Gangnam sees rise in illegal leases

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Gangnam sees rise in illegal leases

Bogeumjari houses are being illegally leased with increasing frequency in Gangnam District, southern Seoul.

Bogeumjari, which means “cozy home” in Korean, is a part of former Lee Myung-bak government’s plans to provide cheaper housing for low-to-middle income earners who don’t own any property.

The houses are built in limited-development areas or cheaper parts of Seoul to keep the sales prices low. To ensure that the homes are used solely for public housing and prevent real estate speculation, homebuyers are legally required to live in the houses for a certain period of time, during which they cannot rent out the property.

That period was originally five years, but the regulations have been eased to between one and three years, depending on when the buyer moved in Still, homebuyers are not abiding by the rules.

Buyers who have not fulfilled their contracted period are already renting their homes through either the jeonse (lump-sum deposit) or wolse (monthly rent) systems, according to real estate agencies around Segok-dong, Gangnam District.

“It’s hard to figure out the exact number of transactions because some are done online, but as far as I know, about 50 units have been leased ahead of the contract,” said a real estate official in Segok-dong. He added that dozens of units in the bogeumjari area of Segok-dong are already being offered by their owners via internet portals or real estate agencies, despite the fact that according to government regulations, the owners’ own official move-in date isn’t until the end of this month.

“Usually around ten joense or wolse houses are listed on the market, but due to recent shortage in jeonse homes, there’s nothing on the market left to sell,” said another real estate agent in Gangnam District. “Those houses left on the market are mostly illegal options.”

One of the most common ways bogeumjari owners try to beat the system is by claiming that they’re renting out one or two rooms of their homes to a tenant. This is legal, as long as the original owner still lives in the home itself, but in most cases the original owner is living somewhere else entirely.

“The homeowner effectively fulfills his or her mandated term of stay and the tenant receives a fixed move-in date on their rental contract,” said an official from real estate agency in Naegok Disrict.

Landlords sometimes give their tenants a discount on the rent if they don’t notify the neighborhood office of the arrangement.

This was the case with a Gangnam District resident surnamed Shin. The 36-year-old found a great deal on a 59-square-meter (635 square feet) jeonse apartment in Segok-dong, but when she went to finalize the paperwork, the contract said that the original owner would still be living in the apartment. The owner told Shin she’d be moving out of the apartment, but asked her not to notify the neighborhood office of their arrangement.

“At first, I thought the landlord just needed more time to get things in order, but it turned out that it was just an illegal leasing,” Shin said.

Bogeumjari owners have good reason to fear being reported. If they’re discovered to be renting their home, they can be imprisoned for up to a year or fined up to 10 million won ($8,532). Owners can be released from their contracts in special circumstances like serious medical issues, but they’re required to sell their home back to the operator of the project.

Still, regulators are having a tough time prosecuting violators, particularly those who claim to merely renting out one or two rooms in their home, which is legal.

“If there are complaints or charges reported to us, we ask for further investigation or summon [the landlord],” said an official from the Korea Land and Housing Corporation, which operates bogeumjari homes along with SH Corporation. “However, it’s really difficult to prove that the apartment is being illegally rented, particularly if the homeowner is actually in the home when the inspectors show up.”

Ministry of Land, Infrastructure and Transport, the Minsitry in charge of the project, also expressed hardships regulating the situation.

“We are keeping an eye on those houses left of obligatory residence periods to check the status,” said an official from the Ministry. “However, since the issue in its nature is hard to crack down, we will try our best to inform the public of illegal lease and the mandated periods through real estate agencies and project operators.”

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