CONTENTS
- 1. Constitutional Complaint | Overview and Issues of the Case
- - Grounds for the Petition for Adjudication on the Constitutional Complaint
- 2. Constitutional Complaint | The Constitutional Court's Determination
- - Provisions on Exclusion From Registration and Cancellation of Registration
- - Provisions on the Obligation to Obtain a Guarantee and Penalties
- - Provisions on the Obligation of Supplementary Registration
- 3. Constitutional Complaint | Significance of This Decision
- - Implications and Advisory Strategy
1. Constitutional Complaint | Overview and Issues of the Case
In this case, in which the Constitutional Court's determination was sought through a constitutional complaint, the issue was whether the reorganization of the Private Rental Housing Act infringed the fundamental rights of rental business operators.
In particular, the parties disputed whether provisions such as exclusion from registration, cancellation of registration, the obligation to obtain a guarantee, and supplementary registration violated the freedom of occupation, property rights, and the principle of protection of trust.
The Constitutional Court determined that the portion concerning the tax act provisions was rejected for lack of directness, and that the remaining provisions related to the Private Rental Housing Act were all constitutional.
This decision is regarded as one that clarified that changes in rental housing policy do not violate the constitutional principle of protection of trust or the principle against excessive restriction.
Grounds for the Petition for Adjudication on the Constitutional Complaint
The complainants, as numerous registered rental business operators, argued that, because the Private Rental Housing Act as amended in 2020 (i) restricted the registration of short-term rental housing and apartment-purchase-type long-term general rental housing, (ii) made the cancellation of existing registrations imminent, and (iii) strengthened the obligations to obtain a guarantee and to make supplementary registration, such amendments infringed the freedom of occupation, property rights, and the principle of protection of trust.
They also argued that the related tax act provisions (the Comprehensive Real Estate Holding Tax Act, the Income Tax Act, and others) were also unconstitutional, on the ground that the tax benefits formerly granted to rental business operators had been reduced.
In response, the Constitutional Court decided that the portion concerning the tax act provisions was inadmissible for lack of directness, and that the provisions of the Private Rental Housing Act were constitutional.
2. Constitutional Complaint | The Constitutional Court's Determination
The Constitutional Court rejected the claim as to the tax-related provisions (the Comprehensive Real Estate Holding Tax Act, the Income Tax Act, and others), on the ground that they could not be regarded as directly infringing fundamental rights.
This is because tax laws are general and abstract provisions, and any actual restriction of fundamental rights is realized through specific administrative acts such as taxation dispositions.
In other words, the Court determined that, because the disadvantage arising from the reduction of tax benefits is merely an indirect effect arising through the enforcement dispositions of the tax authorities rather than from the tax laws themselves, these tax act provisions could not be the subject of a constitutional complaint.
Provisions on Exclusion From Registration and Cancellation of Registration
The amended Private Rental Housing Act excluded short-term rental housing and apartment-purchase-type long-term general rental housing from the scope of registration, and provided that, for existing registered operators, registration would be automatically cancelled upon the expiration of the mandatory period.
On this basis, the existing operators argued that their freedom of occupation and the principle of protection of trust were infringed, in that their ability to continue the business in the future was restricted.
The Constitutional Court first stated that the rental business operator registration system is a policy system serving the public-interest purposes of stabilizing the housing of the people and protecting tenants.
Accordingly, the Court held that the legislature has broad legislative discretion to modify the rental business operator system in accordance with changes in economic and social conditions.
The Court also held that, because the government had, since 2017, progressively announced policy changes such as the abolition of the short-term rental system in order to respond to market overheating and speculative demand, this was not a violation of the principle of protection of trust, in that the operators could have foreseen it.
The Court determined that the cancellation of registration likewise takes place upon the expiration of the mandatory period, and that, because transitional measures and grace periods were granted to existing rental business operators, it is difficult to regard it as an excessive infringement.
