Mandatory Checks Such as Jeonse Ratio and Tax Payment Certificate [War Against Jeonse Fraud]

How to Prevent Jeonse Fraud

Photo by Asia Economy

To prevent jeonse fraud, it is important to frequently check and search for various information related to the house you are moving into?this kind of "handwork" is crucial. Most of these can be verified online or by phone.

The most representative example is checking the "jeonse rate (the ratio of the jeonse price to the housing sale price)." You must look up the sale price and jeonse or monthly rent prices of the place you intend to move into on online real estate information sites or platforms. It is essential to avoid "empty-can jeonse," where the jeonse price is higher than or similar to the sale price. If the jeonse rate is high, there is a significant risk that tenants will not be able to get their jeonse deposit back even if the landlord sells the house. In the real estate industry, a jeonse rate of 70-80% or higher is generally considered to carry a high risk of empty-can jeonse.

You can also use related services provided by the government and local authorities. Seoul City has been pilot-releasing the "Jeonse and Monthly Rent Market Indicators," which include predicted jeonse and monthly rent lease volumes, through the Seoul Housing Portal (Seoul City Jeonse and Monthly Rent Information Mongttang) since the 23rd. You can check predicted lease volumes, jeonse rates by district for 25 autonomous districts, and jeonse-to-monthly rent conversion rates. Seoul City also offers consultation services regarding the appropriateness of jeonse prices. For newly built villas, multi-family, and multi-unit houses where accurate market price verification is difficult, tenants can check the appropriateness of the expected jeonse price before signing the contract, considering senior loan amounts and deposits.

During the contract process, it is important to frequently check the certified copy of the register and promptly complete the fixed date registration and move-in report. Only after completing the move-in report can tenants assert the validity of the existing lease contract against a new owner even if ownership changes during the lease period. Tenants can also oppose subordinate mortgage holders if the leased property goes to auction. Note that the tenant’s right to assert (daehangryeok) arises from "0:00 the day after" the move-in report and fixed date registration are completed. If a mortgage is registered on the same day, the tenant’s right to assert is delayed by one day and thus does not exist. Recently, many jeonse fraud cases have exploited this. Before the tenant’s right to assert arises, the house is sold to someone who cannot return the deposit.

It is also necessary to request and verify the landlord’s tax payment certificate. If the landlord hides arrears such as comprehensive real estate tax and proceeds with the lease contract, and the house goes to public auction, the tenant may not receive part or all of the deposit. Even if the tenant has completed the move-in report and obtained the fixed date registration, if there are tax arrears prior to this under the Framework Act on National Taxes, the tenant’s priority is lowered. In fact, to minimize damage when jeonse fraud occurs, tenants should subscribe to jeonse deposit insurance. Even if the landlord fails to return the deposit on time, the tenant can receive the deposit first from the insurance company.