Grace Period for Owner-Occupancy in Land Transaction Permit Zones Extended Through Next Year... Up to 39-Month Extension

[Financial News] The Ministry of Land, Infrastructure and Transport (MOLIT) has extended the grace period for owner-occupancy for buyers who cannot immediately move into homes purchased in a land transaction permit zone because they are occupied by tenants. The deadline has been moved from the end of this year to the end of next year. However, the requirements that buyers be genuine end-users without a home and reside in the property for two years after moving in remain unchanged. MOLIT initially set the grace period to run through this year in May, but it appears to have extended it once again amid continued declines in approval ratings and rising home prices.
MOLIT announced the measure on the 17th. Amendments to the Act on Reporting Real Estate Transactions will undergo a legislative notice period on the 18th and are scheduled to take effect on the first day of next month. The measure will apply to all homes that are leased or have a jeonse right registered as of the effective date, the first day of next month.
First, MOLIT decided to extend the application deadline for the owner-occupancy grace period for transactions involving leased homes in a land transaction permit zone from December 31 to December 31 of next year. Applications under the extension and expansion will be accepted starting on the first day of next month, when the measure takes effect. However, the requirement to submit registration documents within four months of receiving approval remains the same as under the measure introduced in May.
The measure is understood to reflect the difficulty of trading homes occupied by tenants because of the owner-occupancy requirement. Under the previous law, buyers of homes in a land transaction permit zone had to move in and reside there within four months of the contract date. In May, MOLIT decided that even when a transaction took place in a land transaction permit zone, buyers could defer the owner-occupancy requirement until the tenant’s lease ended. With the latest measure extending the grace period by another year, it is also interpreted as an effort to stabilize the jeonse market.
For privately rented apartments purchased in regulated areas, the mandatory rental period may not have ended, while in overheated speculation zones, the transfer of membership status may be restricted because of reconstruction or redevelopment. In reconstruction projects in overheated speculation zones, the transfer of association membership status is expected to be restricted from the approval of the association’s establishment and the approval of the management and disposal plan until the public notice of transfer. If the period for applying tax benefits is pushed back for these reasons, the application period for the owner-occupancy grace period will also be adjusted, allowing applications for 15 months from that point.
In addition to the current lease term, a lease renewal contract will also qualify for the owner-occupancy grace period. Previously, only the remaining lease period was recognized, but renewal contracts will now be included as well. The renewal is limited to one time and may last up to two years.
Specifically, if there is no renewal contract, buyers must move in by September 30, 2028, at the latest, which is two years from the effective date. If a renewal contract exists, the grace period will last up to three years and three months from the first day of next month, when the measure takes effect. This means buyers must move in by 2029 at the latest, after adding the 15-month application period and the 24-month renewal period. To have the renewal contract recognized, buyers must meet conditions including signing the renewal contract before applying for the owner-occupancy grace period and beginning the renewed lease by December 31 of next year, the end of the grace period.
However, the buyer eligibility requirements and the two-year residence obligation after moving in remain unchanged from the measure introduced in May. To prevent grace periods for the purpose of moving from one home to another and expand purchase opportunities for genuine end-users without homes, eligible buyers must have continuously remained without a home since May 12.
MOLIT explained that the measure reflects a proposal made by the Democratic Party of Korea on the 15th. It said the measure is intended to supplement housing transaction conditions affected by tax reforms, including the temporary easing of the higher capital gains tax rate for multiple-home owners and the phased elimination of tax benefits for privately rented apartments purchased in regulated areas, while improving tenants’ housing stability. The measure reflects concerns that tenants who are suddenly forced to leave their homes could face housing difficulties because of a transaction freeze in the jeonse market. Continued home price increases and falling approval ratings are also understood to have influenced the change.
Kim Yi-tak, First Vice Minister of Land, Infrastructure and Transport, emphasized, "This measure maintains the owner-occupancy principle of the land transaction permit system while addressing the practical difficulties that arise when leased homes are traded and improving tenants’ housing stability. We will maintain the requirements that buyers be genuine end-users without homes and reside in the property for two years, ensuring that transactions are centered on genuine end-users while thoroughly blocking speculative demand."
[email protected] Jung Kyung-soo Reporter