Chonse, a real property lease transaction unique to South Korea

Abstract

This article is a tentative analysis of Korean real property lease transaction system, chonse, a lease with a large sum of the key money deposit and without monthly rent payments. Chonse is the dominant form of lease arrangement used by most middle-class families in Korea without ownership of real property for both principal residences and commercial business places. The author analyzes this unique institution of real estate lease exclusive to South Korea and describes main features and details of it as well as related legal systems. Chonse also has the character of a lending system for the real property owners, where the landlord has the same position of borrowing the money from the tenant and the lending term is the same as the lease period. The tenant as a creditor has the leased property at his/her possession for the term and the tenant has the legal interest not only of a usufructuary right but also of a security right of pledge or collateral. After a brief review of the legal characteristics and roles of chonse in the modern period of development of South Korea, the author critiques the changing role of the chonse system in the modern South Korean society. Continuous economic development, reform of the financial system, globalized lifestyle and home living, and most of all its shrinking and aging population as well as low interest rates and the flourishing of long-term mortgages are all circumstances that need to be taken into account in assessing the implications of the changes taking place with regard to chonse.