[Exclusive] Jeonse Fraud Under 50 Million Won and Multi-family Housing Mainly Affected Low-income People

Most Victims Have Deposits Under 50 Million Won
Zero-Capital & Gap Investment, Empty Jeonse, False Guarantees & Insurance, etc.

[Asia Economy Reporters Jang Sehee and Oh Gyumin] Recently, as jeonse fraud cases have surged, the damage has been concentrated on ordinary citizens. Housing with low deposits and relatively low prices, as well as ordinary citizens who are actual users, have become targets of fraud.

More than Half of Jeonse Fraud Victims Targeted 'Multi-family Housing'

On the 28th, according to the 'Recent 3-Year Jeonse Fraud Special Investigation Arrest Status' submitted by the National Police Agency to Jeong Wootak, a member of the National Assembly's Public Administration and Security Committee from the People Power Party, there were 1,351 victims of jeonse fraud and 495 arrests over three years. Among the victims, 871 had deposits of 50 million won or less, accounting for 64% of all victims.

By housing type, jeonse fraudsters in multi-family housing accounted for the largest number with 251 cases (50.7%). There were 108 cases in officetels, 79 in apartments, 38 in others, and 19 in detached houses.

By crime type, the most common was cases where the fraudster had no intention or ability to return the deposit and embezzled the jeonse deposit, totaling 363 cases. There were 77 cases of fraudsters impersonating landlords, and 55 cases where agents exceeded their delegated authority in contracts.

Typical jeonse frauds that hurt ordinary citizens include ▲no-capital or gap investment ▲non-return of deposits such as in "empty jeonse" ▲false disclosure of real estate rights ▲unauthorized contracts impersonating actual owners ▲contracts exceeding delegated authority ▲false guarantees or insurance ▲illegal brokerage, among others.

Assemblyman Jeong said, "Jeonse fraud is a serious crime against the livelihood economy that takes away the hard-earned savings of individuals and families," and added, "It is necessary to consider stricter penalties."

Limitations in Proving Fraud Intent Lead to Additional Damage

Although the government is intensifying crackdowns and strict responses to jeonse fraud, the frauds are becoming more sophisticated and intelligent. Kim Myunghee (45, pseudonym), living in Gangseo-gu, Seoul, trusted the promise that the real estate deposit would be returned and signed a jeonse contract, only to be defrauded. Those who contracted with Kim falsely reported the number of monthly rental units and financial status, deceiving Kim and a total of 83 people to embezzle deposits worth about 5.4 billion won.

Kim Sangwook (54, pseudonym), living near a university in Iksan, Jeonbuk, was unable to return deposits due to financial difficulties but did not disclose this and signed jeonse contracts with 113 people, embezzling 4.4 billion won in deposits.

Jang Dongmin (47, pseudonym), living in Gangdong-gu, Seoul, after signing a monthly rent contract, forged documents to make it appear as if the contract was a jeonse supported by Korea Land and Housing Corporation (LH) subsidies, and embezzled 10.6 billion won from about 33 people. Although Jang was only entrusted with monthly rent contracts or management authority, he embezzled deposits after concluding jeonse contracts with tenants.

The police also acknowledge limitations in investigations on site. A police officer from a frontline station in Seoul said, "At the time of the jeonse contract, the landlord may have had the intention and ability to compensate, but if they later went bankrupt and became unable to repay, it is not easy to verify this," adding, "It is necessary to trace whether there was no intention or ability to return the deposit from the time of the contract."

Another police officer said, "In cases of organized crime, they may own dozens of real estate properties, so it takes quite some time to verify each one," and added, "The process of proving criminal charges takes a long time, during which additional damage may occur."

Experts Advise Tenants to Do Their Homework and Use Deposit Return Guarantee Systems

The police have been conducting a nationwide special crackdown on jeonse fraud for six months from the 25th of last month to January 24th next year. In a written response, the National Police Agency stated that regarding legislative measures to strengthen punishment for jeonse fraudsters, strong penalties are necessary for organized fraud to protect the housing rights of ordinary citizens and establish a sound jeonse order. President Yoon Suk-yeol also ordered strict measures against jeonse fraud at the Emergency Economic and Livelihood Meeting on the 20th.

Experts advise that due to the nature of fraud crimes, proving intent is very difficult, so tenants themselves should be cautious.

Attorney Kim Yerim of Deoksu Law Firm said, "It is difficult to prove intent in fraud cases, so criminal punishment cases are very rare," adding, "Except for cases where there was clear intent to embezzle the jeonse deposit from the start, generally, tenants fail to recover their deposits. In multi-family housing, tenants need the landlord's consent to check rights relations, so they often trust and sign contracts without viewing them."

Professor Kwon Daejung of Myongji University’s Department of Real Estate said, "In multi-family and row houses, which are types of housing for ordinary citizens, it is often difficult to know the exact price, so contracts are often made with inflated amounts," adding, "It is important for tenants to do their homework by checking prices in similar areas, and subscribing to the jeonse deposit return guarantee system is also a way to prevent damage."

This content was produced with the assistance of AI translation services.