Jeonse (Hangul: 전세; hanja: 傳貰) is a real estate term unique to South Korea that refers to the way apartments are leased. Instead of paying monthly rent, a renter will make a lump-sum deposit on a rental space, at anywhere from 50% to 80% of the market value.
Jeonse involves the tenant giving the landlord a large sum of "key money" when a lease is signed. The amount of money required depends on the economy and the location of the property. Usually the amount required is 50% of the property's value, but can be as high as 60-80%. The tenant is then allowed to stay in the property "rent-free", not requiring any additional monthly payments, until the end of the lease, which is usually 2 years. Utilities and other costs (water, gas, electricity, cable, phone, internet, security) are applied for and paid by the tenant.
The landlord makes a return by taking the deposit money and investing it and keeping all interest earned on the deposit. The tenant's deposit is protected by having a lien issued against the property for the amount given. The entire deposit is then returned to the tenant at the end of the lease. In rare cases where damage has been done to the property, the damage has to be fixed to the landlord's standard before a landlord will return the deposit.
This system is popular for two main reasons. First, there are very few mortgages in South Korea, so it is difficult for consumers to own a home. Also, real estate prices continue to increase so fast that some see the situation as a housing bubble.
During times of lower interest rates, wolse (월세), or monthly rent, is more often used. With a wolse lease, a renter signs a lease for 1 or 2 years and makes a deposit on the apartment equal to perhaps 10% of the market value. The renter then pays monthly rent.
- Key money
- Real estate in South Korea
- Antichresis, (Anticrético in Spanish), a system common in Bolivia, due to limited access to credit.