HUG Claims No Jeonse Deposit Insurance Payout Due to Late Move-In Report... "Why Did You Collect the Premium?"

Must Register Move-in and Obtain Confirmation Date on Loan Day
HUG "Check Details at Guarantee Issuance Stage"
Unpaid Cases: 8 Last Year, 6 in Q1 This Year
"Insurance Premiums Collected Regularly" Frustration Expressed

[Asia Economy Reporter Yoo Byung-don] Mr. A, who lives in Suwon, Gyeonggi-do, is plagued every morning by calls from the bank demanding repayment of a loan. This is because he has been unable to repay a jeonse loan of 90 million won he took out over two years ago. In November 2019, Mr. A signed a lease contract for an officetel with landlord Mr. B through the Small and Medium Business Youth Jeonse Loan product and also subscribed to the Jeonse Deposit Insurance provided by the Housing and Urban Guarantee Corporation (HUG).

On the day of moving in, Mr. A signed the jeonse contract stating that "the new landlord will succeed the jeonse loan as the property is under sale," and the next day, the landlord changed from Mr. B to Mr. C. Four days later, Mr. A registered his move-in and received a fixed date certificate. One year later, in November 2020, Mr. A discovered that a provisional seizure worth several hundred million won had been filed on his officetel. This seizure was due to Mr. C’s unpaid taxes. Mr. A thought little of Mr. C’s tax delinquency or the seizure because he had occupied the officetel about a year earlier and believed he had priority for repayment. He also assumed that even if things went wrong, there would be no major problem since he had subscribed to the jeonse deposit insurance.

In September 2021, two months before the contract expired, Mr. A notified the landlord of his intention to vacate, but Mr. C stated that returning the deposit would be difficult. Consequently, Mr. A immediately applied to HUG for the execution of the jeonse deposit insurance. From this point, the situation became complicated. HUG refused payment, claiming Mr. A violated the terms and conditions. According to HUG, the violated clause was "Article 13 concerning the establishment conditions of the guarantee obligation (the move-in registration and fixed date certificate must be completed on the loan execution date)." Despite Mr. A’s repeated protests, HUG explained that "this happened because Mr. A did not fully understand the terms and conditions."

Ultimately, Mr. A filed a lawsuit against Mr. C for the return of the jeonse deposit and recently won the case, but he still has not received his deposit. Mr. D, who lives in Bupyeong-gu, Incheon, also applied for the execution of the jeonse deposit insurance due to a provisional seizure registration of 5 billion won ahead of his contract expiration in April this year. Mr. D was also denied insurance execution because he registered his move-in the day after the loan execution date.

According to HUG, the number of cases where insurance payments were not made due to the guarantee effect not taking place increased from 1 case (170 million won) in 2020 to 8 cases (1.737 billion won) in 2021. This year, there were 6 cases (970 million won) in the first quarter alone. These figures only include cases where claims were actually filed and reviewed; the number is presumed to be higher when including those who gave up during consultations.

A HUG official stated, "We have obtained confirmation letters regarding the important terms and conditions at the guarantee issuance stage to ensure subscribers clearly understand these contents. In the cases of Mr. A and Mr. D, the rights relationships changed due to landlord changes, making payment impossible compared to when the insurance was subscribed. If the move-in registration had been done on time, insurance payments would have been possible without any issues."

In response, Mr. A criticized, "HUG was aware that subscribers could suffer damages but still collected premiums regularly. They neither revoked insurance qualifications nor took action, and after problems arose, they shirked responsibility as a public institution and ignored the victims."

Meanwhile, HUG said regarding the delay in move-in registration or landlord changes causing rights infringements on guarantee obligations and the reason for collecting premiums from subscribers who did not meet insurance qualification requirements, "Since February this year, we have been operating a notification service via AlimTalk to help tenants meet requirements such as succession evidence when landlords change."