Dear Expat,

One small tip when you rent an officetel or an one-room place:

Recently, I have been requested to find an officetel for rent in Busan. The client specified an officetel which is considered a decent one even though the building itself is a bit old. However, before I helped her sign the contract, I checked the registry and found out that it has considerable amount of loan, 84M KRW. Considering the market price of the property is about 100 M KRW, it seems a bit risky. When the property goes to auction, the beginning price would be the appraised property price, which is much lower (about 15%) than the market price.

To protect yourself from this kind of unforeseeable situation, I would like to advise you to take my advise seriously. Please try to stay away from such property and demand your broker to mark the loan status in the contract and also ask if you are protected by the law.

There is a law which governs specifically housing contracts with low rent/security deposit or protects the less fortunate people like me. In other words, the purpose of the law is to protect tenants with small key money (thus who have significantly less negotiation power against the landlords).  

The formula is: If your converted security deposit (monthly rent times 100 + key money) is 60 M KRW or less, then you are given the highest rank in the registry in terms of the right to collect your key money ahead of other creditors such as banks except for court and governments). 

However, the max amount that you are entitled to collect ahead of other creditors is 20 M KRW.

For example, if one has key money of 5 M KRW and monthly rent 560,000 KRW, then the person cannot be protected by the law. As the converted security deposit is 61 M KRW. 

However, if your monthly rent is 550,000, then the converted security deposit is 60 M KRW and thus you are protected and can collect your 5 M KRW ahead of other creditors.