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ENFORCEMENT DECREE OF THE RENTAL HOUSING ACT

[Enforcement Date: Ju1. 31, 2009] [Presidential Decree No.21641, Jul. 27, 2009, Partial Amendment]

Ministry of Land, Transport and Maritime Affairs (Housing Welfare Planning Division) 02- 2110-6227

Article 1 (Purpose)

The purpose of this Decree is to provide for the matters delegated by the Rental Housing Act and those necessary for the enforcement thereof. Article 2 (Types of Constructed-Rental Houses)

The types of constructed rental housing pursuant to subsection 2 of Article 2 of the Rental Housing Act (hereinafter referred to as the "Act") shall be as follows:

1. Publicly constructed rental housing: housing applicable to one of the following items: (a) Housing constructed and leased by the state or local finance; (b) Housing constructed and leased with the financial support of the National Housing Fund pursuant to Article 60 of the Housing Act (hereinafter referred to as the "National Housing Fund"); and

(c) Housing constructed and leased with an approval for the project plan in accordance with Article 16 of the Housing Act on a housing site prepared by a public project (hereinafter referred to as the "public housing site"); and

2. Privately constructed rental housing: constructed rental housing other than the housing under subsection 1.

Article 3 (Scopes of Dishonor, etc)

(1) The term "period prescribed by Presidential Decree" in subsection 7 (b) of Article 2 of the Act refers to six months.

(2) The term "cases prescribed by Presidential Decree" in subsection 7 (c) of Article 2 of the Act refers to the case where the parent company of the rental business operator (referring to a parent company referred to in Article 342-2 of the Commercial Act) has received a disposition pursuant to subsection 7 (a) of Article 2 of the Act, where the equity capital of the relevant rental business operator has been completely exhausted. Article 4 (Development and Supply of Housing Sites for Rental Housing) (1) When the Minister of Land, Transport and Maritime Affairs (hereinafter referred to as the "Minister") establishes the annual comprehensive housing plan (hereinafter referred to as the "annual plan") pursuant to Article 7 (2) of the Housing Act, he/she shall include the plans to supply housing sites for rental housing to be supplied by the State, local governments, the Korea National Housing Corporation under the Korea National Housing Corporation Act (hereinafter referred to as the "Korea National Housing Corporation"), the Korea Land Corporation under the Korea Land Corporation Act (hereinafter referred to as the "Korea Land Corporation"), or local public corporations established for the purpose of housing business pursuant to Article 49 of the Local Public Enterprises Act (hereinafter referred to as the "local public corporations"): Provided, that the plans to supply the housing sites for rental housing with the obligatory lease period of five years shall be excluded. (2) The State, local governments, the Korea National Housing Corporation, the Korea Land Corporation, or the local public corporations shall develop and supply the sites for rental housing construction according to the plans to supply housing sites for rental housing pursuant to section (1).

Article 5 (Raising Financial Resources for Rental Housing Construction) The term "financial resources as prescribed by Presidential Decree of the National Housing Fund" in Article 5 (1) of the Act refers to the financial resources raised by the following funds among the financial resources for the National Housing Fund:

1. Government contribution;

2. Funds raised by issuing Class 2 National Housing Bonds pursuant to Article 67 of the Housing Act and Article 91 of the Enforcement Decree of the Housing Act; and

3. Profit amount allotted in accordance with Article 23 (1) of the Lottery Tickets and Lottery Fund Act.

Article 6 (Terms and Conditions of Loan of Rental Housing Construction Funds) The interest rate and repayment term of a long-term low-interest loan from the National Housing Fund for the construction of rental housing in accordance with Article 5 (2) of the Act shall be determined by the Minister upon consultation with the Minister of Strategy and Finance.

Article 7 (Scope and Criteria for Registration, etc. of Rental Business Operator) (1) The term "units of houses prescribed by the Presidential Decree" in Article 6 (1) of the Act means the units of houses or households under the classification of each of the following subsections:

1. In the case of constructed rental houses: two units of housing for detached house, and two households for collective housing; and

2. In the case of purchased rental houses: one unit of housing for detached house, and one household for collective housing.

(2) A person who may register as a rental business operator in accordance with Article 6 (1) of the Act shall be the persons who apply to any of the following subsections, and where the housing is constructed or owned by two or more persons, the housing shall be registered under a joint title: Provided, that any person (including any representative or officer of a corporation at the time of dishonor and a corporation of whose representative or director was the representative or an officer of a corporation or a rental business operator who was an individual at the time of dishonor) having a history in which a dishonor (excluding the case in which any liabilities at the time of dishonor was repaid since the dishonor and the rental housing business was recovered to a normal state) occurred in a rental housing business within the past five years from the date of application for the registration shall not be registered as a rental business operator.

1. A housing constructor registered in accordance with Article 9 of the Housing Act;

2. A landowner or an employer constructing houses for the purpose of leasing in accordance with Article 10 (1) and (3) of the Housing Act;

3. A person who has obtained permission in accordance with Article 11 of the Building Act to build houses for the purpose of leasing;

4. A person who either owns a house for the purpose of leasing or has entered into a contract (including a presale contract) to purchase such house; and

5. A company falling under any of the subsections of Article 14 (4). Article 8 (Registration Procedures of Rental Business Operator) (1) A person who intends to register as a rental business operator in accordance with Article 6 (1) of the Act shall submit an application for registration to the Special Self- Governing Do governor, or the head of the city/Gun/Gu (referring to the head of autonomous Gu; hereinafter referred to as the "head of the city/Gun/Gu") as prescribed by Ordinance of the Ministry of Land, Transport and Maritime Affairs. (2) In the case where the head of the city/Gun/Gu has received an application for registration under Section (1), he/she shall confirm whether an applicant meets the criteria for registration under Article 7 (2), and in the event that such applicant is deemed to meet such criteria, he/she shall register him/her in the rental business operator registry and deliver a certificate of registration to the applicant. (3) A person who has received a certificate of registration under Section (2) shall report to the head of the city/Gun/Gu (referred to as the head of the city/Gun/Gu of the place to move into if the changed matter is the address of the rental business operator) any changes in registered matters within 30 days from the date on which such changes occur.

