Will It Become Possible to Punish Landlord Fraud for Swallowing the Deposit and Disappearing... Difficulties in Proof

Proposal of 'Partial Amendment to the Criminal Act' in the National Assembly
Experts say, "It will be difficult to prove intention and ability to repay"

#Tenant A, who rented a jeonse house, informed the landlord last November that they did not wish to renew the contract and requested the return of the 30 million won deposit, but has yet to receive the deposit even after four months. A repeatedly asked the landlord via text and phone calls to return the deposit but received no response. Similarly, tenant B, who also rented a jeonse, has 60 million won of the deposit tied up, but the landlord disappeared, leading to an auction. B is at risk of incurring a loss because the house price is lower than the jeonse deposit.

Recently, cases have emerged where real estate landlords disappear or refuse to return deposits as the lease contract period expires. Amid this, a bill has been submitted to the National Assembly proposing that such landlords be criminally punished for fraud.

According to the National Assembly on the 20th, Representative Seo Il-jun of the People Power Party proposed a partial amendment to the Criminal Act on the 16th, stipulating that anyone who deceives others to obtain a rental deposit or causes a third party to obtain it shall be punished by imprisonment for up to 15 years or a fine of up to 30 million won. The rationale is that returning rental deposits is directly related to housing, a basic survival condition, and thus cannot be regarded as a typical civil debt default issue.

In reality, tenants currently must file civil lawsuits to recover unreturned deposits, which involves significant costs and time. However, experts analyze that there are limitations to punishing landlords who fail to return deposits under fraud charges.

This is because fraud can only be established if it is proven that the landlord had no intention or ability to repay at the time the deposit was received. Even in general debt relationships, if the debtor claims inability to repay due to economic reasons, fraud charges do not apply.

Seo Ji-won, a lawyer at Naran Law Firm, said, "Whether fraud is established depends on whether it occurred at the time of the criminal act." She added, "It must be proven whether the landlord deceived the other party or had intent to defraud when receiving the money, and it seems unlikely that the landlord anticipated returning it two years later when signing the lease contract." She further pointed out, "It appears to be the same as punishing all failures to fulfill debts as fraud." It is difficult to regard debt fulfillment related to lease contracts separately as fraud within the civil domain of debt performance.

Another lawyer, who requested anonymity, said, "Failure to return rental deposits is also related to the collapse of the real estate market," adding, "When real estate prices plummet, landlords sometimes disappear because they cannot afford to return the deposits."

Meanwhile, the government has decided to publicly disclose the identities of malicious landlords who habitually fail to return jeonse deposits.

On the 27th of last month, the National Assembly amended the Housing and Urban Fund Act to allow the Housing and Urban Guarantee Corporation (HUG) to disclose the identities of landlords who fail to repay tenant deposits on their behalf. The disclosure applies to those who have not repaid a total of 200 million won or more in tenant deposits and have failed to fulfill two or more tenant deposit repayment obligations within three years from the date the subrogation debt arose.