[Jeonse Life ABC] No Response from Landlord to Jeonse Deposit Return Request... 'Tenant's Right Registration' Response

Editor's NoteAs so-called ‘Villa Kings’ cause a surge in jeonse fraud victims, tenants' anxiety is growing. However, the jeonse system remains one of the main lease contracts in Korea. Asia Economy delivers practical legal knowledge and information that tenants need to know while living under jeonse through a series titled ‘Jeonse Living ABC’ with attorney Koo Min-su (NH Investment & Securities Real Estate Asset Management).

#Tenant A has been losing sleep lately because the landlord has cut off contact even though the jeonse contract period has expired. Despite multiple attempts to contact the landlord to get the deposit back, calls go unanswered and no replies come through. Having grown impatient, A even sent a ‘certified letter’ demanding the deposit be returned on time, but the landlord remains silent. What should A do in this case?

Attorney Koo Min-su advises utilizing the tenant’s right registration system in such cases. Tenant’s right registration is a system that allows tenants to maintain their opposability (right of possession) and priority repayment right (the right to be paid first in case of auction) even after moving out. Generally, tenants who have subscribed to the Housing and Urban Guarantee Corporation (HUG)’s jeonse deposit return guarantee insurance (hereafter ‘guarantee insurance’) follow HUG’s guidance to proceed with tenant’s right registration when problems arise. Subscribing to guarantee insurance does not mean the jeonse deposit can be immediately refunded. Tenants must complete the tenant’s right registration first before receiving insurance payments from HUG, which then recovers the paid insurance by succeeding the tenant’s right registration and exercising priority repayment rights during the auction process of the property.

Pressuring Deposit Return with ‘Tenant’s Right Registration’... Claiming 12% Annual Delay Damages

Once tenant’s right registration is completed, tenants can claim delay damages at an annual rate of 12% from the landlord until the jeonse deposit is returned. This high interest rate can pressure landlords who refuse to return the deposit. This is because the obligation of simultaneous performance (the civil principle that the house and deposit must be exchanged simultaneously) is extinguished. Simply put, simultaneous performance is the transaction principle of exchanging goods and money at the same time. Typically, about one month after signing the jeonse contract, the balance of the jeonse deposit and the house are exchanged on the payment day. At this time, landlords settle existing rights (for example, negotiating tenant eviction or cancellation of prior secured claims), and tenants often obtain a confirmed date on the signed jeonse contract to apply for bank loans for jeonse funds.

The principle of simultaneous performance also applies when exchanging the jeonse deposit and house again upon contract expiration, but if tenant’s right registration exists, delay interest claims become possible from that point. Landlords often find the 12% annual delay damages on unpaid deposits burdensome and tend to return the deposit around this time. Tenants should wait to receive the deposit and then proceed with the tenant’s right registration cancellation process. Practically, tenants receive the deposit via bank transfer and provide the landlord with the cancellation certificate and power of attorney needed to cancel the tenant’s right. Of course, the landlord must also settle the application for tenant’s right registration order and related costs at this time.

Even if Voluntary Deposit Return Seems Unlikely... Maintaining ‘Opposability’ and ‘Priority Repayment Right’ Is Essential

Even when it is expected to be difficult to get the jeonse deposit back, tenant’s right registration remains necessary. For example, in typical jeonse fraud cases where the landlord is only nominally the owner but lacks credit and assets, deposits are often recovered through auction distribution procedures. Since this process takes at least 1 year and 6 months, tenants must prepare for unavoidable moves due to personnel transfers, studies, or other reasons. Tenants should move only after taking measures to prevent loss of opposability and priority repayment rights through tenant’s right registration. At this time, having only a court order for tenant’s right registration is insufficient; tenants must confirm that the tenant’s right registration has been completed (recorded in the real estate registry) before moving out or releasing possession.