(4) Unless there exist special reasons making electronic data-processing impossible, the rental business operator registry under Section (2) shall be prepared and managed by the method in which electronic data-processing is possible. Article 9 (Establishment, etc. of Rental Housing Association) (1) A person who intends to obtain an authorization for the establishment, alteration, or dissolution of a rental housing association (hereinafter referred to as the "association") in accordance with Article 7 of the Act shall submit to the head of the competent city/Gun/Gu a written application for authorization prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs, attached with the documents pursuant to the classification of the following subsections:

1. In the case of an authorization for establishment: (a) The minutes of meeting of the inaugural meeting; (b) Written consent of an election of the head of the association; (c) Rules of the association jointly signed by all of the association members; and (d) Written business plans;

2. In the case of an authorization for alteration: documents verifying the contents of alteration; and

3. In the case of an authorization for dissolution: written settlement of accounts approved by the association members.

(2) The association shall be composed of two or more association members. (3) Where an association constructs the rental housing jointly with a registered business operator under Article 9 of the Housing Act (including the State, local governments, the Korea National Housing Corporation, and local public corporations), it may have the relevant registered business operator perform as proxy the functions of the association (excluding any arrangement to join the association, or any invitation advertisement).

(4) An association shall be prohibited from replacing any member of the relevant association, except for the case of an association member's death until the acquisition of the approval for a project plan under Article 16 of the Housing Act, the acquisition of a construction permit under Article 8 of the Building Act, or the conclusion of a contract for sale.

(5) The rules of association under section (1) 1 (c) shall contain the following matters:

1. Title and address of the association;

2. Mutual relations of shares among the association members, and matters for reversion of profits and losses;

3. Matters for the dismissal, withdrawal, replacement and new subscription of association members;

4. Rights and duties of the officers of the association, and the method of their elections;

5. Matters for the association's burden of expenses and its accounting;

6. Summary of the project, such as the project year, the method of implementation, and contents of the project;

7. Matters requiring a resolution of the general meeting, and a quorum for its resolution, and the procedures for its resolution;

8. Matters for an opening of the general meeting, and for a request by the association members for a convocation of the general meeting;

9. Procedures and methods for the liquidation;

10. Procedures for altering the rules of association; and

11. Publication of the details of disbursement of the member's fees and the matters resolved by the general meeting and notification thereof to the association members. (6) The written project plan under section (1) 1 (d) shall contain the following matters:

1. Number of houses or households of the housing to construct or purchase, and the types and sizes thereof;

2. Location, lot number, land category, owners and legal relationships of the land scheduled for housing construction or the housing scheduled for purchase;

3. Purpose of use in an urban planning of the land scheduled for housing construction (limited to a construction of housing); and

4. Housing site and its environmental situation. (7) Where there is an application for authorization for establishment of an association for the purpose of constructing the rental housing, the head of the city/Gun/Gu shall verify the matters relating to urban planning, etc., and examine whether or not the rental housing can be built on the relevant land scheduled for housing construction. Article 10 (Auditing of Rental Housing Association) (1) The association to build or purchase housing for not less than 20 houses or 20 households shall undergo an audit by an auditor under Article 3 of the Act on External Audit of Stock Companies within 20 days from the relevant date pursuant to the classification of the following subsections according to Article 8 (3) of the Act:

1. Where the housing is built: date falling under any of the following items: (a) Date of application for the usage inspection or the approval for temporary use under Article 29 of the Housing Act; and

(b) Date of obtaining the permission or approval under Article 13 (2) 2, or date of concluding a contract for conversion into presale of the rental housing under Article 21 (1) or (2) of the Act; and

2. Where the housing is purchased: date of obtaining the permission or approval under Article 13 (2) 2, or date of concluding a contract for conversion into presale of the rental housing under Article 21 (1) or (2) of the Act. (2) The criteria for an audit under section (1) shall be in accordance with Article 5 of the Act on External Audit of Stock Companies.

(3) A person who has conducted the audit pursuant to section (1) shall notify the results of the audit to the head of the city/Gun/Gu and the association within 15 days from the date of completing the audit.

(4) The association shall report the results of the audit notified pursuant to section (3) to the association members without delay.

(5) Where the head of the city/Gun/Gu recognizes that there exist illegal or unlawful matters after his/her examination on the details of audit results notified pursuant to section (3), he/she may notify the association of such contents and demand corrections thereof.

(6) The association intending to build or purchase housing of not more than 20 houses or 20 households shall, under the conditions as determined by the rules of association, conduct a self-audit, and notify the association members of its results thereof within 20 days from the date of applying for approval of use or temporary use under Article 22 of the Building Act or from the date of entering a sales contract for selling the built or purchased housing. In this case, the provisions of sections (3) and (5) shall apply mutatis mutandis.

Article 11 (Repurchase Procedures, etc. of Housing Sites) (1) In the event that the State, a local government, a public corporation or a quasi- governmental institution under Article 5 (3) of the Act on the Management of Public Institutions (hereinafter referred to as the "public corporation, etc.") sells a housing site to a rental business operator in accordance with Article 10 (1) of the Act, it shall make a special agreement for repurchase to the effect that it may repurchase the housing site if the operator fails to commence the construction of rental housing within two years from the date of the purchase of the housing site, and shall enter register such special agreement thereof: Provided, that the same shall not apply to the cases where the rental business operator is the State, local government, the Korea National Housing Corporation or a local public corporation. (2) When a person who purchased a housing site in accordance with Article 10 (1) of the Act has commenced the construction of rental housing, he/she shall notify the seller concerned thereof by attaching the documents proving such fact thereto. (3) The State, a local government or a public corporation, etc. which sold a housing site in accordance with Article 10 (1) of the Act shall urge the purchaser to immediately commence the construction of rental housing if there is no notice pursuant to section (2) from the purchaser within one year and six months from the date of the sale, and if the purchaser has failed to fulfill this within two years from the date of the purchase, he/she shall commence the repurchase procedures according to the contents of the special agreement for repurchase.

(4) The term "percentage prescribed by Presidential Decree" in Article 10 (2) of the Act refers to ten percent.

