Holding Deposit Refund Rules in Korean Real Estate (Gagyeyakgeum)
It is the legal rule that decides whether the 'holding deposit' you paid to reserve a house gets refunded or lost if you change your mind.
Definition In Korean real estate, a gagyeyakgeum is a preliminary holding deposit sent before signing a formal contract to reserve a property and take it off the market. While the term is not defined in statutory code, whether you can get this money back depends entirely on whether you and the landlord already agreed on essential terms—such as the total price and payment schedule—when you transferred the funds.
Did You Just Reserve It, or Did You Already Enter a Contract?
Imagine you find a great apartment and send 1,000,000 KRW (about $750) to the landlord, saying, "Please hold this room and do not show it to other prospective tenants." The next day, you discover a larger and cheaper place. If you ask for your money back, does the landlord have to return it?
Many people assume, "I never stamped an official paper contract, so I can definitely get 100% of my money back." Under Korean civil law, however, a contract is a consensual agreement that becomes legally binding through mutual consent alone, even without a written document. The courts place far more weight on the actual substance of the agreement than on whether physical paperwork exists.
If you discussed and confirmed essential terms over text messages with the real estate agent or landlord—such as the total purchase price, lease deposit, move-in date, and remaining balance schedule—the law considers a binding contract already in effect. In that situation, recovering the deposit you sent becomes very difficult.
The Core Legal Standards Established by Court Precedents
When Korean courts determine whether a holding deposit must be refunded, their primary criterion is whether the parties agreed on the essential terms of the contract. If there was a specific agreement on core deal points—such as total price, formal contract deposit amount, balance payment schedule, and move-in date—a valid contract is deemed to exist.
The second standard is whether a 'special clause' was established. If you clearly specified via text message before sending the money that "this deposit is 100% refundable if the transaction is cancelled before signing the main contract," this special term takes legal precedence over general contract principles.
Conversely, if you merely sent money after receiving a basic address and price, asking them to "just hold the unit without letting others see it" without discussing specific terms, the situation is completely different. In this case, no contract was formed, and the landlord must return the money as unjust enrichment without legal cause.
How Much Penalty Do You Face If You Back Out?
The most dangerous misconception regarding holding deposits is thinking, "I can walk away from the deal anytime just by forfeiting the 1,000,000 KRW I put down." If essential terms were already agreed upon and a valid contract exists, the cancellation penalty is measured against the entire promised formal deposit, not just the partial holding deposit you transferred.
For example, suppose you negotiate a jeonse (lump-sum deposit) lease of 100 million KRW (around $75,000). The standard 10% contract deposit is 10 million KRW, but you paid only 1 million KRW as a holding deposit. If you change your mind, Supreme Court precedents state that the landlord can legally demand the remaining 9 million KRW of the full deposit. On the flip side, if the landlord cancels to take a higher offer, they cannot simply repay double the 1 million KRW; they may be held liable for damages based on the full 10 million KRW.
Therefore, never rush to wire money simply because an agent warns that a property will disappear quickly. If you must send money, always protect yourself by confirming a clear written text clause beforehand: "This deposit is fully refundable at any time prior to signing the formal contract."
🤔 Common misconceptions
You can always get a full refund on your holding deposit as long as you haven't signed a physical paper contract.
Even without paper documents, if you agreed on essential terms (price, balance payment dates, etc.) via text or phone call before wiring funds, a binding contract is recognized and you may forfeit the deposit.
If you cancel after paying a holding deposit, you only lose the small preliminary amount you actually wired.
Under Korean Supreme Court precedents, once core terms are established, cancellation damages are calculated based on the full promised contract deposit (typically 10% of the total price), not just the holding deposit.
🧺 Where you meet it
Whether a real estate holding deposit in Korea is refundable depends not on physical paperwork, but on whether essential terms were agreed upon and whether a clear refund clause was documented.