Who does the Provision Protect?

(1) Introduction

The Housing Lease Protection Act article 6-3 generally protects lessees, excluding exceptional cases written below the article 6-3 (1). The exceptions are written down below.

1. Where the lessee has been in arrears with a rent equivalent to an amount of two months’ rent;
2. Where the lessee has entered into a lease by fraud or other improper means;
3. Where the lessor has provided the lessee with substantial compensation by mutual consent;
4. Where the lessee has subleased all or part of the intended house without the consent of the lessor;
5. Where the lessee has caused damage to all or part of the leased house by intention or gross negligence;
6. Where the purpose of the lease is not fulfilled because all or part of the leased house has been destroyed;
7. Where the occupancy of the intended house needs to be recovered in order for the lessor to demolish or reconstruct all or part of such house on any of the following grounds:
(a) Where, at the time of entering into the lease contract, the lessor notifies the lessee of a plan for demolition or reconstruction specifically including the time and required period of the relevant construction and complies with the plan;
(b) Where a safety accident is likely to occur as the building is old, damaged, partially destroyed;
(c) Where demolition or reconstruction is conducted pursuant to other statutes or regulations;
8. Where the lessor (including his/her lineal ascendants and lineal descendants) intends to actually reside in the intended house;
9. Where the lessee has seriously failed to fulfill the obligations as a lessor or has significant reasons making it difficult to continue the lease.

In addition to these exceptions, there are some other cases with controversies.

(2) Foreign lessee[2]

The Housing Lease Protection Act protects stability of the residential life of lessees. Article 3 clarifies that a lessee can argue his right against any third party if provided with a house and has completed the resident registration. This article protects unregistered lessees from losing their housing due to an involvement of a third party. Furthermore, Immigration Act article 88-2 regulates the fact that a foreigner can substitute alien registration certification or a certification of an alien registration for resident registration. In addition, the supreme court has decided that although an alien registration certification may have weaker public announcing function, both the alien registration and the resident registration are same in regard of the announcing function of the presence of a lessee. Therefore, even though foreigners do not have Korean nationality, if the Housing Lease Protection Act do not require special registration, foreigners can also be protected by this Act. If the Act does require specific requirements such as resident registration, foreigners can submit their registration as a substitute. This indicates that the newly made article also protects foreigners without special requirements, as it does not require special registrations to Korean citizens.

(3) Corporate body[3]

The supreme court precedent clarifies that the Housing Lease Protection Act does not protect corporate body as a lessee. The Act is designed to protect individual lessees who are natural men, not corporate bodies. Also, as a corporate body lessee cannot complete the resident registration, it cannot be protected by the law which requires such process to request protection. The Korean academia also takes this stance without many opposing opinions.

(4) Unregistered person with a right to lease on a deposit basis[4]

An unregistered creditor of lease is a lessee without charter set-up documents or registration. However, the right to lease on a deposit basis is a real right which requires registration. Therefore, the right to lease on a deposit basis can be divided into 2 rights; one with the registration is considered as a real right and the other without the registration cannot be considered as a real right. The Housing Lease Protection Act is applied correspondingly to the unregistered lease, therefore ending the debate between different schools. Therefore, there are no other opinions conceding the fact that an unregistered person with the right to lease on a deposit basis also has the right mentioned in Article 6-3. However, this does not mean that people who completed the registration can also be protected by the Housing Lease Protection Act; they can assert their own real right with requiring protection by this Act.

  1. Can the new lessor refuse the renewal of the lease contract? – when the lessor sold the house, and the buyer wants to live in the house

Because the article is recently made, there is no unified supreme court precedent on this issue. Therefore, putting together and analyzing the discording precedents written below will provide better understanding about this article.

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The defendant leased a house from A, who is both the owner and lessor since 2018. 12. 3. The complainant bought the house and signed the contract on 2020. 2. 27. and completed the registration of ownership transfer on 2020. 10. 20. After Article 6-3 took effect on 2020. 7. 31., the complainant exercised his right according to the Article 6-3 on 2020. 10. 13. The complainant asserted that he succeeded the status of the former lessor and asked the lessee to give back the leased house as the contraction has expired. The defendant argued that the contract has not yet expired as he exercised his right to renew the contract. The main issue of this case was whether the expiration date of the lease contraction has been extended due to Article 6-3. The court clarified that the defendant’s right to renew the contract was valid, and dismissed the claim of the complainant by Article 6-3 (1) 8, 9. The court decided that according to Article 6-3 (1) 8, A originally did not have the right to refuse the renewal of the contract since the former lessor did not intend to live in the house and A himself did not complete the registration of ownership transfer when claiming his right by Article 6-3. Moreover, because the former lessor did not have the right to refuse the renewal of the contract, the buyer who succeeded his status cannot have this right either. Lastly, the court did not accept this claim about Article 6-3 (1) 9, because the lessee’s right to renew the contract is a Gestaltungsrecht.

However, since this precedent, there have been other decisions such as 2020gadan151924 which did not accept the lessee’s right to renew the contract, mainly due to the fact that the lessor is actually willing to live in the house.[5]

Ⅳ. Conclusion

The Housing Lease Protection Act is successful in many ways as it protects tenants from housing displacements and provides a necessary level of residential area, eventually improving the quality of life of many citizens. Through the newest article, the Act is trying to include as many individuals as possible and rights that it can afford to protect, therefore, protecting numerous citizens and their rights. However, the newly enacted article does not include corporate bodies and, workers who live in the housings leased and provided by a corporate body. In addition, there is no supreme court decision that clarifies the argument on situations where a new lessor refusing the renewal of contract to live in the house. Seemingly, the Act is trying to protect more citizens and rights to make a better residential area, there are still people who are not protected by this Act. Therefore, the Housing Lease Protection Act should keep up its good work but also, at the same time should try to prevent city problems beforehand and embrace a maximum range of citizens and rights it can cover to make a better residential area.

 

 

References

H.Shin (ed.), Anti-gentrification: What is to be Done, Dongnyok, 17-18, (2017)

Lee, Right to Request Contract Renewal and a Monthly Rent Cap under the Housing Lease Protection Act, The Association of Theory and Practice of Private Law, vol.24, no.3, 331, 334-336, (2021).

Choi, Study on the Actual Residence of the Lessor among the Grounds for Refusal of Renewal of Article 6-3 of the Housing Lease Protection Act, Chung-Ang Law Association, 52, 57-59, vol.24, no.1, issue 83, (2022).

 

 

[1] H.Shin (ed.), Anti-gentrification: What is to be Done, Dongnyok, 17-18, (2017)

[2] S. Lee, Right to Request Contract Renewal and a Monthly Rent Cap under the Housing Lease Protection Act, The Association of Theory and Practice of Private Law, vol.24, no.3, 331, 334-336, 2021.

[3] Supra note 1, at 5, 331, 336-338, 2021.

[4] Supra note 1, at 5, 331, 338-342, 2021.

[5] J. Choi, Study on the Actual Residence of the Lessor among the Grounds for Refusal of Renewal of Article 6-3 of the Housing Lease Protection Act, Chung-Ang Law Association, 52, 57-59, vol.24, no.1, issue 83, (2022).

 

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Posted in Autumn 2022.