"Tears of a Tenant: Thought Deposit Was Made to HUG, but a 'Bolt from the Blue'... Risk of Losing Hard-Earned Security Deposit"

Thought It Was Deposited to HUG, but a 'Bolt from the Blue'... Sion Supsokui Achimbyu
Collected Deposits While Hiding 'Capital Erosion' at Nammyung The Rau
Tenants Say, "De Facto Jeonse Fraud"
Rental Deposit Guarantee Accidents Up 148% in One Year

Tenants of private rental apartments are at risk of losing their deposits due to the consecutive bankruptcies of regional construction companies. As the construction companies responsible for the rentals go bankrupt, tenants find it increasingly difficult to recover their deposits. Although tenants have initiated lawsuits, the outcomes remain uncertain. Some experts point out that the 'domino effect' of insolvency among small and medium-sized construction firms is acting as a structural crisis threatening the lives of vulnerable housing groups.

Residents of Nammyung The Row rental apartments in Gimhae-si, Gyeongnam, are urging an investigation and strict punishment of the rental company. Photo by Se-ryeong Lee.

Thought it was deposited to HUG, but a 'bolt from the blue'... 'Sion Supsokui Achimbyu'

According to the construction industry on the 16th, tenants of the private rental apartment complex 'Sion Supsokui Achimbyu' in Chuncheon, Gangwon Province, have filed fraud charges against eight individuals, including the developer Sion Togeon and Saemaeul Geumgo officials. The rental apartment complex, consisting of 318 households, was scheduled for occupancy in June 2023, but construction halted after the contractor Sion Construction Development and the developer Sion Togeon consecutively went bankrupt. The construction progress rate is about 80%.

The tenants who filed the complaint believe that part of the rental deposits paid through Bulrobongmu Saemaeul Geumgo was not directly deposited into the Housing and Urban Guarantee Corporation (HUG) account but instead flowed into Sion Togeon's account. Of the total 38.5 billion KRW in deposits, 7.8 billion KRW was deposited into the HUG account, while the remaining approximately 30 billion KRW went into Sion Togeon's account. The tenants suspect that Saemaeul Geumgo colluded with the developer in this matter.

The tenants claimed, "Saemaeul Geumgo agreed to deposit into the HUG-designated account but transferred the intermediate payments to the developer's account without notifying or obtaining consent from the contract holders," adding, "The agreement stipulated that Saemaeul Geumgo would directly deposit into the HUG-designated account once it was established, but this was not honored." The funds that flowed into the developer's account appear to have been used for construction costs.

As occupancy was delayed, tenants inquired about the return of their deposits but realized that many had not been refunded, recognizing the problem. A HUG official stated, "Since the occupancy payments were not properly received, we sent official letters requesting normalization of payments to the developer starting July 2023, but received a response that payments would be made once construction progress exceeded 50%," adding, "It appears the developer actively concealed the misappropriation of intermediate payments."

Ultimately, HUG announced this apartment as a guarantee accident site in February. However, according to the terms, they can only refund the 7.8 billion KRW that was deposited to HUG. This means tenants will not recover the remaining 30 billion KRW of their deposits. The Gangwon Provincial Police Agency, which received the complaint, has begun a full-scale investigation targeting Sion Togeon officials.

'Nammyung The Rau' in Gimhae collected deposits while hiding 'capital erosion'

Tenants of the rental apartment 'Nammyung The Rau' in Gimhae, Gyeongsangnam-do, are also losing sleep for similar reasons. Recently, 309 out of 824 households filed fraud charges against the rental operator 'Nammyung Industrial Development' for rental deposits amounting to 47.1 billion KRW. Nammyung Industrial Development was already in a state of complete capital erosion between 2022 and 2023 but continued to collect deposits without disclosing this fact. After entering rehabilitation procedures (court receivership), the damage escalated significantly. The estimated scale of losses due to unreturned deposits is about 47 billion KRW. Tenants are outraged, calling it a "de facto jeonse (long-term lease) fraud."

Both the 'Sion Supsokui Achimbyu' in Chuncheon and 'Nammyung The Rau' in Gimhae are rental apartments located in provincial areas. Rental apartments are often built by small and medium-sized construction companies that lack sufficient financial resources or marketing capabilities. Most tenants are from economically vulnerable groups. With both construction companies and residents financially weak, the economic downturn led to a wave of bankruptcies among small and medium-sized construction firms, causing the greatest harm to low-income households. Victims are demanding solutions from the government, but no effective measures have been found yet.

Incidents involving deposit fraud are increasing. According to HUG, the amount of 'corporate rental deposit guarantee accidents' rose by 148% from 232 billion KRW in 2023 to 575.9 billion KRW in 2024 within a year. During the same period, the number of incidents doubled from 1,259 to 2,674 cases. A HUG official stated, "Following the guarantee accident at 'Sion Supsokui Achimbyu,' we have been regularly inspecting and strengthening management of payment statuses at occupancy payment management sites," adding, "So far, no additional accident cases have been confirmed."