Multiple-home owner A, ahead of the restriction on extending maturities of home mortgages that takes effect on the 17th, tried to sell an apartment in Gangnam-gu, Seoul, that has a jeonse tenant and fell into confusion. The jeonse contract for this apartment expires on March 1, 2028, and one real estate brokerage said, “It is difficult to sell.” They said a sale permit could not be obtained because the deferment of the owner-occupancy obligation does not apply under the land transaction permit system. Another real estate brokerage, by contrast, said, “A sale should be possible.” They said the deferment of the owner-occupancy obligation does apply. A said on the 15th, “I am trying to sell to avoid a heavy capital-gains tax surcharge and the burden of holding taxes, but I do not know whether a sale is possible or not, which is frustrating.”

Recently, with the end on May 9 of the grace period suspending the capital gains tax surcharge on multiple-home owners approaching, the government has repeatedly announced exceptions to the land transaction permit system to open a ‘way out’ for transactions of homes with jeonse tenants owned by multiple-home owners, and confusion is arising in some parts of the market over the ‘timing of exception applicability’.

The confusion arose because the timing of lease contracts to which the deferment of the owner-occupancy obligation applies has been presented differently with each announcement.

On February 12, the government said that if multiple-home owners completed both the land transaction permit and the sales contract by May 9, the owner-occupancy obligation under the land transaction permit system would be deferred until the lease expires. A proviso was attached. The lease had to be valid as of the announcement date, February 12, and it had to end no later than February 12, 2028.

In other words, the home owned by A, whose jeonse contract expires on March 1, 2028, could not receive the exception to the owner-occupancy obligation.

This criterion was reflected in the amended Enforcement Decree in February and was promulgated and implemented. Thereafter, it was amended again so that the deferment would also apply in cases that ‘applied’ for the land transaction permit by May 9, and it has been pre-announced through the 17th.

The problem is that a different criterion appears in the household debt management plan announced on the 1st. While restricting maturity extensions for home mortgages held by multiple-home owners, the government again opened a way out so that transactions of ‘jeonse-encumbered listings’ could proceed. For homes that have both a tenant and a home mortgage, it said that if a non-homeowner purchases the home by December 31 of this year and applies for a land transaction permit, the owner-occupancy obligation will be deferred until the end of the existing tenant lease.

At that time, unlike the February announcement, it did not separately specify the timing for a valid lease contract or the scope of the deferment. In that case, even if a jeonse contract was signed or renewed on April 1 of this year, there is room to interpret that, as long as an application for a land transaction permit is filed by the end of the year, the owner-occupancy obligation would be deferred until April 1, 2028. If so, the ‘jeonse-encumbered listing’ owned by A, whose jeonse ends in March 2028, would also become sellable.

The Ministry of Land, Infrastructure and Transport has not yet established specific criteria on this. Even though the restriction on loan maturity extensions begins on the 17th, a ‘gap’ remains in the policy.

An official at the Ministry of Land, Infrastructure and Transport said, “The detailed standards for the owner-occupancy deferment related to land transaction permits that were announced on April 1 have not yet been finalized, and a review is under way for amending the Enforcement Decree.” This is why, even if A relies on the announcement on the 1st and visits a brokerage or a local government office, no clear answer is forthcoming.

Seo Jin-hyeong, a professor in the Department of Real Estate Law and Administration at Kwangwoon University, expressed concern, saying, “Even for listings from the same multiple-home owners, whether a transaction is possible varies by the applicable rule, which is heightening consumer confusion.” Shim Hyeong-seok, senior expert committee member at Law Firm Joyul, pointed out, “Because the authorities have been responding from moment to moment without a roadmap, the land transaction permit system is being operated like a patchwork without consistency,” adding, “The successive measures are continuing to dismantle previously announced policies.”

There are also concerns that if an exception to the owner-occupancy obligation is applied in measures to be announced regarding ‘jeonse-encumbered listings’ of non-resident single-home owners, the effectiveness of the land transaction permit system itself could be shaken.

A licensed real estate agent in Songpa-gu, Seoul, said, “Many people are taking the continued addition of exceptions to the land transaction permit system as a signal of deregulation,” adding, “This is why, rather than an increase in listings recently, we are seeing sellers raise prices or sit on the sidelines.”

Shim also said, “In trying to induce listings to come to market, the move could instead send the wrong signal to the market,” adding, “It could also stimulate expectations of price increases.”