"Half of Tenants Fail to Receive Deposits During House Auctions"

Unpaid Amount per Household Reaches 42.09 Million KRW This Year
Assembly Member Kim Jin-ae: "Urgent Need for System Improvement"

A real estate agency in Mokdong, Seoul.

[Asia Economy Reporter Donghyun Choi] It has been revealed that half of the tenants did not receive all or part of their deposit back when the house they lived in went to auction.

According to the status of unpaid rental deposits received by Kim Jin-ae, a member of the Open Democratic Party, from the Supreme Court on the 21st, among 39,965 houses that went to court auction from 2015 to last month, 18,832 tenants, accounting for 47.1%, did not recover all or part of their deposits. Unpaid deposits refer to cases where the distribution amount is less than the tenant's claim amount.

The proportion of tenants who did not receive their full deposit back by year was 44.2% in 2015, 51.2% in 2016, 47.9% in 2017, 41.3% in 2018, 43.1% in 2019, and 48.6% up to September this year. This means that every year, about one in two tenants fail to fully recover their deposits even through auctions.

The unpaid deposit amount per household was 33.76 million KRW in 2015, 35.28 million KRW in 2016, 34.24 million KRW in 2017, 35.71 million KRW in 2018, and 35.81 million KRW in 2019. As of the end of September this year, the amount significantly increased to 42.09 million KRW.

By region, Daejeon had the highest proportion of unpaid deposit cases at 71.7%. This was followed by ▲Gwangju Metropolitan City (67.5%), ▲Jeonnam (64.0%), ▲Chungnam (59.2%), and ▲Ulsan (55.2%). Regions such as ▲Incheon (24.7%), ▲Jeju (30.7%), and ▲Gyeongbuk (32.2%) had relatively lower unpaid rates.

According to Supreme Court precedents and related court auction laws, distributions for houses disposed of through auctions are divided into priority distribution and preferential distribution. Priority distribution first deducts auction execution costs, the last three months’ wages, retirement pay, small deposits, and current taxes from the auction price. For example, if there is a creditor with a mortgage of 100 million KRW on an apartment worth 100 million KRW, theoretically, the entire 100 million KRW should go to the mortgage holder, but due to priority distribution, the full amount may not be returned. Preferential distribution means distributing in order of the registration date of rights on the registry. In the case of 'Kkangtong Jeonse' (a Jeonse deposit exceeding the market price), the recoverable deposit through auction is lower, causing significant damage to tenants.

Rep. Kim said, "For low-income households whose Jeonse deposit is practically their entire asset, losing the deposit puts them at great risk," and emphasized, "It is urgent to improve systems such as strengthening subscription to Jeonse return guarantees, expanding priority repayment amounts, and immediate effectuation of fixed-date efficacy to protect tenant deposits."