[Exclusive] Villa Kings Who Swept Up Jeonse Fraud Villas, Turns Out to Be One Person... Suspicion of Tax Evasion Also Revealed

[The Suspicious New Villa King: Fears of a Second Jeonse Fraud]
Three Major Corporations Acquired Jeonse Fraud Villas
Actual Owner is Choi, Holds 108 Units in Total
Bought at Bargain Prices, Then Brought in New Tenants
Corporations Closed, No Report of Monthly Rent Income
Deposits May Not Be Returned If Repayment Is Demanded

Asia Economy revealed in an in-depth report last October that there is only one so-called "Villa King." After establishing multiple corporations, he acquired numerous villas (multi-family and row houses) that were victims of jeonse fraud at bargain prices. It was confirmed that this Villa King owns dozens of villas per corporation, totaling over 100 villas.

When these villas are acquired through auction, the buyer must repay the Jeonse fraud victim support funds from the Housing and Urban Guarantee Corporation (HUG), but he did not repay these and instead rented them out to tenants. It was also revealed that he has outstanding tax arrears.

If tenants, feeling uneasy, demand the return of their deposits or if the National Tax Service and HUG continue to demand repayment, there is concern that a second wave of jeonse fraud could occur. Relatedly, neither the government nor HUG has any effective countermeasures, raising fears that jeonse fraud damages may further spread.

Asia Economy visited a villa village in Simgok-dong, Wonmi-gu, Bucheon-si, Gyeonggi Province in July last year and confirmed that corporations had won bids on a large number of houses affected by jeonse fraud and brought in new tenants. Photo by Kwon Hyunji

The Villa King: In fact, They Were One Person

According to a comprehensive report by Asia Economy on the 16th, the actual owner of three corporations (S, L, and H corporations) that acquired dozens of jeonse fraud victim villas in the Seoul metropolitan area from 2023 to 2024 was one person named Choi. For S and L corporations, the registered and actual representatives were both Choi. Although a third party was the registered representative of H corporation, Choi’s son held half of H corporation’s shares as a major shareholder. It is presumed that Choi appointed a figurehead president who only lent his name. Asia Economy previously reported in October last year that S and L corporations acquired 49 and 31 jeonse fraud victim villas respectively, and H corporation acquired 30 villas. Among these, the villas owned by Choi amounted to at least 108 units(▶See our exclusive report from October 15, 2024: Corporations 'shopping' hundreds of jeonse fraud villas... Acquiring them by collecting monthly rent deposits).

Choi acquired these villas at about 3.5% of their appraised value. For example, under the name of S corporation, a multi-family house in Sinwol-dong, Yangcheon-gu, Seoul, appraised at 209 million KRW, was acquired for 7.52 million KRW (auction price rate 3.6%). Under L corporation’s name, a multi-family house in Hwagok-dong, Gangseo-gu, Seoul, appraised at 167 million KRW, was purchased for 5.23 million KRW (3.13%).

The villas acquired at bargain prices were put back on the jeonse and monthly rent market. A villa in Wonmi-gu, Bucheon-si, Gyeonggi Province, appraised at 272 million KRW, was acquired for 11.24 million KRW and rented out with a deposit of 10 million KRW and monthly rent of 700,000 KRW. A newly built villa appraised at 233 million KRW was acquired for 4.83 million KRW and offered with a deposit of 15 million KRW and monthly rent of 600,000 KRW.

Expert: "Typical Gap Investment, a Second Jeonse Fraud is Coming"

There are concerns that similar damages to past jeonse fraud incidents may occur again. The rental behavior of Choi is not much different from previous jeonse fraud landlords who expanded their villa holdings using tenants’ deposits but could not return the deposits, causing mass victimization. Choi was able to own nearly 100 villas because he did not repay the victim support funds to HUG during the auction process of jeonse fraud victim villas.

Professor Kim Cheon-il of the Department of Real Estate and Construction at Gangnam University pointed out, "If these corporations were separate companies with different owners, the risk would be dispersed, but since they share the same owner, problems occurring in one company can spread like tentacles to others," adding, "Ultimately, tenants of these villas may simultaneously face risks." Lawyer Lee Kang-hoon (Vice Chairman of the Participatory Solidarity Steering Committee) explained, "This is why we say the damage related to jeonse fraud has not yet ended," and "As jeonse fraud victims continue to be unable to recover their deposits, second and third waves of damage are following."

Closed Businesses and Unpaid Taxes, "Tenant Damage Passed On"

Evidence of tax evasion by Choi was also found. All three corporations owned by Choi have long been closed, with only business registrations remaining. Closed corporations do not file income reports. It appears that Choi did not pay income tax despite earning monthly rent income. The estimated amount of evaded taxes is in the millions of KRW. A tax industry official said, "In the past, real estate landlords who dealt only in cash sometimes did not register their businesses, but recently, most do so due to tenants’ monthly rent income deductions," adding, "It is very abnormal not to have registered a business despite earning monthly rent income."

If the government moves to collect unpaid taxes, new tenants may not be able to recover their deposits. Professor Kim expressed concern, "If tenants received their fixed-date certificates later than the landlord’s tax delinquency date or did not receive them at all, the state or local government, which must recover the taxes, holds the highest priority for repayment, so tenants may face problems such as not being able to recover their deposits."