Types of Real Estate Contracts

For most ordinary people, the biggest investment is probably real estate. In Korea, that typically means an apartment, and whether you want to buy your own home or invest in real estate for profit, you need to study a lot.
Before studying what you need for real estate investing, let's go over the basic terms related to real estate contracts that we should know. Please note that we plan to keep posting articles on real estate terms.

1. Mortgage contract
- Refers to the right of a creditor to dispose of a property if the buyer or owner of the property provides it as collateral and fails to fulfill the related debt
- It takes effect only when a mortgage agreement is concluded with the debtor (or collateral provider) and registration (in the case of real estate) is completed.
- Multiple mortgages can be set on the same property, and the mortgage set first has priority for repayment.
- It is set by clearly specifying the mortgage amount, and the mortgage amount cannot be changed (if a 100 million won mortgage is set, the full 100 million won is the loan amount)
2. Revolving mortgage (maximum-amount mortgage) contract
- It carries the same rights as a mortgage, but differs in how the mortgage amount is set
- A maximum limit for the mortgage amount is set, so the loan amount with the creditor can vary. (If a 100 million won revolving mortgage is set, you can freely borrow within the 100 million won limit)
3. Superficies contract
- Refers to the right to use another person's land in order to own a building or other structures (roads, warehouses, etc.) on it
- The superficiary does not own the land but has the right to build or maintain a building on it.
- The superficiary may sell the building built on the land or offer it as collateral.
- The superficies remains even if the landowner changes, but when the contract period ends, the building must be demolished unless an agreement is reached with the landowner.
- A superficies contract can be freely traded, so it can be transferred to another person.
4. Lease contract
- Refers to a contract in which the lessor (owner) allows the lessee (user) to use the property (land, building, etc.) for a certain period, and in return the lessee pays rent (monthly rent, deposit, etc.).
- When the contract ends, the lessee must return the property to the lessor in its original condition.
5. Sublease contract
- Refers to a contract in which the lessee (tenant) leases the property or item they are renting to another person
- A person entering into a sublease must check whether the lease agreement contains a clause allowing subleasing and obtain written consent from the lessor.
6. Title trust (nominee) contract
- Refers to a contract in which the actual owner does not register the property in their own name but owns it by borrowing another person's name
- Title trusts of real estate are illegal in principle, so they are not allowed except in special cases (setting up a real estate title trust for the purpose of managing a minor's property under an inheritance or will is allowed)
- Title trusts may be possible for financial assets or non-real-estate assets. (For example, non-real-estate assets such as cars and stocks are not subject to the Real Estate Real Name Act, so title trusts can be made relatively freely)