"Thought It Was Monthly Rent..." False Lease Contracts That Deceive Auction Winners

Landlord, Tenant, and Broker Collude to Deceive Jeonse Contract as Monthly Rent
Securing Loans Using Deposit as Collateral... Successful Bidder Bears Repayment Responsibility
No Way to Verify Through Registry or Auction Bidding Documents

# Mr. A, who embarked on 'owning a home' through court auctions, recently found a villa he liked in Gyeonggi-do. After confirming the monthly rent contract with a fixed date stamp from the tenant of the property, he judged it to be a safe asset and won the bid by spending over 100 million won. Although he completed the eviction and ownership transfer while even supporting moving expenses, Mr. A was later sued by Seoul Guarantee Insurance for subrogation claims. It turned out that the monthly rent contract was fake, and in reality, the previous owner and tenant had signed a jeonse (lump-sum deposit lease) contract. Moreover, the owner had taken out a large loan from the Suhyup Bank secured by the jeonse deposit and failed to repay it, leaving the auction winner to bear the full responsibility for the loan repayment.

Recently, a new type of fraud has emerged where the homeowner’s loan arrears are passed on to the auction winner. Exploiting loopholes in the lease contract verification process, scammers create fake jeonse or monthly rent contracts to deceive buyers into thinking the property is safe, as in Mr. A’s case.

Typically, this new fraud involves the homeowner, tenant, and real estate agent. For example, the homeowner and tenant, who have a jeonse contract, falsely create a monthly rent contract through a real estate agent and obtain a fixed date from the local government to make it appear genuine. Using the jeonse deposit as collateral, they take out large loans from various financial institutions like Suhyup Bank, share the profits among the tenant and real estate agent, and then the homeowner disposes of the troublesome property through court auction. The tenant even receives moving expenses from the new owner.

The problem is that bidders in court auctions have no reliable way to verify this in advance. Since jeonse deposit claims are not real rights, they are not subject to mortgage registration and thus do not appear in the official registry. Furthermore, because registering a jeonse right is not mandatory, it is difficult to confirm whether the existing lease contract is jeonse or monthly rent through the registry. Additionally, local government offices such as community centers issue fixed dates without thorough verification of double or fake contracts, making it practically impossible to determine the authenticity of the contracts presented by homeowners.

Taking advantage of this, fraudsters also disguise monthly rent contracts as jeonse contracts. In reality, tenants pay a small deposit and monthly rent, but they create fake jeonse contracts claiming a large deposit and demand the return of the deposit from the auction winner. Since bidders have no proper way to prove the authenticity of these contracts, trials often drag on through second and third instances, causing significant difficulties.

Attorney Eom Jeong-sook (Beopdo Comprehensive Law Office) said, “When winning a bid at auction, caution is needed if suspicious details such as collateral guarantees appear in the registry.” She added, “Especially for auction properties, various risks exist not only from double or fake contract fraud but also from occupancy issues, so thorough prior review is required.”