Article 12 (Application, etc. for Designation of Public Project Operator) (1) The term "units of houses prescribed by Presidential Decree" in Article 14 (1) of the Act refers to100 units for detached houses, and 100 households for collective housing. (2) A person who intends to request for the designation in accordance with Article 14 (1) of the Act shall submit a written project plan for the rental housing construction attached with the documents of the following subsections to the Special Metropolitan city Mayor, the Metropolitan City Mayor, the Do governor, or the Special Self- Governing Do governor:

1. A drawing which describes the object land for the project;

2. Documents certifying the fact that not less than 90 percent of the area of the object land for the project has been purchased (including the case where the consent for the purchase is obtained from the landowner);

3. A drawing which describes the land intended to be expropriated or used; and

4. Documents which specify the particulars of the land intended to be expropriated or used.

(3) When a rental business operator who has received the designation in accordance with Article 14 (1) of the Act intends to obtain an approval of the project plan for the relevant project according to Article 16 of the Housing Act, notwithstanding the provisions of Article 15 (5) of the Enforcement Decree of the Housing Act, he/she may not submit a certified copy of the register or a written approval of use of the land intended to be expropriated or used.

Article 13 (Obligatory Lease Period, etc. of Rental Housing) (1) The term "period prescribed by Presidential Decree" in Article 16 (1) 4 of the Act refers to the period of five years from the commencing date of lease of the relevant rental house.

(2) In the case of any of the following subsections, the rental houses may be sold within the obligatory lease period pursuant to Article 16 (3) of the Act:

1. Where the rental business operator sells the rental houses to another rental business operator after reporting to the head of the city/Gun/Gu as prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs;

2. Where the rental business operator is unable to continue the rental housing business due to dishonor, bankruptcy and other financial conditions, and has obtained the permission or approval of conversion into presale pursuant to the classification of the following items:

(a) In the case of rental housing leased from the State, a local government, the Korea National Housing Corporation or a local public corporation, the permission from the Minister;

(b) In the case of public-constructed rental housing other than item (a), approval under Article 21 (3) of the Act; and

(c) In the case of rental housing other than items (a) and (b), the permission from the head of the city/Gun/Gu having jurisdiction over the location of the relevant rental housing; and

3. Where a rental business operator and a lessee have reached an agreement on the conversion into presale of the rental houses falling under Article 16 (1) 3 and 4 of the Act for which half of the obligatory lease period has elapsed since the commencing date of the lease, and the rental business operator converts such rental houses into presale to the lessees after making a report to the head of the city/Gun/Gu under the conditions prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs. In this case, public-constructed rental houses may be converted into presale to the lessees falling under Article 21 (1) or (2) of the Act. (3) In the case where the rental business operator intends to obtain permission or approval from the head of a city/Gun/Gu due to other financial conditions, etc. in accordance with section (2) 2 (b) and (c), he/she shall submit the documents applicable to any of the following subsections:

1. The profit and loss statements for the relevant period, which prove the fact that the deficit has accrued for two consecutive years; and

2. The cash flow chart for the relevant period, which proves the fact that negative operating cash flows have occurred for two consecutive years. (4) In the event that a rental business converts rental houses into houses for presale according to section (2) 2 (a) and (b), he/she shall preferentially convert to presale to the lessees who satisfy the requirements under Article 21 (1) or (2) of the Act. (5) Where public-constructed rental houses excluding those falling under the following subsections are converted into houses for presale according to section (2) 2 or 3, the standards for the assessment of presale prices for the converted houses shall be determined by the Ordinance of the Ministry of Land, Transport and Maritime Affairs:

1. Houses constructed by a rental business operator other than the State, local governments, the Korea National Housing Corporation, or local public corporations, the exclusive area of which exceeds 85 square meters;

2. Houses constructed by a rental business operator other than the State, local governments, the Korea National Housing Corporation, or local public corporations, the exclusive area of which does not exceed 85 square meters, which is constructed on a site other than public housing sites with an obligatory lease period of 10 years; and

3. Houses constructed by the State, a local government, the Korea Housing Corporation, or a local public corporation, the exclusive area of which exceeds 85 square meters. (6) Matters necessary for the permission and authorization under section (2) 2 and the report under section (2) 3 shall be determined by the Ordinance of the Ministry of Land, Transport and Maritime Affairs.

(7) The term "necessary matters prescribed by Presidential Decree" in the proviso of Article 16 (3) of the Act refers to the following requirements:

1. Future management plan of the rental housing including the plan for conversion into presale;

2. Plans for raising financial resources required for reimbursement of the loan from the National Housing Fund and rental deposits; and

3. Subscription to guaranty under Article 17 (1) of the Act for the normalization of the dishonored rental housing, etc. or a plan for establishment of a special-purpose corporation.

Article 14 (Subscription, etc. to Guaranty for Rental Deposits) (1) The term "rental business operators of the constructed rental housing prescribed by Presidential Decree" in the text of the part other than each subsection of Article 17 (1) of the Act refers to all the rental business operators of public-constructed rental housing.

(2) A rental business operator under section (1) shall make a public notice on whether or not subscribing to the guaranty for rental deposits at a place easily seen by the lessees. The same shall also apply to the case where the subscribed guaranty is terminated or altered.

(3) Where a rental business operator under section (1) has subscribed to the guaranty for rental deposits, he/she shall deliver to a lessee the copies of a certificate of guaranty and a standardized contract for guaranty, immediately after the said lessee has moved into the rental house.

(4) The term "special purpose corporation, etc. incorporated to independently undertake rental housing projects by complexes as provided by Presidential Decree" in Article 17 (1) 2 of the Act refers to the corporation, etc. falling under any one of the following subsections, which has been established in order to independently implement the rental house projects by complex :

1. A real estate investment company under the Real Estate Investment Company Act;

2. A collective investment organization under the Capital Market and Financial Investment Services Act;

3. An investment company falling under Article 51-2 (1) 6 of the Corporate Tax Act; and

4. A stock company or limited liability company under the Commercial Act, which meets all the requirements of the following items: (a) No business place shall be established except for the main office; (b) No full-time officers shall be appointed;

(c) No staff members shall be employed;

(d) Related affairs shall be entrusted to the asset management company as referred to in Article 86-2 (5) 2 of the Enforcement Decree of the Corporate Tax Act or the trust business operator established by obtaining authorization according to Article 12 of the Capital Market and Financial Investment Services Act, and (e) No stocks shall be offered as security (excluding securities for the loans from the National Housing Fund).

