Removal of Damage Deposit Compensation and Area Standards
10-Year Interest-Free Loan for Priority Repayment Amount
Public Bond Purchase Plan Excluded
After five rounds of committee meetings, the government passed a special law on jeonse fraud that includes victim eligibility criteria and support measures. The special law raises the compensation limit for victims to 500 million won and provides interest-free loans from the government to victims who do not receive priority repayment. Jeonse fraud victim groups opposed the bipartisan agreement, arguing that it regressed from the 'rescue first, recovery later' approach where the public sector purchases claims.
According to the Ministry of Land, Infrastructure and Transport on the 22nd, the "Special Act on Support for Jeonse Fraud Victims and Housing Stability" includes provisions to raise the compensation standard for recognized jeonse fraud damage deposits from 450 million won to 500 million won and to remove the area criteria for leased housing.
Regarding the priority repayment system designed to protect small-scale tenants, the opposition party's proposal to raise the standard and apply it retroactively was excluded. Instead, the government’s plan was adopted, which provides interest-free loans equivalent to the priority repayment amount to victims who do not receive priority repayment, and loans at a low interest rate of 1-2% for the excess amount. Priority repayment rights allow tenants to receive a portion of their deposit back ahead of senior secured creditors such as financial institutions when the house they lived in is sold through a public or private auction.
Additionally, the original provision defining victims as those who suffered or are expected to suffer significant losses of their deposits was deleted. Furthermore, while initially only the commencement of auction or public sale was defined as a victim criterion, cases where the landlord’s bankruptcy or rehabilitation procedures have begun are now also recognized as victims.
The purchase of deposit claims under the 'support first, subrogation later' method demanded by victims was ultimately excluded. As an alternative, the ruling and opposition parties agreed to a support measure where the Housing and Urban Guarantee Corporation (HUG) acts on behalf of victims in auctions and public sales. If victims apply to HUG, HUG will coordinate with legal professionals such as judicial scriveners to handle the auction procedures and increase the commission support from the existing 50% to 70%.
For victims who find it difficult or do not wish to purchase the house but want to continue residing, the Korea Land and Housing Corporation (LH) will purchase the right of first refusal and guarantee residency through long-term leasing. Additionally, living expenses, medical expenses, housing costs, and education expenses will be supported for victims in crisis. To prevent credit deterioration of jeonse fraud victims, delinquency information registration and delinquency charges will be exempted for up to 20 years, and exceptions will be made to allow loan applications.
Interest-free jeonse loans for priority repayment amounts will also be supported. For victims who cannot receive priority repayment due to senior mortgages or renewal contracts, interest-free loans equivalent to the priority repayment amount at the time of auction or public sale completion will be provided for up to 10 years without separate income or asset requirements.
Lee Eun-hyung, a research fellow at the Korea Construction Policy Institute, evaluated, "The overall content and framework are the same as previously announced. It is positive in that it supplements and specifies the points that were criticized when first announced."
The ruling and opposition parties plan to pass the special law approved at the committee meeting today at the full meeting of the Land, Infrastructure and Transport Committee on the 24th, and then pass it at the plenary session of the National Assembly on the 25th.
However, since jeonse fraud victims find it difficult to accept the government’s compromise of interest-free loans for priority repayment amounts, difficulties are expected until the bill passes. The National Countermeasures Committee for Jeonse Fraud and Empty Jeonse Victims issued a statement on the day, saying, "The agreed special law has not properly resolved the problems of the bill submitted by the government and ruling party," and criticized, "We cannot help but be disappointed as the responsibility is still being fully shifted onto tenants by adding debt to debt."
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