Ultimately, the Constitutional Court held that "a reasonable modification of a policy system falls within the scope of the legislature's discretion to shape the law, and the infringement of the trust interest of existing registered operators is not so grave as to warrant constitutional protection," and decided that there was no violation of the freedom of occupation or the principle of protection of trust.
Provisions on the Obligation to Obtain a Guarantee and Penalties
The amended Act made it mandatory for all private rental business operators to obtain a guarantee for the return of rental deposits, and provided that a violation would be punishable by imprisonment for up to two years or a fine of up to twenty million won.
The complainants argued that such provisions infringed property rights and that the penalty was excessive.
The Constitutional Court determined that the obligation to obtain a guarantee is a system for protecting tenants' deposits and securing housing stability, and that its purpose is highly legitimate.
The Court held that, because the guarantee premium rate is around 0.1 percent per year, the economic burden is not excessive, and because tenants also bear a portion of the premium, the property disadvantage imposed on operators conforms to the principle of minimal infringement.
The Court also determined that, because the penal provisions are a means of securing the effectiveness of the guarantee system and fall within the domain of legislative policy judgment, they cannot in themselves be regarded as contrary to the principle of proportionality.
Accordingly, the Constitutional Court held that "the obligation to obtain a guarantee and the criminal punishment for its violation constitute an appropriate and necessary regulation for the protection of tenants' property rights, and do not violate the principle against excessive restriction or the principle of proportionality in punishment."
Provisions on the Obligation of Supplementary Registration
The amended Act made it mandatory for rental business operators to record, by supplementary registration, key information such as the mandatory rental period and the rent ceiling for registered rental housing.
In response, the complainants argued that their property rights were infringed on the grounds of restrictions on ownership and the burden of costs.
The Constitutional Court determined that the obligation of supplementary registration is a disclosure system intended to enable tenants to verify the rental conditions before leasing a dwelling, and that its purpose is legitimate and its means appropriate.
The Court held that the cost of supplementary registration is very minor, at about ten thousand won per case, and that, because supplementary registration does not transfer or restrict ownership but is merely a procedural indication for the disclosure of information, it cannot be regarded as substantively restricting property rights.
Ultimately, the Constitutional Court held that "the obligation of supplementary registration is a reasonable system for the protection of tenants, and is not an infringement of property rights or a violation of the principle against excessive restriction."
3. Constitutional Complaint | Significance of This Decision
This decision is regarded as significant in that the Constitutional Court held that the reorganization of the rental business operator system does not infringe the constitutional protection of trust or the freedom of occupation.
First, the Court reaffirmed the legal doctrine that a modification of a policy system does not violate the Constitution where it is accompanied by foreseeability and transitional measures.
Second, the Court emphasized the constitutionality of the obligations to obtain a guarantee and to make supplementary registration, holding that the public interest in protecting tenants and ensuring housing stability takes precedence over the economic disadvantage of operators.
Third, the Court clarified the standard for the requirements of admissibility of a constitutional complaint by strictly applying the requirement of directness to the tax act provisions.
Accordingly, this decision is regarded as a case that once again confirmed that the reorganization of the system for the state's housing policy and the stabilization of the rental market lies within the scope of policy discretion permitted under the Constitution.
Implications and Advisory Strategy
· Strategy for Responding to Policy Changes
In particular, operators of short-term rental housing or apartment-purchase-type rental housing should review in advance their legal status after the expiration of registration and the changes in tax benefits.
· Advisory on Performing the Obligations of Guarantee and Supplementary Registration
Daeryun comprehensively reviews the registration information, housing type, and guarantee enrollment status of rental business operators, and provides support so that the risks of administrative dispositions and criminal liability in the event of a violation can be averted in advance.
· Responding to Constitutional Complaints and Administrative Litigation
Therefore, where a specific disposition has been made, it is advisable to respond by concurrently pursuing administrative litigation or tax objection procedures.
The trust-protection interest of rental business operators does not take precedence over the state's pursuit of public-interest housing policy, and the obligations to obtain a guarantee and to make supplementary registration may likewise be regarded as legitimate regulations serving the significant public interest of protecting tenants.
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