Veto Passed on 'Seonguje Hoohoesoo' Jeonse Fraud Special Act... "Rapid Relief Impossible"

"Amendment Bill Likely to Cause Confusion and Conflict"
Expert Panel Discussion and Victims' Opinions Gathered

The government has decided to exercise its veto power and request reconsideration from the National Assembly regarding the amendment to the "Special Act on Support for Jeonse Fraud Victims and Residential Stability (Jeonse Fraud Special Act)," which includes a 'prior relief and subsequent recovery' plan for victims of jeonse fraud.

Minister of Land, Infrastructure and Transport Park Sang-woo announced on the 29th at the Government Seoul Office that he decided to request reconsideration from the National Assembly regarding the amendment to the Special Act on Jeonse Fraud.
[Photo by Park Seung-wook]

On the afternoon of the 29th at the Government Seoul Office, Park Sang-woo, Minister of Land, Infrastructure and Transport, stated, "The government has decided at the Cabinet meeting to request reconsideration from the National Assembly regarding the amendment to the Jeonse Fraud Special Act," adding, "There are various reasons including the inappropriateness of the victim compensation funds, damage to fairness with other fraud victims, infringement on property rights and freedom of contract due to forced sale of claims held by financial institutions, and insufficient consultation and formation of social consensus."

On the same day, the government passed the reconsideration request proposal for the amendment to the Jeonse Fraud Special Act at an extraordinary Cabinet meeting presided over by Prime Minister Han Duck-soo. The Presidential Office approved this. The government held the extraordinary Cabinet meeting the day after the bill passed because it was the last day of the 21st National Assembly session. With the decision on the reconsideration request, the amendment is set to be discarded.

The amendment, which passed the National Assembly plenary session the previous day, centers on the Housing and Urban Guarantee Corporation (HUG) fairly evaluating the value of the jeonse deposit refund claims held by victims of jeonse fraud and purchasing them at a price above the highest priority repayment amount (prior relief), then selling the victimized housing to recover the funds (subsequent recovery). At this time, the refund claims are purchased using the Housing Urban Fund.

Minister Park emphasized, "As the minister in charge, the most important reason for requesting reconsideration is that the enforcement of the amendment is difficult, which does not help the victims' prompt relief and is likely to cause confusion and conflict."

He added, "It is very difficult to evaluate the value of the claims held by the victims," explaining, "It is not easy to clarify how many competing creditors there are and what their rights entail." He continued, "Even if the value of the jeonse deposit refund claims is determined, it is not easy to obtain consent for the proposed price," adding, "If the public sector undervalues the claims, victims will not accept it."

He also pointed out the appropriateness of the funds for purchasing the refund claims. He said that national consensus is necessary to buy refund claims with the Housing Urban Fund, which borrows from subscription savings for housing by low-income, non-homeowners. Additionally, he noted that some citizens oppose preparing the budget for purchasing refund claims through supplementary budgets, making it difficult to reach an agreement.

The Ministry of Land, Infrastructure and Transport proposed a plan to support victims using the auction profits of the victimized housing one day before the amendment passed. If victims transfer the right of first refusal to the Korea Land and Housing Corporation (LH), LH can purchase the jeonse fraud victim housing at a price lower than the appraised value. The plan is to provide this housing to victims as public rental housing for 20 years. Victims can live in the housing rent-free for the first 10 years and at 50-70% below market price for the additional 10 years.

At this time, the rent is supported by LH’s profits generated from purchasing the victimized housing at a lower price. If LH buys the housing cheaper than the appraised value, LH’s profits increase. The increased amount is used to support the victims. Any remaining amount after supporting the rent will be paid in full upon eviction.

Minister Park said, "If this plan is actively utilized, victims can immediately receive relief in the form of 'residential stability' and the 'promise of auction profit refund,'" adding, "We will closely consult with both ruling and opposition parties to institutionalize the government plan promptly." The Ministry of Land, Infrastructure and Transport will hold expert forums starting next week to gather opinions on the amendment to the Jeonse Fraud Special Act. They also plan to meet with victims as soon as possible to reflect their opinions.