South Korea Rent Increase Regulations: 5% Cap, Renewal Limits, and Conversion Rates

Rent increases in South Korean residential leases are strictly regulated under the Housing Lease Protection Act (with key amendments regarding caps and renewal rights effective 31 July 2020). Upon contract renewal, increases to both rent and deposits are capped at 5% of the existing amount, and any increase exceeding this limit is legally void.

The 5% Rent Increase Cap

Core Rules

Calculation Examples

When the 5% Cap Applies

Cap Applies

1. Agreed renewals — landlord and existing tenant negotiate a contract extension
2. Contract Renewal Request Right — tenant exercises their statutory right to renew (Article 6-3)
3. Mid-term increase requests — landlord requests an increase during the contract period due to changed economic circumstances

Cap Does NOT Apply

1. New contracts — when signing a lease with a new tenant (no cap on initial pricing)
2. Full conversion — when fundamentally changing from jeonse to wolse or vice versa (but conversion rate caps still apply)

Jeonse-to-Wolse Conversion Rate

When converting between jeonse and wolse formats, the conversion rate is capped (Article 7-2) at the lower of 10% or the BOK base rate + 2%:

Monthly rent = (Jeonse deposit − Wolse deposit) × Conversion rate / 12

Mid-Term Increase Requirements

To request a rent increase during the lease period, the landlord must demonstrate:

1. Changed economic circumstances — inflation, increased taxes or levies, comparable market rents
2. Elapsed time — at least 1 year since the last increase or the start of the contract
3. Within the 5% cap — the increase may not exceed 5%
4. Objective justification — supported by comparable rental data, tax assessment changes, etc.

Tenant's Right to Request a Decrease

Conversely, tenants may also request a rent decrease when economic conditions change (e.g., falling property values, declining market rents). The same 5% framework and evidence requirements apply.

Local Government Variations

Some local governments may set the cap lower than 5% through local ordinances (Article 7, Paragraph 2):

Consequences of Exceeding the Cap

• The excess portion of any increase above 5% is automatically void
• The tenant remains liable only for the lawful amount
• Overpaid rent can be reclaimed as unjust enrichment
• The Housing Lease Dispute Mediation Committee may be engaged for resolution

Best Practices for Landlords

1. Calculate increases precisely — amounts exceeding the cap are void and expose you to unjust enrichment claims
2. Verify the timing — confirm at least 1 year has passed since the last increase
3. Observe the notice window — ensure notice is delivered between 6 and 2 months before the lease expires
4. Communicate in writing — use certified mail or documented channels for increase notices
5. Comply with conversion rate caps — when switching between jeonse and wolse formats

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