Has the Jeonse Fraud Storm Passed?... Tenant's Right Registration Order Applications Decline [Real Estate AtoZ]

Applications for Tenant's Right Registration Orders Drop 40% from January to April
"Decrease Attributed to Base Effect and Growing Preference for Monthly Rent"

A row house and multi-family complex in Seoul. Photo by Yonhap News

The number of applications for tenant's right registration orders, which had surged in the wake of the jeonse fraud crisis, has been on the decline this year. The decrease in applications is attributed to a base effect from last year's record-high figures, as well as the growing preference for monthly rent contracts.

According to the Court Registration Information Plaza on May 23, there were 10,898 applications for tenant's right registration orders nationwide from January to April this year, based on collective buildings such as officetels, apartments, row houses, and multi-family housing. This represents a decrease of about 40% compared to 17,920 cases during the same period last year. After recording 2,289 cases in January this year, the number rose to 3,187 in March, but dropped again to 2,800 last month, signaling a return to a downward trend.

The tenant's right registration system allows tenants to officially state on the real estate register that there is an outstanding deposit claim if they have not received their deposit back after the end of a lease contract. This system prevents tenants from losing their right of opposition and preferential repayment in cases where they move out without receiving their deposit, making it difficult to recover the deposit. If the deposit is not fully or partially returned after the lease contract ends, tenants can apply to the court for a tenant's right registration order.

From January to April this year, the largest number of tenant's right registration order applications was concentrated in the Seoul metropolitan area, where the population is dense. Gyeonggi Province recorded the highest number with 2,882 cases, followed by Seoul with 2,173 cases, Busan with 1,749 cases, and Incheon with 1,278 cases. Compared to the same period last year, Incheon saw the largest decrease, with a steep drop of 63%. The number of applications in Seoul and Gyeonggi Province also fell by about 56% and 40%, respectively. In contrast, Busan saw only a 3% decrease.

Until last year, the number of tenant's right registration order applications exceeded 47,000, setting an all-time high. As jeonse prices fell in the metropolitan area, more landlords failed to return deposits, and fraud cases became a major social issue, leading more people to seek court intervention.

However, the decline in applications this year is explained by the fact that last year's surge created a base effect, as well as the impact of "jeonse phobia" since statistics began in 2010. There is a growing preference for monthly rent contracts over jeonse in lease agreements, which has reduced the frequency of situations where deposits cannot be returned.

Last month, about 60% of all nationwide contracts that received a fixed date were monthly rent contracts. This figure is 7 percentage points higher than the 53% recorded two years ago, and 1.5 percentage points higher than last year's 58.5%.

Kim Jaekyung, head of Toomee Real Estate Consulting, explained, "A tenant's right registration order is a measure taken before a property goes to auction, but since all the potential jeonse fraud cases have already surfaced, the number of applications is now declining. Overall, trust in jeonse has been broken and people are avoiding it. In the case of monthly rent, the deposit is relatively small, so the risk of not getting it back is low, and even if it is not returned, tenants can use the deposit to cover living expenses while staying in the property. This is leading to a decrease in applications for tenant's right registration orders."