South Korea Commercial Rent Increase: Cap, Conversion, Renewal
Guide to commercial rent increase regulations in South Korea including the 5% cap on renewals, jeonse-wolse conversion rates for commercial leases, and statutory thresholds.
Legal Disclaimer
This content is for general informational and educational purposes only. It does not constitute legal advice and should not be relied upon as such. Laws change frequently — always verify current regulations and consult a licensed attorney in your jurisdiction for advice specific to your situation. Landager is a property management platform, not a law firm.Information last verified: May 2026.
Commercial rent increases in South Korea are strictly regulated under the Commercial Building Lease Protection Act (effective 1 November 2002). While a 5% cap exists for the majority of tenants, its application depends on whether the lease falls within specific "Converted Deposit" thresholds. Landlords must also justify any increase during the lease term based on changes in taxes or economic conditions.
The 5% Cap (Art. 11)
vs. Residential
When the Cap Applies / Does Not Apply
Applies (5% Limit): Leases where the Converted Deposit is within the regional threshold (e.g., 900M KRW in Seoul). This includes agreed renewals and statutory renewal requests.
Does not apply (Reasonable Increase): New contracts with new tenants, or existing leases where the Converted Deposit exceeds the regional threshold (Art. 10-2). However, even for large leases, the 10-year renewal right still applies.
Conversion Rates (Deposit ↔ Monthly Rent)
When converting a security deposit to monthly rent, the rate is strictly capped under Article 12 of the Act:
Tenant's Right to Request a Decrease
Under Article 11, commercial tenants may request rent decreases when economic conditions change (e.g., area decline, significant market downturn). This right is independent of the conversion thresholds.
Consequences of Exceeding the Cap
- Excess is automatically void (Art. 15)
- Overpaid amounts are reclaimable as unjust enrichment
- Disputes may be referred to the Commercial Building Lease Dispute Mediation Committee
Best Practices for Landlords
- Calculate thresholds first — confirm if the 5% cap applies or if "reasonable" standards apply.
- Document justification — keep records of tax increases or local economic changes to justify any hike.
- Observe the 1-year rule — no re-increase within 12 months (Art. 11, Para. 2).
- Apply the correct conversion formula — commercial use of the 4.5x multiplier differs from the residential "plus 2%" rule.
- Plan for post-10-year negotiations — statutory renewal rights expire after 10 cumulative years.
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