The monthly rent is 270,000 won, but the management fee is 1.05 million won?

Real estate sales flyer at a real estate agency in downtown Seoul. random news

The result of a survey showed that landlords transfer part of the rent to management costs in order to avoid rental income tax and transfer the tax burden, which happens more often in multi-family houses such as villas and detached houses than in apartments.

According to a report titled “The reality of setting management fees in the dark and measures to improve the system,” released on the 6th by Sungjin Yoon, an associate researcher at the Korea Research Institute for Human Settlements, the difference in management costs between renting an apartment and owning an apartment between the 2nd quarter of 2019 and the 2nd quarter of 2022 ranged from 79.1 earned per ㎡ to 99.9 earned per ㎡ Although only increased by 20.8 earned per ㎡, non-flats were found to have increased significantly from 324.4 won per ㎡ to 533.8 won per ㎡.

This means that after the enforcement of the revised Lease Act 3, the increase in deposit and monthly rent is limited, and the benefit of transferring the remaining increase to management costs increased. In particular, Associate Research Fellow Yoon said, “If we look at the difference in management cost per unit area by type of tenure by type of house, the difference between rental households and own households is limited for apartments and townhouses, but the difference is limited. large for detached/multi-dwelling and multi-family housing.” it was said.

This is a phenomenon caused by a vacuum in the management fee system. According to the ‘Flat House Management Act’, flats among flats are subject to ‘compulsory management’ with the duty to disclose management fees, but other single-family houses, terraced houses, multi-family houses, dormitories, offices, etc. Business facilities are not subject to compulsory control.

In most types of housing apart from flats, there is no obligation to disclose details of the maintenance fee, so no real control is achieved, and the maintenance fee, charged as a fixed monthly fee, is effectively acts as a second monthly. rent’.

According to the Korea Research Institute for Human Settlements, there are currently about 4,296,000 households with ‘management cost gaps’ that are not required to disclose management fees. This corresponds to 20.5% of all households.

Associate Research Fellow Yoon explained, “This means that a significant number of households are in a state where they do not receive adequate institutional protection against the threat of non-disclosure of management costs and transfer of rent to management costs.”

This ultimately leads to damage to tenants. If you look at the cases that have been caught, there are many cases where the difference is passed on to management costs instead of receiving less monthly rent to avoid the lease reporting system. In order to avoid ‘housing rental contract exceeding 60 million won in deposit or 300,000 won in monthly rent’, which is subject to lease reporting, the monthly rent is transferred to the management fee.

In fact, if you look at the rental properties listed on real estate brokerage sites, there are cases where a deposit of 1.5 million won and a monthly rent of 270,000 won are offered, while management fees are 1.05 million won.

Korea Research Institute for Human Settlements

Korea Research Institute for Human Settlements

Deputy Research Fellow Yoon suggested that in order to solve the problem of transferring management costs, the details of management fees should be transparently disclosed and specific standards should be established for installation.

He said, “There is a need to establish a standard for setting management fees applicable to housing leases by establishing a management fee regulation in the Housing Lease Protection Act, and improving related systems so that management costs can be taken into account when applying the Lease Act, such as the housing lease reporting system and the right to request contract renewal.” suggested

In particular, ‘blinking management fee’ is caused by relatively poor management such as non-flats or low bargaining power of tenants, so we need to find a response accordingly.” A fundamental improvement is needed by implementing and strengthening the functions of the Housing Lease Dispute Mediation Committee,” he said.

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