(5) The term "ratio prescribed by Presidential Decree" in Article 17 (1) 2 of the Act means that the aggregate of the rental deposits for rental houses in the relevant complex and the loans from the National Housing Fund is 80 percent (90 percent in the case where a holding company or the largest contribution company jointly guarantees the relevant special purpose corporation, etc.) of the construction costs of the rental houses within the relevant complex: Provided, that in the case where the rental deposits, etc. have been adjusted after commencement of rent, it shall refer to 80 percent (90 percent in the case where a holding company or largest contribution company jointly guarantees for the relevant special purpose corporation, etc.) of the price of the rental houses computed according to the Ordinance of the Ministry of Land, Transport and Maritime Affairs.

(6) Matters on the ratio of bearing required expenses, the range of rental deposits to be guaranteed, subscription and maintenance of guaranty pursuant to Article 17 (4) of the Act shall be in accordance with each of the following subsections:

1. The ratio of bearing guaranty fees for the rental deposits which are borne by a rental business operator and a lessee shall be 75 % by the rental business operator and 25 % by the lessee;

2. The subscription to the guaranty for rental deposits and the payment of guaranty fees for rental deposits shall be done by the rental business operator. In this case, the rental business operator shall collect the guaranty fees to be borne by the lessee by including it in the rental fee thereof, and the relevant details shall be clearly stated in the written notice of rental payment;

3. Where the rental business operator has subscribed to the guaranty for the rental deposits in accordance with Article 17 of the Act, he/she shall submit a copy of the certificate of guaranty to the head of the city/Gun/Gu having jurisdiction over the location of his/her rental housing;

4. The head of the city/Gun/Gu in receipt of a copy of the certificate of guaranty submitted pursuant to subsection 3 shall keep the copy of the certificate of guaranty during the rental period;

5. Guaranty period for the rental deposits shall be the rental period; and

6. The amount to be guaranteed under Article 17 Section (3) of the Act shall be the total amount of the balance after subtracting the amount of Item (b) from that of Item (a): (a) The sum of the loan from the National Housing Fund and the amount of the rental deposits;

(b) The amount equivalent to 60/100 of the housing price determined by the Ordinance of the Ministry of Land, Transport and Maritime Affairs; and

7. The guaranty fees for rental deposits shall be recomputed each year. Article 15 (Notification of Audit Results on Corporations, etc.) A company falling under Article 14 (4) 4 shall forward the data related to a debt to equity ratio of the company and the audit results thereon, based on the end of each business year, to the head of the city/Gun/Gu having jurisdiction over the location of rental housing and the loan institution of the National Housing Fund for the relevant rental housing within 90 days from the end of each business year. Article 16 (Subscription to Guaranty for Rental Deposits in Case of Falling Short of Requirements)

Where the companies, etc. of each subsection of Article 14 (4) fall under any one of the following subsections, they shall immediately subscribe to the guaranty for the rental deposits according to Article 17 (1) of the Act:

1. Where the companies, etc are in violation of the purpose of establishment under Article 17 (1) 2 of the Act;

2. Where the aggregate of the rental deposits for rental housing and the loan from the National Housing Fund exceeds the ratio as provided by Article 14 (5); and

3. Where the company falling under Article 14 (4) 4 does not meet the requirements of each item of the same subsection or violates the provisions of Article 15. Article 17 (Supplementary Registration, etc.)

(1) In the supplementary registration under the text of Article 18 (2) of the Act, the contents of that "excluding the establishment of a restricted real right for the National Housing Fund, all activities such as the establishment of a restricted real right or the activities imposing any restrictions on the ownership such as seizure, provisional seizure, temporary disposition, etc., without the consent of the lessee on this house" shall be clearly stated.

(2) The term "cases prescribed by Presidential Decree" in the proviso of Article 18 (2) of the Act refers to the cases where rental business operators entrust the relevant rental housing to a trust company established by obtaining the authorization in accordance with Article 12 of the Capital Market and Financial Investment Business Act or under the Korea Housing Guarantee Company Limited established in accordance with Article 76 of the Housing Act.

Article 18 (Permission for Transfer, etc. of Right of Lease) (1) The term "case prescribed by Presidential Decree" in the proviso of Article 19 of the Act refers to the case falling under any of the following subsections:

1. Where all the constituent members of the household of a lessee of the rental house applicable to Article 16 Section (1) 3 and 4 of the Act fall under any of the following items after moving into the rental house, and thus transfer their right of lease or sublease the rental house to a houseless head of a household (referring to a person selected randomly by the lessee in the cases of privately constructed rental houses and purchased rental houses):

(a) Where they intend to move to a city/Gun/Gu (limited to autonomous Gu; hereinafter the same shall apply) other than that of the administrative area of the city/Gun/Gu of his/her residence due to work, livelihood, or treatment of illness, etc.; (b) Where they move to a house acquired by inheritance or marriage; and (c) Where they move overseas or reside overseas for not less than one year;

2. Where a resident escaping from North Korea pursuant to subsection 1 of Article 2 of the Act on the Protection and Settlement Support of Residents Escaping from North Korea has exchanged his/her rental house which was especially provided to him/her with another public-constructed rental house and resides therein for reasons of work, livelihood, etc.; and

3. Where a lessee moves out of a rental house due to marriage or divorce and his/her lineal descendant or ascendant, spouse or siblings who intends to continue to reside in the relevant rental house intends to make him/her its lessee after changing the name of the householder as his/her own.

(2) A lessee who intends to obtain consent on the transfer of right of lease or on the sublease of a rental house according to the proviso of Article 19 of the Act shall submit the materials which prove that the lessee falls under any of the subsections of section (1) to the rental business operator. In this case, where applying to section (1) 1 (a), the rental business operator may demand the lessee for a house lease contract, a lease contract on a deposit basis, or a house sales contract, etc. related to the transfer to another city/Gun/Gu.

