Deposit, monthly rent and jeonse: how Korean rent works and how to avoid deposit fraud

Renting a room in Korea is different from many countries. You usually pay a large refundable deposit first, then rent every month. Most students and new workers choose a monthly-rent room. A room usually has four kinds of costs:

• Deposit (보증금): money you give the owner at the start. You get it back when you move out, if there is no unpaid rent or damage. It is often much larger than one month’s rent.
• Monthly rent (월세): paid every month on a fixed day, usually by bank transfer.
• Maintenance fee (관리비): a monthly fee for the building, such as cleaning, common-area electricity or the elevator. What it includes is different for each building, so ask for a list.
• Utilities: electricity, gas (heating and hot water) and water. In some buildings, water or internet is in the maintenance fee. Gas bills are usually higher in winter.

Jeonse and how deposit fraud happens

With jeonse (전세), you pay a very large deposit and no monthly rent. At the end of the contract, the owner must return the whole deposit. This can be risky for newcomers. The amount is huge, it is hard to check the real value of a house in a new country, and owners often return the money only after they find the next tenant. Deposit fraud also happens with monthly-rent rooms. Common patterns:

• Loans plus deposits are more than the house is worth: the owner’s bank loans (mortgages, 근저당) and all tenants’ deposits add up to more than the property’s value. If the house is sold at auction, there may not be enough money to return your deposit.
• Fake owner: someone uses a fake ID or pretends to be the owner’s agent, takes your money and disappears.
• Double contracts: the same room is rented to more than one person, or a person who only rents the room rents it out again and keeps your deposit.
• Same-day tricks: the owner takes a new loan or sells the house around your move-in day. Your legal protection starts only from the next day, so the new loan can come before your deposit.

Warning signs

• The deposit is almost the same as the price of the house.
• The owner can’t meet you, or only talks through another person.
• You are asked to send money to someone who is not the owner on the registry.
• You are rushed: “Many people want this room. Send a holding deposit now.”
• You hear “There’s no need to check the registry,” or nobody will show you the documents.
• The price is much lower than similar rooms nearby.

How to protect your deposit, from contract to move-out

1. 1

   Use a registered broker

   Use a licensed real estate broker (공인중개사). The office registration certificate must be displayed in the office. Check that the office name and the agent’s name match the contract.

2. 2

   Check the registry on contract day

   Look at the property registry (등기부등본) on the Internet Registry Office (인터넷등기소). Anyone can view it for a small fee. Check the owner’s name and any mortgages (근저당). Add the loans and the other tenants’ deposits, and compare the total with the property’s value.

3. 3

   Meet the real owner

   Check that the ID of the person signing matches the owner on the registry. If someone signs for the owner, ask for a power of attorney and the owner’s certificate of seal impression (인감증명서).

4. 4

   Pay only into the owner’s own account

   Send the contract deposit and the balance only to a bank account in the owner’s name, the same name as on the registry. Keep the transfer records and receipts.

5. 5

   Get a fixed-date stamp and report your address

   Soon after signing, get a fixed-date stamp (확정일자) on your lease at a community service center (주민센터) or a registry office. On move-in day, report your new address. For foreigners, the change-of-address report (체류지 변경신고) at a community service center, an immigration office or on HiKorea counts as the move-in report (전입신고). Living in the room, the address report and the fixed-date stamp together help protect your deposit. This protection starts from the next day.

6. 6

   Consider a deposit-return guarantee

   Some public and private guarantee providers offer a deposit-return guarantee (보증금 반환보증). If the owner can’t return your deposit, the provider pays it instead. Conditions and fees differ, and not every house or tenant can join, so ask before you sign.

1. 1

   Before move-out: give notice

   Tell the owner well before the contract ends. A written message is best, so you have a record.

2. 2

   Move-out day: settle the last bills

   Read the electricity, gas and water meters on the last day. Pay the final maintenance fee and utility bills, and cancel or move your internet.

3. 3

   Move-out day: check the room and get the deposit back

   Check the room with the owner and take photos. Get your deposit back before you hand over the keys or the door code.

4. 4

   If the deposit is not returned

   Get advice before you move out. A lease registration order (임차권등기명령) from the court can keep your protection after you move, once it is registered. Foreigners must still report a change of address after moving, so plan the timing with an expert.