Land Transaction Permit System

A real estate regulation system that requires approval from the head of a local government when transacting land within a designated Land Transaction Permit Zone

Land Transaction Permit System

Overview

The Land Transaction Permit System is a system under which, when acquiring land exceeding a certain area within a Land Transaction Permit Zone designated by the Minister of Land, Infrastructure and Transport through sale, gift, exchange, etc., one must obtain permission from the competent city mayor, county governor, or district head before concluding a contract. It is an administrative prior regulation intended to suppress speculative transactions and induce normal land use centered on actual demand, and a transaction concluded without permission has no legal effect.

The current legal basis is the 「Act on Real Estate Transaction Reporting, etc.」 (hereinafter the 'Transaction Reporting Act'), enacted in 2020 and enforced on February 19, 2021. As a result of integrating and reorganizing the regulatory framework that had continued through the 「Act on Land Transaction Permits」 enacted in 1978 and the 「Act on the Upper Limit of Housing Site Ownership」 in 1990, the previous individual laws were abolished and the relevant content was transferred to the Transaction Reporting Act.

Main Contents

Legal Basis and Designation Procedure

Under Article 10 of the Transaction Reporting Act, the Minister of Land, Infrastructure and Transport may designate a Land Transaction Permit Zone when any of the following grounds exist: ① speculative land transactions are prevalent or likely to become prevalent, ② land prices are surging or likely to surge, ③ designation is deemed necessary in light of the state of land use, the surrounding environment, and other circumstances. The designation period is in principle within five years, and it may be extended or partially lifted if necessary. Designation and lifting are announced in the Official Gazette and disclosed through local government websites and the Land Use Regulation Information Service (LURIS).

Areas Subject to Permission

Not all transactions within a permit zone are subject to permission; permission must be obtained only when the area exceeds the standard area set for each use district. Representative standards are: exceeding 18 m² in residential areas, exceeding 150 m² in commercial and industrial areas, exceeding 100 m² in green areas, exceeding 200 m² in management and agricultural/forestry areas (exceeding 500 m² for farmland), and exceeding 100 m² in natural environment conservation areas. However, detailed standards may be set differently by local government ordinance, so they vary by region, and even when acquiring multi-family housing such as apartments, permission is required if the area exceeds a certain threshold.

Permission Requirements

Article 11 of the Transaction Reporting Act sets forth substantive requirements for determining whether to grant permission.

1. Not for speculative purposes — The motive for the transaction must be actual use, not speculative demand.

2. Appropriate area — The area to be acquired must not substantially exceed the scope actually necessary for that use.

3. Adequacy of the financing plan — The proportion of one's own funds, dependence on loans, and legitimacy of the source of funds are examined. If the borrowing ratio is excessively high, permission may be denied.

4. Reasonableness of the transaction price — The transaction price must not be unjustifiably high compared with market prices such as officially assessed land prices and actual transaction prices.

Procedure and Sanctions for Violations

The buyer (acquirer) must apply for permission to the competent local government before concluding a sales contract. After receiving permission, the land must be used for the permitted purpose, and registration must be completed within the period set from the permission date. If a contract is concluded without permission, the contract has no civil effect, and in the case of an unpermitted transaction or permission obtained by improper means, imprisonment for not more than two years or a fine corresponding to 30/100 of the land value is imposed. If the land is used in violation of the permitted purpose, an enforcement fine is imposed, and if the violation is not corrected, the permission may be revoked.

Designation Status

The areas of Gangnam-gu, Seocho-gu, Songpa-gu, and Yongsan-gu in Seoul have repeatedly been lifted and redesignated since they were bound as permit zones in June 2020 to prevent overheating speculation. The regulation in southeastern Seoul has been operated flexibly according to real estate market conditions, including partial lifting in April 2022, redesignation in February 2023, and redesignation again on February 13, 2025 for one year (until February 12, 2026). In local regions, overheated markets such as Sejong, Daegu Suseong-gu, and Gwacheon and Bundang in Seongnam, Gyeonggi Province, have frequently been designated.

Limitations and Criticism

Because the permit system controls transactions themselves in advance, its regulatory intensity is high, and there is criticism that it may restrict opportunities for end users to transact and cause a transaction cliff. In addition, expedient transactions through bypass routes such as corporations, title trusts, and gifts have appeared, and it has been pointed out that the effect of suppressing gap investment is temporary. On the other hand, during periods of market overheating, it has the effect of directly blocking speculative demand seeking short-term gains, so the government uses it in combination with other loan and tax regulations.

Latest Trends

Entering 2024–2025, as apartment prices in the Seoul metropolitan area continued to rise, there was a trend toward expanding permit zone designations again. The government redesignated the three Gangnam districts and Yongsan-gu in Seoul for one year in February 2025, and afterward reviewed measures to expand the designation scope depending on market conditions. In addition, in permit screening, measures such as strengthening the review of loan dependence (confirming the proportion of one's own funds), blocking circumvention acquisitions by corporations and multi-home owners, and imposing an actual residence obligation after acquisition are being discussed. To prevent gap investment, screening for rental-purpose acquisitions is being strengthened, and post-management to check whether the land is used for the permitted purpose after permission is becoming regularized. Conversely, during downturns, lifting designations supplies liquidity to the market, and many evaluate that permit zone designation and lifting effectively function as a policy signal.