(3) The rental business operator shall comply with the demand for the transfer of right of lease or sublease of a rental house by the lessee, unless there exist any special problems in the evidence materials submitted by the lessee to the rental business operator according to section (2).

Article 19 (Qualification and Selection Method of Lessee of Constructed Rental Housing)

The qualification and selection method of lessees of public-constructed rental housing, which are constructed by obtaining approval for the project plan under Article 16 of the Housing Act shall be in accordance with the conditions as prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs, and the qualification and selection method of the lessees of the constructed rental housing other than those shall be determined by the relevant rental business operator. Article 20 (Time for Invitation of Occupants of Privately Constructed Rental Houses) Rental business operators that construct privately constructed rental houses shall invite tenants after securing the ownership of the site for the rental house and cancelling the rights of mortgage, lease on deposit basis and superficies, which are established on the site.

Article 21 (Rental Deposit and Rent of Constructed Rental Housing) (1) The initial rental deposit and rent of a rental house built with the approval for the project plan in accordance with Article 16 of the Housing Act among the public- constructed rental housing shall not exceed the standard rental deposit and rent determined and publicly notified by the Minister: Provided, that the same shall not apply to the rent of a public-constructed rental house under Article 13 (5) 1 and 3 and Article (3) and the initial rental deposit of a public-constructed rental house supplied as the house for long-term lease on a deposit basis. (2) When the Minister estimates the standard rental deposits and standard rents, he/she shall take into consideration the construction costs of the rental housing and the facilities appurtenant thereto, support ratio of the state and local finance and the National Housing Fund, standard rental deposits and rents in adjacent areas of the relevant rental housing, guaranty fees for the rental deposits (limited to the portion of lessee's share), depreciation expense, expenses for repair and maintenance, fire insurance premiums, interests paid for a loan from the National Housing Fund, allowances for bad debts, taxes, and public charges. In this case, the construction costs of rental housing shall refer to the costs computed by the computation criteria as determined by the Ordinance of the Ministry of Land, Transport and Maritime Affairs. (3) The initial rental deposit of a public-constructed rental house under section (1) shall not exceed the amount fixed according to the classification of the following subsections:

1. For rental houses constructed by the State, local governments, the Korea National Housing Corporation, or local public corporations, the amount obtained by deducting the loan amount of the National Housing Fund from the construction costs (referring to the construction cost under the provisions of the latter part of section (2)) of the relevant house and its appurtenant facilities (hereinafter referred to as the "upper limit of rental deposit"; hereinafter the same shall apply in this section); and

2. For rental houses other than the houses constructed by a rental business operator as referred to in subsection 1, the amount of the following items. In this case, the rental deposits for the rental houses constructed in sites other than the public housing sites shall not exceed the amount of the rental deposits which has been agreed upon with the fund trustee under Article 62 of the Housing Act at the time of being supported by the National Housing Fund:

(a) An amount corresponding to 90 percent of the upper limit of rental deposits, if it is located in the Seoul Metropolitan area (referring to the Seoul Special Metropolitan City, Gyeonggi-do, and Incheon Metropolitan City; hereinafter in this section the same shall apply); and

(b) An amount corresponding to 80 percent of the upper limit of rental deposits, if it is located in an area other than the Seoul Metropolitan area. (4) The rent of the rental housing pursuant to Article 22 (3) shall not exceed the standard rent, which is separately prescribed and announced by the Minister taking into consideration the lessee's prepaid amount equivalent to the presale conversion price (hereinafter referred to as the "presale conversion money").

(5) The initial rental deposit of the public-constructed rental housing furnished as a long- term rental housing on a deposit basis shall not exceed the amount calculated by the Ordinance of the Ministry of Land, Transport and Maritime Affairs taking into consideration the rental deposit amounts of nearby rental housing which is similar to the corresponding rental housing in terms of its type, scale, living condition, etc. Article 22 (Preferential Conversion, etc. of Constructed Rental Housing into Housing for Presale)

(1) The term "cases prescribed by Presidential Decree" in Article 21 (2) of the Act refers to the case of a house of which the exclusive area exceeds 85 square meters. (2) The term "cases prescribed by Presidential Decree" in Article 21 (5) of the Act refers to the cases falling under Article 3 (2) of the Act. (3) In the case of the rental houses (hereinafter referred to as the "installment rental houses") for which the presale conversion money is paid by installments without rental deposit among public-constructed rental houses constructed by the State, local governments, the Korea National Housing Corporation, or local public corporations, the rental business operator may receive the partial amounts of presale conversion money (hereinafter referred to as the "installment") in advance from the lessee prior to the commencement of or during the lease period.

(4) Matters necessary for the installment standards and installment methods of the presale conversion money pursuant to section (3) shall be determined by the Ordinance of the Ministry of Land, Transport and Maritime Affairs.

Article 23 (Appraisal and Assessment, etc. for Calculation of Presale Conversion Price) (1) The head of the city/Gun/Gu shall commission two appraisal and assessment corporations satisfying the criteria publicly announced by the Minister pursuant to Article 7 (2) of the Public Notice of Values and Appraisal of Real Estate Act (including the Korea Appraisal Board Corp. pursuant to Article 2 of the Enforcement Decree of the State Properties Act, and hereinafter referred to as the "appraisal and assessment corporations") with the appraisal and assessment duties pursuant to Article 21 (9) of the Act. (2) The appraisal and assessment corporations commissioned with the appraisal and assessment duties pursuant to section (1) shall make appraisals and assessments on the basis of the day the rental business operator or the lessee (referred to the "lessees' representative council" in the case where the lessees' representative council has been organized) requests to select the appraisal and assessment corporations. (3) The appraisal and assessment corporations shall complete appraisal and assessment within 20 days from the request day of the appraisal and assessment: Provided that if it is deemed by the head of a city/Gun/Gu that there exists any inevitable reason, such period may be extended for a period within the limit of ten days. (4) The term "matters prescribed by Presidential Decree" in the proviso of Article 21 (9) of the Act refers to the following cases:

1. Where the appraisal and assessment is completed in violation of the relevant laws and regulations; and

2. Where it is deemed to be unfairly estimated. (5) The reassessment under the proviso of Article 21 (9) of the Act (hereinafter referred to as the "reassessment"; and the same shall apply in this Article) shall conform to the provision of section (1) by clearly stating the reason thereof, and shall not be commissioned to the original appraisal and assessment corporations. (6) The provisions of section (3) shall apply mutatis mutandis to the period of reassessment, and the expenses for the reassessment shall be paid by the person who raised a formal objection.

