[Opinion] "Jeonse Fraud, a Matter of Life for Someone"... Prevention Methods for Trust Real Estate Jeonse Fraud

Hwang Kyuhyun, Adjunct Professor at Konkuk University Graduate School of Real Estate

It has been two years since a man in his 30s in Incheon took his own life after failing to recover his jeonse deposit.

On February 28, 2023, he left a will saying, "I hope my death will be a turning point to resolve jeonse fraud." Although the Jeonse Fraud Victims Act was enacted in May 2023, it is known that more than 11 people have lost their lives so far.

Jeonse fraud, which involves embezzling the tenant's entire jeonse deposit?equivalent to their entire assets?has evolved in various forms over a long period. Fraudsters exploit legal systems and set traps that ordinary people are easily deceived by to seize jeonse deposits. Recently, numerous victims have emerged from 'trust real estate jeonse fraud.'

Real estate trust refers to a legal relationship where the real estate owner, as the trustor, transfers ownership to the trustee, who then performs necessary acts to achieve the trust's purpose according to the trust contract.

Among real estate trusts, collateral trusts mainly related to jeonse fraud involve the trustor receiving loans from a financial institution, the primary beneficiary, by using a beneficiary certificate as collateral instead of setting a mortgage on the real estate ownership for securing claims.

Non-lawyers inevitably have a low understanding of the certified copy of the register and the trust ledger when signing a lease contract for a trust-registered house. Therefore, legally uninformed tenants trust real estate agents and landlords and enter into lease contracts, which can lead to jeonse fraud.

The method to prevent trust real estate jeonse fraud is surprisingly simple. Since in collateral trusts the landlord transfers ownership to a trust company, the tenant should check the 'Gapgu' section of the certified copy of the register to confirm whether the property is under trust when signing the lease contract. Then, they should obtain the trust ledger and verify △ the trustee’s consent and fulfillment regarding the lease contract △ the party receiving the deposit △ the party claiming the deposit refund after the lease term.

Also, if the tenant has special circumstances requiring them to move into a trust-registered house, it is necessary to consider converting part of the jeonse deposit into monthly rent and signing a semi-monthly rent or monthly rent contract. If the house is auctioned, tenants with semi-monthly or monthly rent contracts can reduce damage by deducting the monthly rent from the deposit during the auction process without paying rent.

Jeonse fraud crimes typically begin when tenants pay large jeonse deposits, and tenants can prevent most jeonse fraud by being especially cautious at this stage. Tenants of trust-registered houses should not only listen to explanations from real estate agents and landlords but also actively and thoroughly check the trust ledger themselves to protect their jeonse deposits.