"Non-Returnable Right of First Refusal and Auction Loss Risks... Tenants Should Choose Carefully"

'Jeonse Fraud Victim Support Measures' Webinar
"LH Public Rental Housing Is for Long-Term Residence"
Discussion on Affordable Rental Housing Boundaries at the National Assembly
Existing Jeonse Loans Allow 20-Year Repayment + Low-Interest Loans

On the 30th, the government urged, during a briefing held after proposing the 'Special Act on Support for Jeonse Fraud Victims,' that "victimized tenants carefully consider whether to exercise their right of first refusal." This is because if the deposit cannot be returned later and tenants do not have priority repayment rights, they may suffer losses such as bearing the winning bid amount during the auction process.

Kwon Hyuk-jin, Director of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, is answering viewers' questions during the 'Support Measures for Jeonse Fraud Victims' webinar held on the afternoon of the 30th via YouTube and Zoom. / Photo by YouTube video capture

On the same day, Kwon Hyuk-jin, Director of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, stated at the 'Support Measures for Jeonse Fraud Victims' webinar held via YouTube and Zoom, "Under no circumstances will the public sector directly return the deposit."

He added, "These support measures are intended for those who have been victims of jeonse fraud, and ownership transfers agreed upon between landlords and tenants should be considered as having resolved the deposit issue."

The webinar was attended by officials from related ministries and agencies, including the Ministry of Land, Infrastructure and Transport, Ministry of Justice, Financial Services Commission, National Tax Service, and Housing and Urban Guarantee Corporation (HUG). Viewers asked detailed questions about the criteria for recognizing jeonse fraud victims, whether additional loans are possible if there is an existing jeonse loan, and whether there is support for tenants who have already been evicted after auctions or public sales.

In particular, there was curiosity about whether tenants living in public rental housing purchased by the Korea Land and Housing Corporation (LH) exercising the right of first refusal would have their deposits returned.

In response, Director Kwon firmly stated, "LH public rental housing is supported for long-term residence and is unrelated to deposit returns or partial compensation." He emphasized, "Victimized tenants can choose whether to directly win the auction (exercise the right of first refusal) or reside long-term in LH public rental housing." Regarding the exercise of the right of first refusal, Prosecutor Hong Hyun-jun from the Ministry of Justice advised, "The number of times is effectively limited to once, so please be cautious."

The same response was given regarding the jeonse fraud case in the Dongtan officetel in Hwaseong City, Gyeonggi Province. In the Dongtan case, it is known that the landlord recommends ownership transfer before the auction as a form of agreement. However, some viewers asked whether compensation is possible since tenants would incur losses when considering market price differences.

Director Kwon said, "The government holds the first-priority mortgage in the financial sector and aims to help those who face difficulties because they do not receive the highest priority repayment under the Housing Lease Protection Act. As clearly stated in the opposition party's bill, it is desirable to recover the jeonse deposit by oneself if possible." He also mentioned that the Dongtan case could have various outcomes depending on the purchase price when the tenant acquires ownership.

There were many inquiries about the 'low-income tenant housing' criteria among the victim recognition requirements, specifically the standard of 'exclusive area 85㎡ and market price under 300 million KRW.' It was pointed out that many houses in Seoul have deposits exceeding 300 million KRW. In response, Director Kwon explained, "About 56-60% of the affected houses in the metropolitan area have deposits under 300 million KRW," adding, "The boundary effects will be thoroughly discussed during the legislative process in the National Assembly."

Regarding loans, when asked if it is possible to receive a low-interest loan again if an existing jeonse loan must be repaid in a lump sum, he answered affirmatively.

Kim Tae-hoon, Head of the Macroeconomic Finance Team at the Financial Services Commission, said, "If confirmed as a victim, the existing loan can be repaid in installments over 20 years, and the low-interest loan is designed to be available as well. The priority is the prompt passage of the special law." The Housing Finance Corporation (HF) will first repay the matured jeonse loan to financial institutions, allowing tenants to repay over 20 years. At this time, even if receiving a Support Loan, there will be no issue of overlapping loans, explained Jeong Jin-hoon, Director of the Housing Fund Division at the Ministry of Land, Infrastructure and Transport.

Additionally, the government stated that victims who have already been evicted cannot receive support for the right of first refusal or tax claim apportionment but can receive LH public rental housing and loan support. Regarding requests to extend the two-year special law application period, Director Kwon explained, "If recognized as a jeonse fraud victim within the two years the special law applies, support can continue thereafter."