The government shares the blame
A new act took effect last week that is supposed to insure the lump-sum deposits that tenants must pay up front to lease commercial buildings. However, the government has not yet set guidelines on rates or contracts, making the bill essentially useless.
As a result, the market is in disarray because tenants and landlords have put off signing deals with no rules to follow for setting lease premiums. President Park Geun-hye has long blamed the National Assembly for hampering the economic recovery because lawmakers have failed to approve related laws on time.
But the government, too, should share the blame. It has not followed through on its part, even though the legislature has since passed a law supporting smaller enterprises.
Under the new law, under which there are no fixed guidelines, tenants can pay the premium for a lease based either on the market or assessed value. Tenants are worried that they could end up losing money if they pay the premium according to market value. Landlords fear damage suits due to premium disputes.
Some are considering raising the lease price to prepare themselves for court battles. Because the law failed to incorporate the establishment of a dispute arbitration committee, tenants and landlords would have to take their disputes to the court for settlement. Instead of helping and protecting tenants, the law could end up worsening the dispute over rent premiums.
The Ministry of Land, Infrastructure and Transport - which claimed it did not think the law would pass so quickly - is entirely to blame for causing confusion in the market.
Protecting tenant premiums was part of the government’s three-year plan to promote an innovative economy, and the government had pushed the legislature to pass the law since last September. It does not explain why the ministry has not completed any work to supplement the act.
The ministry has explained that it will come up with guidelines to set premium rates and a contract template by next month. It also argued that the task takes time because it is not easy to set rates due to various complicating factors. So why then did it push for the act in the first place? It is no wonder business is slow with such impotence on the government’s part.
JoongAng Ilbo, May 18, Page 34