(7) In the event that the public-constructed rental housing is converted to the housing for presale pursuant to the provisions of Article 21 (1) through (9) of the Act (excluding the public-constructed rental housing under each subsection of Article 13 (5)), necessary matters concerning the standards, method, and procedures of presale conversion price, other than the matters prescribed by sections (1) through (6), shall be prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs. Article 24 (Investigation of Actual Conditions of Dishonored Rental Housing, etc) (1) In the event that the head of a city/Gun/Gu has received a report on the occurrence of nonpayment, etc. from a fund trustee according to Article 23 (1) of the Act, he/she shall perform, without delay, the investigation of the actual conditions pursuant to Article 24 (1) of the Act.

(2) In the event that the head of a city/Gun/Gu performs the investigation of actual conditions in accordance with Article 24 (1) of the Act, he/she shall prepare a report for the investigation of actual conditions as prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs. (3) The term "data prescribed by Presidential Decree" in Article 24 (3) of the Act refers to the data applicable to any of the following subsections:

1. Data concerning the contents of lease contract by household;

2. Data concerning the present status of empty households;

3. Data concerning the present status of default rents and management expenses;

4. Data related to the loans from the National Housing Fund;

5. Data concerning the present status of conversion into presale and auction proceedings; and

6. Data concerning disputes between the rental business operator and the lessees, other than those listed above.

Article 25 (Report on Lease Terms and Conditions) (1) The term "rental housing prescribed by Presidential Decree" in the first part of Article 26 Section (1) of the Act refers to the public-constructed rental housing under subsection 1 of Article 2, and the term "matters concerning the terms and conditions of the lease prescribed by Presidential Decree" refers to the following matters.

1. Term of lease contract;

2. Rental deposit;

3. Rent; and

4. The presale conversion period and the standards for calculation of the presale conversion price (limited to the cases of rental houses to be converted into houses for presale falling under Article 16 (1) 3 and 4 of the Act among the public-constructed rental housing built with the approval for the project plan in accordance with Article 16 of the Housing Act): Provided, that in the case of public-constructed rental houses referred to in each subsection of Article 13 (5), the standards for calculation of the presale conversion price may not be reported.

(2) The term "cases prescribed by Presidential Decree" in Article 26 (2) of the Act refers to the following cases:

1. Where the reported contents are deemed noticeably unreasonable compared with those of a similar rental house in the vicinity; and

2. Where the reported contents are deemed inappropriate under the relevant laws and regulations.

(3) A rental business operator who intends to make a report on the matters under each subsection of section (1) shall submit a report on the terms and conditions of lease accompanied by the standard lease agreement according to Article 32 of the Act to the head of the city/Gun/Gu having jurisdiction over the location of the relevant rental house within ten days prior to the expected date of moving in (in the case of reporting a change, ten days prior to the date of change).

(4) The head of the city/Gun/Gu, who has received a report pursuant to section (3), shall confirm the contents thereof and enter such contents in the ledger of reports on the terms and conditions of lease within ten days from the date of receiving such reports in the case where the contents do not apply to any subsection of section (2), and deliver the certificate of the report on the terms and conditions of lease to the reporting person.

(5) In the event that an employer under the provisions of Article 10 Section (3) of the Housing Act, among rental business operators who intend to report the terms and conditions of lease pursuant to section (1), purchases and leases a rental house constructed by a local government, the Korea National Housing Corporation, or a registered business operator referred to in Article 9 of the Housing Act, or where a local government purchases and leases a rental house constructed by a maintenance and improvement project cooperative under Article 16 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, the terms and conditions of lease including the contents of Article 16 (1) 1 through 3 and Article 21 of the Act, Articles 19 and 21 of this Decree shall be reported. (6) The head of the city/Gun/Gu shall publish the terms and conditions of lease reported by the rental business operator pursuant to Article 26 Section (1) of the Act on the official report of the relevant local government not later than the end of the next month following the end of each quarter.

Article 26 (Refusal of Renewal of Lease Contract) (1) The term "cases applicable to the matters prescribed by Presidential Decree" in Article 27 (1) of the Act refers to the cases falling under any of the following subsections:

1. Where the rental house is leased by fraudulent or other unlawful means;

2. Where the right of lease is transferred to another person or a rental house is subleased to another person in violation of Article 19 of the Act;

3. Where a lessee has failed to move into the rental house within three months from the beginning date of the lease period: Provided, that the same shall not apply to the case where such occupation has been delayed due to reasons attributable to the rental business operator;

4. Where rents have been in arrear for at least three months; 4-2. Where installment payments for the installment rental house have been in arrear for more than three months;

5. Where the rental house and its subsidiary facilities are reconstructed, extended, modified or misused without prior consent of the rental business operator;

6. Where the rental house and its subsidiary facilities are intentionally damaged or destroyed;

7. Where a lessee owns another house in the lease period of a public-constructed rental house constructed with the approval of the project plan pursuant to Article 16 of the Housing Act: Provided, that this shall not apply to the cases where the lessee disposes the relevant house within six months from the date of notice of a disqualified person due to the reason that he/she owns another house by inheritance, judgment, marriage, or other inevitable reason, and where a lessee acquires the right of lease on a first- come-first-served basis for the remaining rental houses after selecting the occupants at the time of the invitation of occupants of the relevant rental housing; and

8. Where the obligation on the standard lease contract pursuant to Article 32 of the Act is violated.

(2) The term "cases prescribed by Presidential Decree" in Article 27 Section (2) of the Act refers to the cases falling under any of the following subsections:

1. Where the head of a city/Gun/Gu deems that there is a major defect making it difficult for a lessee to live in the rental housing;

2. Where the rental business operator has failed to perform upon orders of repairing defects within the designated period;

3. Where the rental business operator has damaged, destroyed, or removed the appurtenant facilities or welfare facilities against the intention of the lessees;

4. Where the lessee has been unable to move into the rental house within three months from the expiration date of the occupation period due to faults attributable to the rental business operator; and

5. Where the rental business operator has violated the obligation on the standard lease contract pursuant to Article 32 of the Act.

