Borrowed Money to Rent Jeonse, Ended Up with an 'Empty Can'... There Are Rescue Measures Available

Consultation through HUG Jeonse Damage Support Center
Ministry of Land, Infrastructure and Transport Urgently Starts Additional Support Center Installation and Emergency Loans

[Asia Economy Reporter Park Hyun-joo] As cases of jeonse fraud, such as the 'Villa King,' have recently come to light, awareness of the risks of "Kkangtong Jeonse" (empty-can jeonse) is also increasing. Kkangtong Jeonse refers to situations where the jeonse deposit exceeds the difference between the housing price and debt, causing tenants to not receive their deposits properly.

It is premature to feel assured just because a tenant who moved out earlier received their deposit back. If housing prices drop sharply, there is a sudden risk of turning into Kkangtong Jeonse. According to the report "Estimation of the Risk of Deposit Non-Return - Focusing on Kkangtong Jeonse Apartments" released on the 5th by the Korea Housing Finance Corporation's Housing Finance Research Institute, if housing prices fall by 10-20% over the next two years, one out of eight jeonse contracts expiring in the second half of this year could potentially turn into so-called Kkangtong Jeonse.

Jeonse damages, where tenants fail to get their deposits back after lease contracts end, are also increasing significantly every year. According to the report, the Housing and Urban Guarantee Corporation (HUG) deposit return guarantee accident amounts were ▲79.2 billion KRW in 2018 ▲344.2 billion KRW in 2019 ▲468.2 billion KRW in 2020 ▲579 billion KRW in 2021, and from January to September last year, it already exceeded the previous year's scale at 646.6 billion KRW.

On the afternoon of the 23rd of last month, a banner urging for relief measures was hung on the window of an apartment in Michuhol-gu, Incheon, where victims of jeonse fraud were reported to have emerged one after another. Photo by Yonhap News

So, what should tenants do if they do not receive their deposits? They can consult about jeonse damage cases through the HUG Jeonse Damage Support Center. Starting this month, the Ministry of Land, Infrastructure and Transport has added more Jeonse Damage Support Centers and initiated emergency loans with interest rates in the 1% range from the Housing and Urban Fund. Additionally, the Ministry of Land, Infrastructure and Transport, together with the Ministry of Justice, is operating a joint legal support task force to shorten HUG deposit return review periods and expand free legal and financial counseling support.

If a licensed real estate agent who brokered a Kkangtong Jeonse property did not sufficiently explain the risks, tenants can file a claim for damages against them. There is a precedent where the court ruled in favor of a tenant who filed a damage claim against a real estate agent after losing their jeonse deposit due to the building being auctioned. This tenant was compensated 40% of their 100 million KRW deposit, amounting to 40 million KRW.

In the National Assembly, efforts are underway to establish laws to support victims of housing lease damages. Last month, Representative Heo Jong-sik of the Democratic Party of Korea introduced the so-called "Jeonse Damage Prevention Three Acts," which are partial amendments to the Licensed Real Estate Agents Act, Real Estate Registration Act, and the Housing Lease Protection Act.

The Jeonse Damage Prevention Three Acts include an amendment to the Licensed Real Estate Agents Act allowing agents to request information from landlords before lease contracts, such as the date of fixed-date registration, secured loans, and priority relationships; an amendment to the Real Estate Registration Act requiring landlords' unpaid national and local taxes to be recorded in the real estate registry; and an amendment to the Housing Lease Protection Act mandating the state and provincial governors to establish support organizations for jeonse damage and provide various administrative and financial supports.