[Late Response to Jeonse Fraud Measures] "Victims Must Prove Fraud"... Damage Spreads Due to Lack of Early Response

#. Hong Mi-young (alias, 26), who lives in a one-room building in Seongbuk-gu, Seoul, is a tenant of a canned jeonse and a suspected victim of jeonse fraud. About 20 tenants in similar situations as Hong live in this building. As the contract period ended, some tenants who did not receive their deposit back visited the Jeonse Damage Support Center to complain about the damage, but it is difficult to expect immediate results. This is because it takes time to prove the 'landlord's fraudulent act.' Meanwhile, the building owner suddenly got divorced and even filed for bankruptcy.

There are criticisms that the government's initial response to jeonse fraud is hardly taking place and is concentrated after the incident occurs, thereby increasing the damage. Due to the nature of jeonse contracts, victims who do not receive their deposits back at the expiration date sporadically occur, but because it is necessary to prove the landlord's fraudulent act, support for initial victims or investigations into the case are rarely conducted. In particular, due to the lack of initial response, cases where perpetrators attempt to hide assets or flee are emerging, indicating the need for countermeasures.

Banners expressing grievances about damages are hung on the apartment windows of victims of jeonse fraud in Michuhol-gu, Incheon.
[Image source=Yonhap News]

Government Responds Only When Group Damage Occurs

Recently, tenants suspected of being victims of jeonse fraud met on-site expressed their frustration. To receive government support for jeonse fraud damage, they must prepare evidence proving the landlord's fraudulent act, but individuals have no way to prove it. Even when trying to prove jeonse fraud damage by hiring a lawyer, the reality is that they only hear that "the method is account tracing, but it is not easy for individuals" and turn away, they unanimously say.

Hong said, "Currently, the government's jeonse fraud measures and responses only move when group damage occurs," and "Even lawyers advise that it is realistic to claim jeonse fraud through group responses when more victims occur."

He continued, "If damage is suspected, initial investigations should secure the suspect's personal and asset status, but neither the government nor the police show such movements," and "While victims' appeals are buried, landlords who committed jeonse fraud are hiding assets and disappearing," he pointed out.

In fact, although jeonse fraud victims are emerging one after another, cases where the damage scale has increased due to the lack of initial investigation continue to appear.

A representative case is the 'Hwagok-dong Villa King' incident in Hwagok-dong, Gangseo-gu, Seoul, where 283 villas were purchased and 3.2 billion won of jeonse deposits were embezzled. Kang (55), identified as the main culprit, was accused of fraud in August 2019. However, the police sent Kang to the prosecution only a year later, and it took another 2 years and 4 months before he was brought to trial. Due to sluggish investigations, the statute of limitations expired on the co-conspirator Jo, who received a large bribe from Kang, on charges of violating the Real Estate Brokerage Act.

The recent officetel case in Dongtan New Town, Hwaseong, Gyeonggi Province, where about 90 suspected victims of jeonse fraud occurred, also showed disappointing initial responses. Some jeonse contract holders living there recognized problems months ago and reported to the government's Jeonse Fraud Damage Support Center but received no help. Again, this was because they could not prove the landlord's fraudulent act. Meanwhile, the number of victims exceeded dozens, and only then did the government take interest and start investigations.

In Busan, a couple owning about 90 villa and officetel units recently changed their phone numbers and disappeared just before the expiration of jeonse contracts. Some victims there have claimed suspected jeonse fraud since early this year, but investigations were hardly conducted. Now that many victims have occurred, investigations are being intensified.

The government is currently organizing a dedicated investigation team to respond to and investigate jeonse fraud, but there is a shortage of personnel. According to the National Police Agency, the number of personnel in jeonse fraud dedicated investigation teams formed in metropolitan police agencies nationwide is 1,681. They focus on on-site investigations of illegal real estate brokerage activities through tips. In this process, it is necessary to prove the landlord's fraudulent act to some extent to transfer the case to the police for full-scale investigation of the perpetrator. As a result, victims have no choice but to rely on their reports.

As initial responses to jeonse fraud are not easy, the number of detected cases and punishment results are minimal. According to police statistics, from July 25, when the nationwide special crackdown on jeonse fraud began, to the 26th of last month, 1,705 victims of jeonse fraud were reported, with damages amounting to 309.9 billion won. Of these, only 580 million won (0.19%) was confiscated or recovered before prosecution as criminal proceeds. Among the 2,188 suspects arrested, only 209 were detained.

"Methods to Prove Jeonse Fraud Need Revision"

Suspected victims of jeonse fraud argue that the methods to prove jeonse fraud need revision. This is because it is practically impossible to prove fraudulent acts such as intentional contracts for fraud purposes, false information delivery to tenants, or concealment of truth.

In fact, most perpetrators who stand trial for jeonse fraud argue that it is a result of the housing market downturn to evade the law.

All suspects in the Hwagok-dong Villa King case deny the charges. Kang, identified as the main culprit, claimed, "There was no intention to harm the victims, and while civil liability is acknowledged, there was no intent to deceive."

Jo, who proposed the no-capital gap investment method to Kang for purchasing houses, denied conspiracy, and Kim said, "I did not know that Kang had no intention or ability to return the deposit."

Regarding this, another suspected victim of jeonse fraud, Kim Mi-yeon (alias, 38), lamented, "There are victims and perpetrators, but I cannot understand why the victim has to prove intent." She argued, "It's like judging whether someone drank and drove to cause an accident or accidentally drank and caused an accident." She added, "Because the law is like this, speculators with houses thrive, and crimes like jeonse fraud occur."

Kim Ye-rim, a lawyer at Law Firm Simmok, said, "It is rare to receive a prison sentence for jeonse fraud," and "It is difficult to prove the intent to unjustly take the deposit from the beginning of the contract." However, Lawyer Kim added, "Sometimes fraud charges are recognized when it is objectively impossible to return the deposit or pay interest, and gap investment is forced."