(3) In the case where the rental business operator of an installment rental housing cancels or terminates a lease contract or refuses the renewal of a lease contract pursuant to Article 27 of the Act, he/she shall pay the fees for repayment calculated according to the standards prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs to the lessee.

Article 27 (Management of Rental Houses)

(1) The term "scale prescribed by Presidential Decree" in the text of Article 28 (1) of the Act refers to the rental housing falling under any of the following subsections for the respective rental housing complex:

1. A collective housing of not less than 300 households;

2. A collective housing equipped with elevators; and

3. A collective housing with a central heating system. (2) The term "technical manpower and equipment prescribed by Presidential Decree" in Article 28 (2) of the Act refers to the technical manpower and equipment pursuant to the criteria in the attached Table 4 of the Enforcement Decree of the Housing Act. (3) The case where not less than two rental business operators may jointly manage rental houses pursuant to Article 28 (3) of the Act refers to the case where the head of the City (including the Seoul Special Metropolitan City Mayor and the Metropolitan City Mayor) or the head of the Gun deems it reasonable to jointly manage such rental houses because not less than two rental housing complexes are adjacent to each other. In this case, such complexes shall be regarded as one rental housing complex in applying the criteria of the technical manpower and equipment under Section (2). Article 28 (Lessees' Representative Council)

(1) The term "number of houses prescribed by Presidential Decree" in Article 29 (1) of the Act refers to twenty houses.

(2) The term "other matters prescribed by Presidential Decree" in Article 29 (3) 4 of the Act refers to the following matters:

1. Repairing defects; and

2. Matters agreed upon between the rental business operators and the lessees' representative council on the management of collective housing. (3) In the case where the lessees' representative council requests the rental business operators to hold a consultation on the matters under each subsection of Article 29 (3) of the Act, the rental business operators shall faithfully comply with such consultation. (4) The lessees' representative council shall be composed of representatives elected in proportion to the number of households of each building of the rental housing (hereinafter referred to as the "representatives of the respective building"). (5) Persons who are qualified to become the representatives of the respective building shall be the lessees who have continuously lived in the respective collective housing complex for not less than six months: Provided that the same shall not apply to the case where the lessees' representative council is constituted for the first time. (6) The lessees' representative council shall elect one chairperson, one vice-chairperson, and one auditor from the representatives of the respective building. (7) Where intending to convene the lessees' representative council, the purpose, date and time, venue, etc. of the meeting shall be notified to the lessees or publicly announced five days prior to the date of convocation.

(8) The lessees' representative council shall, without delay, notify or publicly announce the progressing situations of major affairs, such as the matters resolved at the relevant meeting, the outcomes of consultation with the rental business operators, etc., to the lessees.

(9) The lessees' representative council shall, when holding its meeting, prepare and maintain the minutes, and comply with the request of lessees for perusal or photocopying thereof at their own expenses.

Article 29 (Lessees' Representative Council of Dishonored Rental Housing) (1) In the case where the lessees' representative council of dishonored rental housing reports its establishment to the head of the city/Gun/Gu pursuant to Article 30 (1) of the Act, the meeting minutes of the inaugural meeting of the lessees' representative council of dishonored rental housing shall be attached to the establishment report including the following matters:

1. Date of organizing the lessees' representative council; and

2. Names and addresses of chairperson, vice-chairperson, and auditor. (2) The head of a city/Gun/Gu who has received an establishment report by the lessees' representative council of dishonored rental housing under Article (1) shall issue a certificate of report of lessees' representative council of dishonored rental housing after confirming the contents of the report, as prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs. (3) The term "matters prescribed by Presidential Decree" in Article 30 (2) of the Act means matters falling under each subsection of Article 29 (3) of the Act and each subsection of Article 28 (2) of this Decree.

(4) The term "cases prescribed by Presidential Decree" in Article 30 (3) of the Act means the case where the rental housing business operator has been missing or disappeared Article 30 (Rate, Procedures for Use, etc. of Special Repair Reserve Funds) (1) A rental business operator who has built the rental housing falling under any subsection of Article 27 (1) of the Act shall establish a long-term repair plan pursuant to Article 47 of the Housing Act pertaining to commonly used parts of the relevant rental housing and appurtenant facilities thereto as well as welfare facilities (excluding sold facilities), and shall submit the plan with an application for usage inspection when applying for the usage inspection thereof, and maintain it in the management office located in the relevant rental housing complex during the lease period. (2) The long-term repair plan to be submitted and maintained pursuant to section (1) shall be in accordance with the standards prescribed by the Ordinance of the Ministry of Land, Transport and Maritime Affairs.

(3) The rental business operator shall accumulate the special repair reserve funds pursuant to Article 31 (1) of the Act (hereinafter referred to as the "special repair reserve funds") every month from the month to which the day one year after the date of the usage inspection (referring to the date of the approval for temporary use, in the case of obtaining an approval for temporary use) of a rental house belongs, and the rate of accumulation shall be in accordance with the rate of each of the following subsections:

1. For rental housing under Article 16 (1) 1 of the Act, 4/10,000 of the standard construction costs announced by the Minister;

2. For rental housing under Article 16 (1) 2 of the Act, 4/10,000 of the standard construction costs announced by the Minister; and

3. For rental housing under Article 16 (1) 3 and 4 of the Act, 1/10,000 of the standard construction costs according to the approval of the project plan pursuant to Article 16 (1) of the Housing Act.

