Deferral of Actual Residence Requirement in Land Transaction Permit Zones Extended up to 2029... Move-in Timing Delayed

The period during which the actual residence requirement can be deferred when purchasing a house within a Land Transaction Permit Zone will be increased. According to new details announced by the Ministry of Land, Infrastructure and Transport, the application period for deferring actual residence within a Land Transaction Permit Zone is scheduled to be extended by one more year, from the end of 2026 to the end of 2027. In particular, in addition to existing lease contracts, renewed contracts using the Right to Request Lease Renewal will also be included, allowing for an actual residence deferral of up to 2 years. Accordingly, if the conditions are met, it will be possible to delay the actual residence move-in timing until the end of 2029 at the latest.

Checking Land Transaction Permit Targets and Precautions During Contracts

When purchasing an apartment or house within a Land Transaction Permit Zone, you must check whether it is subject to permission because you acquire not only the building but also the land share, which is the land portion of the building. While 25 autonomous districts in Seoul and 12 areas in Gyeonggi Province are grouped as regulated areas and Land Transaction Permit Zones, not all commercial buildings or officetels are targets. One must examine whether it is subject to permission focusing on designated individual complexes such as apartments, row houses, and multi-family houses. Whether a property is a target can be confirmed through the Land Use Planning Confirmation Certificate.

Regarding the timing of the contract, it is pointed out that a provisional contract signed before receiving permission may be in a state of fluid invalidity depending on whether permission is granted. If permission is not granted, the contract may be retroactively invalidated; therefore, it is important to specify detailed special terms in the contract, such as the seller and buyer cooperating with the permission application, or details regarding the return of the down payment and adjustment of the balance in case of non-permission. In principle, the seller and buyer must jointly apply for permission, and the competent authority must decide whether to grant permission within 15 days from the date of receipt of the application in principle.

Fines and Penalties for Violating the Actual Residence Requirement

The deferral of actual residence is merely a special exception that delays the move-in timing for non-homeowning actual users; the actual residence requirement itself does not disappear. If a property is leased or sold without actually residing there for 2 years after obtaining permission and acquiring it, strict sanctions will follow. If the property is left unused without being used for the intended purpose of the permission, a fine of 10% of the acquisition amount may be imposed; if it is leased, a fine of 7% of the acquisition amount is imposed, and if the purpose of use is changed without permission, a fine of 5% is imposed. The standard amount in this case is the actual transaction value, not the officially announced price.

If an act of hiding the actual resident by using a family member's name to meet the permission requirements is committed, it is considered an evasive act to avoid the Land Transaction Permit system. This constitutes obtaining permission through fraudulent methods and may result in imprisonment for up to 2 years or a fine of up to 30% of the land value based on the individual officially announced land price. Additionally, if a property is purchased under a child's name while the parents bear the funds, issues of title trust and gift tax may arise simultaneously.

Differences from Gifts, Inheritances, and Auction Transactions

Not all real estate transfer transactions are subject to Land Transaction Permit. Since the Land Transaction Permit targets paid sales transactions where ownership is transferred in exchange for consideration, simple gifts or inheritances without consideration are excluded from the permission target. However, in the case of a gift, one must consider gift tax, acquisition tax, and the deferred taxation issue that occurs when transferring within 10 years; in the case of an encumbered gift where debt is transferred together, caution is required as the transfer tax and gift tax vary depending on the child's ability to repay the debt. Also, court auctions according to the Civil Execution Act are an exceptional case where Land Transaction Permit is not required.

The designation of a Land Transaction Permit Zone does not immediately lead to heavy taxation of acquisition tax or transfer tax. A Land Transaction Permit Zone is a system that regulates the obligation of use, and it is a separate system from the Regulated Area, which deals with tax and loan regulations. However, if a specific area is designated for both regulations simultaneously, the tax burden may increase together, so the designation of the property as a regulated area and the number of owned houses must be checked separately for each.