"Eradicating Ggangtong Jeonse Rental Scams"… Seoul City Launches Intensive Investigation into Illegal Brokerage Activities

Intensive Inspection of Newly Built Multi-Family Housing Clusters in 4 Districts Including Gangseo-gu with High Risk of Kkangtong Jeonse
Seoul City Operates 3 Major Kkangtong Jeonse Prevention Services Linked with Consultation Data for Thorough Investigation
Organizational Restructuring to Strengthen Investigation of Real Estate Crimes Causing Significant Citizen Damage... Two Real Estate Investigation Teams Deployed

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government’s Civil Life Judicial Police Unit announced on the 13th that it will conduct a focused investigation into illegal brokerage activities related to jeonse fraud, such as "Kkangtong Jeonse," which has seen a recent surge in victim cases and threatens citizens' housing stability, until the end of this year.

Kkangtong Jeonse refers to cases where the jeonse deposit is higher than or similar to the sale price, making it highly likely that the tenant will not be able to recover the jeonse deposit upon lease contract expiration. According to the Seoul Jeonse Deposit Support Center, about 35,000 lease-related consultations were conducted in 2021, and according to the National Police Agency, the number of prosecutions for jeonse fraud, including Kkangtong Jeonse, increased from 97 cases in 2020 to 187 cases in 2021. This situation calls for strict investigations to alleviate citizens’ concerns surrounding lease contracts.

Accordingly, Seoul plans to focus investigations on areas densely populated with newly built villas, where it is difficult to accurately grasp market prices and where the jeonse rate (the ratio of jeonse price to sale price) is high, increasing the risk of Kkangtong Jeonse. According to data provided by Seoul’s ‘Jeonse Information All-in-One’ service, as of August 2022, the average jeonse rate for row houses and multi-family houses in Seoul was 84.5%, with the highest rates by district being Gangseo at 96.7%, Geumcheon at 92.8%, Yangcheon at 92.6%, and Gwanak at 89.7%.

The main investigation targets are violations of the Licensed Real Estate Agents Act related to Kkangtong Jeonse, including ▲ false listings and advertisements ▲ false statements or other acts that mislead clients regarding important matters of the brokerage object ▲ unlicensed or unregistered illegal brokerage activities. In particular, many Kkangtong Jeonse cases involve inflating prices of newly built villas, where market prices are hard to determine, to induce contracts. There is concern that brokerage assistants, who are paid mainly on a commission basis, may knowingly participate in illegal brokerage activities despite being aware of the high risk of Kkangtong Jeonse. These aspects will be thoroughly examined.

Last year, the Civil Life Judicial Police Unit uncovered a case where an assistant at a real estate agency in Yeongdeungpo-gu was caught distributing and brokering various properties, including newly built villas, using business cards with the title “Director,” which could give the impression of being a licensed real estate agent. The assistant was prosecuted for violating the Licensed Real Estate Agents Act.

Another major investigation target is false statements that mislead clients regarding important matters of the brokerage object. For example, a licensed real estate agent B brokered a jeonse contract worth 250 million KRW to a newlywed couple, inflating the market price to over 2 billion KRW despite existing senior mortgages and deposits totaling 1.4 billion KRW. The agent assured the clients there was no risk of losing their deposit, failing to properly inform them of the market price and rights, which led to the tenants being forcibly evicted six months before the lease expiration due to compulsory auction and eviction orders.

Violations of the Licensed Real Estate Agents Act involving illegal brokerage related to Kkangtong Jeonse can result in imprisonment of up to one year or fines up to 10 million KRW.

For efficient investigations, Seoul plans to take a multifaceted and meticulous approach, including ▲ linking investigations with consultation data from the ‘Seoul Kkangtong Jeonse Prevention Service’ ▲ strengthening online monitoring of real estate cafes and personal blogs ▲ operating a crime report reward system to encourage citizen reporting.

First, Seoul will actively utilize consultation data from three major services for Kkangtong Jeonse prevention: ▲ ‘Jeonse Deposit Support Center’ lease consultations ▲ checking regional jeonse rates via ‘Jeonse Information All-in-One’ ▲ verifying appropriate jeonse prices through the ‘Jeonse Price Consultation Center.’ Investigations will be promptly initiated upon detecting cases with Kkangtong Jeonse risk. Additionally, online monitoring of real estate cafes and personal blogs will be intensified, and on-site investigations will be conducted if suspicious signs are detected.

Kim Myung-joo, head of the Seoul Civil Life Judicial Police Unit, stated, “Kkangtong Jeonse is a crime that must be eradicated as it exploits situations where price information is difficult to access, such as newly built villas, and mainly affects social newcomers and newlyweds.” He added, “With organizational restructuring to strengthen real estate investigations, we will do our best to prevent citizen damages.”

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