[2022 National Audit] Criticism of Poor Management of Jeonse Deposit Return Guarantee... "Doubtful Measures for Empty Jeonse"

Lee Byung-hoon, Vice President of the Korea Housing & Urban Guarantee Corporation, is responding to a lawmaker's question during the National Assembly Land, Infrastructure and Transport Committee's audit of the Korea Real Estate Board and the Korea Housing & Urban Guarantee Corporation on the morning of the 12th.
[Photo by Yonhap News]

[Asia Economy Reporter Seongpil Cho] At the National Assembly Land, Infrastructure and Transport Committee's audit held on the 12th, ruling and opposition lawmakers continued to criticize the Housing and Urban Guarantee Corporation (HUG) for poor management of guarantee products.

Yoo Kyung-jun, a member of the People Power Party, stated, "Since 2000 until this year, over 90% of the rental deposit return guarantee insurance accidents involving rental business operators were caused by five specific corporations," questioning HUG's poor management of these corporations. Yoo said, "These specific corporations exploit legal loopholes to receive tax benefits as rental business operators while committing fraud using guarantee insurance as bait," adding, "The Ministry of Land, Infrastructure and Transport and HUG must immediately file criminal charges and prepare drastic measures to prevent these malicious corporations from running rampant."

Cho Oh-seop, a member of the Democratic Party, criticized that the change in guarantee conditions for the Jeonse deposit return guarantee due to ownership changes at HUG reached 36,375 cases (7.2775 trillion KRW) over three years, but sufficient data related to succession facts has not been secured, resulting in inadequate tenant protection. Cho emphasized, "Urgent measures are needed to address Jeonse fraud by malicious landlords who intentionally change landlords during the lease period, as seen in last year's three-mother incident," and added, "System improvements such as allowing access to sales contract-related information are necessary to protect tenants and stabilize housing for the common people."

Han Jun-ho, a Democratic Party member, questioned the effectiveness of the measures announced last month by the Ministry of Land, Infrastructure and Transport and HUG to prevent "empty Jeonse" and Jeonse fraud. Han said, "The risk of empty Jeonse is increasing, but does the government's alternative?lowering the housing price applied to row houses, multi-family houses, and urban lifestyle housing from 150% to 140% of the current official price when subscribing to Jeonse guarantee insurance, and notifying areas with Jeonse rates over 90% as caution zones?effectively prevent this?" He added, "Especially for new houses, there are cases where appraisers collude to artificially inflate house prices and illegal buildings are constructed to exploit the return guarantee system, so countermeasures are needed."

Choi In-ho, a Democratic Party member, pointed out, "HUG prioritizes KB Real Estate market prices when guaranteeing Jeonse deposit returns, but in cases where it is difficult to confirm market prices, such as multi-family houses, it guarantees up to 150% of the official land price," adding, "As the official land price realization rate rose to about 70% of market prices this year, there are cases where HUG's Jeonse guarantee amount exceeds the sale price, which malicious landlords are exploiting." Shim Sang-jung, a Justice Party member, also said, "HUG guarantees up to 150% of the official land price and leaves the appraisal of newly built houses without transactions to tenants. This loophole has led to Jeonse fraud," and added, "Before promoting fraud prevention, the standards themselves must be changed to prevent empty Jeonse from occurring."

Jung Dong-man, a member of the People Power Party, pointed out the need to notify tenants in detail about the terms and conditions in advance to prevent reasons for refusal to fulfill Jeonse deposit return guarantees. Jung said, "Many tenants receive indirect guarantees rather than direct guarantees from HUG, and many may suffer damages due to not properly understanding the terms," urging, "Since most victims are young people or newlyweds, measures must be established."

Lee So-young, a Democratic Party member, criticized HUG's plan to disclose a list of malicious landlords on an application (app) as a measure to prevent Jeonse fraud, saying it may be less effective for those unfamiliar with app usage. Lee suggested, "Instead of an app with low usage rates, it would be better to amend the Real Estate Registration Act to indicate this in the supplementary registration," and proposed, "Allowing tenants to request information on landlords' unpaid taxes and senior guarantees, or obligating landlords or brokers to verify this, would better protect tenants."

Lee Jong-bae, a member of the People Power Party, raised concerns about lax discipline after reviewing the business trip days of key HUG executives over the past two years, noting that former CEO Lee Jae-kwang went on business trips for 149 days (45%) out of 330 actual working days, and former CEO Kwon Hyung-taek went on business trips for 211 days (59%) out of 356 working days. Lee said, "Even in business trip reports, there are no specific reasons detailing who met whom and what was discussed," and insisted, "The Ministry of Land, Infrastructure and Transport should conduct a full investigation of HUG business trips, recover travel expenses if false trips are found, and file charges and disciplinary actions."

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