[Practical Finance] If I Became a Victim of Jeonse Fraud... How to Respond?

Submit an Accident Notification to HUG First
Do Not Move but Hold On or
Apply for Lease Registration Order

As a result of the real estate market downturn, numerous cases of "empty-can jeonse" and jeonse fraud are occurring nationwide, causing tenants to be unable to recover their deposits. The best countermeasure is to prevent such incidents, but many cases fail to do so. What should one do if they become a victim of jeonse fraud? It is fortunate if relief can be obtained through special legislation, but the requirements are stringent, making it difficult to have the damage recognized in reality.

If You Have HUG Guarantee Insurance, Submit an Accident Notification First

If you have subscribed to the Housing and Urban Guarantee Corporation (HUG) Jeonse Deposit Return Insurance, tenants can recover their deposits through subrogation payment. Subrogation payment is a system where the guarantee institution first refunds the deposit to the tenant and then claims reimbursement from the landlord.

Tenants must submit an accident notification to the HUG branch office if they have not received their deposit without justifiable reason within one month after the end of the jeonse contract period, or if an auction or public sale has been conducted on the jeonse property during the contract period and the deposit has not been returned.

Afterward, by submitting necessary documents such as the guarantee debt performance claim form, guarantee certificate, identification card, real estate registration certificate, confirmation of eviction, and confirmation of planned move-out, HUG will verify the appropriateness and notify the results of the review. Finally, by submitting documents such as the subrogation payment certificate and vacating the property, the amount can be received.

Of course, even if insured, it may not be easy to immediately recover the deposit. If the landlord has passed away, inheritance procedures must be followed, and if relatives refuse inheritance, the tenant must wait until the court appoints an administrator for the inherited property.

If Not Insured, Do Not Move Out and Endure as Much as Possible

If you have not subscribed to HUG Jeonse Deposit Return Insurance, tenants face greater difficulties. If the house goes to auction and there are priorities ahead of the jeonse deposit, tenants cannot recover the damaged amount. The jeonse system is a credit contract, while the mortgage held by the bank on the house is a real right; in case of auction, real rights have priority over credit rights.

However, if the tenant holds a preferential right to repayment, they can receive distribution ahead of real rights established later. The Housing Lease Protection Act guarantees preferential repayment rights to tenants who have registered their residence and obtained a fixed date. The most important thing at this time is not to move out and continue residing. If you register your residence elsewhere or move, you lose the preferential repayment right. You must maintain possession of the house, residence registration, and fixed date until the deposit is recovered.

On the 26th, members of the National Countermeasure Committee for Jeonse Fraud and Empty Jeonse Victims held a press conference in front of the main building of the National Assembly in Yeouido, Seoul, urging the enactment of a special law on Jeonse fraud. Photo by Hyunmin Kim kimhyun81@

If Moving Is Unavoidable, Apply for Tenant Registration Order

If you have already contracted a new place to move to, you must apply to the court for a tenant registration order. This system allows tenants to maintain their opposability and preferential repayment rights even after the lease contract ends while moving out. You can apply at the court with jurisdiction over the location of the house. Tenant registration can be applied for even if only part of the deposit has not been received. You can apply for a tenant registration order without the landlord's consent. Required documents include the lease contract date, deposit amount, move-in date, possession start date, and resident registration certificate.

Claim Compensation If Real Estate Agent Is Found Responsible

If you cannot recover your deposit and the real estate agent is liable for damages, you can claim compensation. If the real estate agent lacks the capacity to compensate, you can claim indemnity from the Korea Association of Realtors. According to the Real Estate Agent Act, a licensed real estate agent is liable to compensate for property damage caused to transaction parties by intentional or negligent acts during brokerage activities. The key issue is to determine whether there was intent or negligence in the brokerage, which often leads to disputes. Even if the real estate agent is responsible, if the victim's fault is recognized, the compensation amount may be adjusted.

Although the government has pledged to provide relief through special legislation on jeonse fraud, the requirements are stringent, making it difficult to have damages recognized. If you are not eligible for special law support, victims must seek relief on their own. The Ministry of Land, Infrastructure and Transport has opened 'Jeonse Damage Support Centers' in Seoul, Incheon, Gyeonggi, and Busan. If you have not received all or part (30% or more) of your jeonse deposit back, you can receive assistance from these centers.