[Ryu Taemin's Real Estate A to Z] Can You Get Your Deposit Back from a Jeonse House That Went to Auction?

Return Rights Vary Based on Priority Status
Recognition Requires Moving-In Report, Confirmed Date, and Actual Residence Before Auction Start
Seoul Tenants Under 150 Million KRW and Metropolitan Area Tenants Under 130 Million KRW Receive Priority Repayment

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[Asia Economy Reporter Ryu Tae-min] Tenant A recently heard that the house he was living in under a jeonse (long-term lease) contract had been transferred to real estate auction. With only a short time left until the end of the jeonse contract, he is unable to sleep due to worries that he might not be able to get his jeonse deposit back, as he did not separately purchase jeonse deposit return guarantee insurance.

Recently, as concerns about ‘empty jeonse’ have arisen amid the widespread decline in housing prices, tenants’ worries are deepening. Unlike cases where the jeonse deposit is returned normally, when the leased house goes to auction, there are many cases where the deposit is not fully refunded. Especially until a few years ago, it was common not to subscribe to jeonse deposit return guarantee insurance because the landlord’s consent was required to apply.

Must Have ‘Opposability’ with Move-in Report, Fixed Date, and Actual Residence Requirements

In such cases, the right to return the jeonse deposit depends on whether the tenant has opposability. Opposability refers to the legal right of the tenant to assert the lease contents against third parties. In real estate auctions, the tenant’s opposability is the right to have the jeonse deposit recognized as valid. Attorney Eom Jeong-suk of Beopdo Comprehensive Law Office advised, “Opposability is recognized only if the tenant meets all three requirements?move-in report, fixed date, and actual residence?before the auction commencement decision date. If the house you lived in has gone to auction, you should first check for opposability.”

If opposability is not established, the tenant is classified as a subordinate general creditor and may not receive the full jeonse deposit after the auction or may receive only a partial amount, explained Attorney Eom. In cases where the jeonse deposit cannot be recovered even from the auction winning bid, the tenant can file a jeonse deposit return lawsuit to claim the deposit and delayed interest from the landlord. If the landlord has no other assets to seize, the tenant is granted the right to claim the return for 10 years.

Small-Amount Tenants Have Priority Repayment... Earlier Move-in Report Means Higher Priority

If the tenant’s jeonse deposit is a small amount, they can receive priority repayment through the preferential repayment right during the distribution process. The preferential repayment right is a system that pays part of the jeonse deposit first from the winning bid amount to tenants with small jeonse deposits who are struggling to make a living. In Seoul, the standard is for jeonse deposits of 150 million KRW or less, and in other metropolitan areas, 130 million KRW or less. The preferential repayment amount is 50 million KRW in Seoul and 43 million KRW in other metropolitan areas.

When there are multiple tenants with opposability in the building, the earlier the move-in report and fixed date, the higher the priority. Attorney Eom said, “Move-in report and fixed date are essential to protect tenants’ rights. However, even if opposability is established, tenants may not fully recover their jeonse deposit, so it is advisable to subscribe to the safest jeonse deposit return guarantee insurance whenever possible.”