(4) The special repair reserve funds shall be deposited in a financial institution under the joint names of the rental business operator and the head of the city/Gun/Gu having jurisdiction over the location of the relevant rental housing and shall be separately managed: Provided, that in the event that the rental business operator is the State, a local government, the Korea National Housing Corporation, or a local public corporation, the funds may be deposited in a financial institution under its own name and managed separately.

(5) Where the rental business operator intends to use the special repair reserve funds, he/she shall consult in advance with the head of the city/Gun/Gu having jurisdiction over the location of the respective rental housing. (6) Method of use, detailed procedures of use, and other necessary matters for the special repair reserve funds other than those prescribed by this Decree shall be determined by the long-term repair plan.

Article 31 (Matters Subject to Dispute Mediation) The term "matters prescribed by Presidential Decree" in Article 33 (1) of the Act means matters falling under any of the following subsections:

1. Matters pertaining to conversion of dishonored rental housing into housing for presale, housing management, reimbursement of the loans from the National Housing Fund loan and return of rental deposits, etc.; and

2. Matters pertaining to management of dishonored rental housing pursuant to Article 30 Section (3) of the Act.

Article 32 (Objects of Mediation by Rental Housing Dispute Mediation Committee) (1) The term "constructed rental housing prescribed by Presidential Decree" in Article 34 (2) of the Act means the public-constructed rental housing. (2) The term "matters prescribed by Presidential Decree" in Article 34 (3) of the Act means the matters falling under each subsection of Article 31. Article 33 (Organization of Rental Housing Dispute Mediation Committee) (1) The members of the rental housing dispute mediation committee (hereinafter referred to as the "mediation committee") pursuant to Article 33 Section (1) of the Act shall be appointed or commissioned by the corresponding head of the city/Gun/Gu among the persons falling under any of the following subsections, and not less than one committee member shall be respectively commissioned from the persons applicable to each subsection, and not less than six private members shall be commissioned:

1. A person who has served as an assistant professor for not less than one year at the school pursuant to subsections 1 and 2 or 5 of Article 2 of the Higher Education Act, who majored in law, economics or studies in the field of housing including real estate studies;

2. A person who has served as a lawyer, a certified public accountant, a certified appraiser, or a tax accountant for not less than one year;

3. A housing manager pursuant to Article 56 Section (2) of the Housing Act who has served in the related affairs for not less than three years;

4. A grade 5 or higher public official recommended by the head of the relevant agency, who conducts the related affairs such as authorization, permission, etc. for the rental housing project in the State or other local government, or a grade 5 or higher public official who conducts the related affairs such as authorization, permission, etc. for the rental housing project in the relevant local government; and

5. An officer or a staff engaged in the affairs related to rental housing projects in the Korea National Housing Corporation or local public corporation, recommended by the head of the relevant institution.

(2) The vice-chairperson shall be chosen from the committee members by mutual votes. (3) The term of office of the committee members other than public officials shall be two years and they may be reappointed.

Article 34 (Meeting)

(1) The meeting of the rental housing dispute mediation committee shall be convened by the chairperson.

(2) The chairperson shall notify the matters related to the meeting to committee members not later than two days prior to the opening date of the respective meeting. (3) The meeting of the rental housing dispute mediation committee shall be opened by attendance of a majority of the registered committee members, and a resolution shall be concluded by consenting votes of a majority of the present members. (4) The chairperson shall nominate one person as an executive secretary among the staff concerned with the rental housing affairs of the relevant local government in order to conduct the administrative affairs of the mediation committee. (5) The executive secretary shall prepare the meeting minutes and preserve thereof pursuant to the Act on the Management of Public Archives, and such minutes shall includes the following matters:

1. Date and time, and venue of the meeting;

2. Register of signatures of present committee members;

3. Agenda presented to the meeting and the results of the meeting; and

4. Other important matters discussed in the meeting, etc. (6) Allowances and traveling expenses may be paid to the committee members who have attended the mediation committee meeting within the limit of the budge: Provided that the same shall not apply to the case where the committee member, as a public official, attends the mediation committee in direct connection to his/her duties. (7) The mediation committee may request the rental business operator to submit the data necessary for the mediation of the disputes of the relevant rental housing. In this case, the rental business operator shall comply with such request with due diligence. Article 35 (Detailed Managerial Regulation)

Matters necessary for the meeting and operation of the mediation committee, other than the matters prescribed in this Decree shall be determined by the chairperson via resolution of the mediation committee.

Article 36 (Standards for Imposition of Penalty Surcharge) The standards for imposition of penalty surcharge pursuant to Article 40 of the Act shall be as stated in the attached Table.

Article 37 (Imposition of Penalty Surcharge and Payment) (1) In the event of imposing a penalty surcharge pursuant to Article 40 of the Act, the head of the city/Gun/Gu shall notify the corresponding person to pay the penalty surcharge through a written notice by stating the imposition standard for the offense and the amount of penalty surcharge.

(2) A person who has received the notice in accordance with section (1) shall pay the penalty surcharge within 30 days from the receipt of the notice to the collecting agency designated by the head of the city/Gun/Gu: Provided, that in the event that he/she is not able to pay the penalty surcharge within the due date due to force majeure or other inevitable reasons, he/she shall pay the penalty surcharge within seven days from the day such reason vanishes.

(3) The collecting agency which has received the penalty surcharge pursuant to section (2) shall issue a receipt to the payer.

(4) When the collecting agency has received the penalty surcharge pursuant to section (3), it shall immediately notify such fact to the head of the city/Gun/Gu. (5) Other matters necessary for imposition or collection of the penalty surcharge shall be determined by the Ordinance of the Ministry of Land, Transport and Maritime Affairs. Addenda (Enforcement Decree of the State Properties Act)

Article 1 (Enforcement Date)

This Decree shall enter into force on Jul. 31, 2009 Articles 2 through 13 Omitted

Article 14 (Amendment of Other Laws and Regulations) (1) through <40> Omitted.

<41> Part of the Enforcement Decree of the Rental Housing Act shall be amended as follows:

The term "subsection 27 of Article 2 of the Enforcement Decree of the Act on the Contribution In-kind of State Properties" shall be changed to "Article 2 of the Enforcement Decree of the State Properties Act".

<42> through <65> : Omitted.

Article 15 Omitted.