Landlord asked ₩600,000 a month? The law caps it at ₩500,000

The landlord proposes turning jeonse into monthly rent: release ₩120M of the deposit in exchange for ₩600,000 a month. It is hard to answer on the spot because there is no benchmark for what is fair. But there is one. The law writes a cap, and on these terms it is ₩500,000 a month. ₩600,000 is over it. And this cap changed on August 27, the day the Bank of Korea raised its base rate. Why a tenancy cap moves because of the central bank is today's story.

Turning deposit into monthly rent is called rent conversion, and the Housing Lease Protection Act caps the rate. People call it the 'jeonse-to-monthly conversion rate', but that phrase is not in the law. What the law fixes, precisely, is the rate you may not exceed when converting deposit to rent during an existing lease, so it does not apply everywhere. Four steps: ① when does the cap apply, ② how is it calculated, ③ why did it change in August, ④ what happens if it is exceeded.

Step one: scope. The article governs 'converting all or part of the deposit into monthly rent'. That means continuing a lease in the home you live in while shifting deposit to rent, typically at renewal. There are three boundaries. ① It does not apply to a home you are newly renting: new-lease rent is set by the market, and a listing priced above this calculation is not illegal. ② It does not apply in reverse: the rate for turning monthly rent into deposit is not set by this article. ③ It is a ceiling, not a market price. Agreeing below the cap is always allowed. Miss these boundaries and you get two errors: calling a new-lease rent illegal, or treating the cap as the fair price. The cap is a line not to cross, not a number to charge.

Step two: the calculation. The cap is the lower of two rates. One is 10% a year. The other is the Bank of Korea base rate plus 2% a year, as the Decree provides. With the base rate at 3.00% the second is 5.00%, and the lower of 10% and 5%, which is 5.00%, is today's cap. As long as the base rate stays under 8% the second is always lower, so in practice the base rate sets the cap. On the opening example: ₩120M × 5% = ₩6M a year, ÷ 12 = ₩500,000 a month. Ask ₩600,000 and ₩100,000 a month is over the cap.

Step three. On August 27, 2026 the Bank of Korea raised the base rate from 2.75% to 3.00%, and that day the tenancy cap moved with it, from 4.75% to 5.00%. For the same ₩120M, the cap through August 26 was ₩475,000 a month; now it is ₩500,000, a ₩25,000 difference. When the base rate rises, the ceiling on what a tenant can be charged rises; when it falls, the ceiling comes down. So a conversion calculation must carry a date. Today's 5.00% assumes the 3.00% base rate of August 27, 2026. When you receive a conversion proposal, first check the base rate as of that day. It is on the front page of the Bank of Korea website.

Step four: what if you agreed above the cap? Two provisions apply. One is the mandatory-law clause (Art. 10): any agreement that violates this Act to the tenant's disadvantage is void, even if it is written in the contract and signed. The other is the refund claim (Art. 10-2): rent paid above the cap can be claimed back, as the article itself provides. On the opening example that is ₩100,000 a month, ₩1.2M a year. Still, claiming money back from the landlord of the home you live in strains the relationship, so the best moment is not after signing but at the table when the proposal is made. Someone who sits down knowing the cap is ₩500,000 and someone who does not will end the same negotiation on different numbers.

One more thing. Conversion proposals often arrive with a renewal, and then 5% appears twice. Raising the deposit or rent at renewal also has a 5% cap (Art. 7), and that is a different rule from the 5.00% conversion cap (Art. 7-2). The 5% increase cap is fixed by statute and local governments can lower it by ordinance. The conversion cap moves with the base rate and merely happens to be 5% right now. If the base rate fell to 2.5%, the conversion cap would become 4.5% while the increase cap stayed at 5%. When a renewal includes a conversion, both rules apply: the increase cap sets how much can be raised, the conversion cap sets the conversion rate. Lump the two together and the numbers come out wrong. And both rules concern continuing the current lease. Move to a new home and neither applies.

Two things to do now. ① If you received a conversion proposal, multiply the deposit being released by 5% and divide by 12. The result is today's cap. ② Check the base rate on the day you calculate; this video's numbers are as of August 27, 2026. Today covered only the typical residential case: commercial leases fall under a different law with a different rate, and individual disputes turn on their facts, so get professional advice when the amount is large. The gap between ₩600,000 and ₩500,000 came from one article of law, not from bargaining power.