Concerns Over 'Kkangtong Jeonse' Become Reality... Largest Ever Jeonse Deposit Return Guarantee Incident

[Image source=Yonhap News]

[Asia Economy Reporter Ryu Taemin] Last month, the Korea Housing & Urban Guarantee Corporation (HUG) recorded the highest-ever number of guarantee accidents and subrogation payments related to the Jeonse deposit return guarantee, bringing the concerns over ‘empty shell Jeonse’ into reality.

According to HUG on the 19th, the number of guarantee accidents for the Jeonse deposit return guarantee insurance last month was 523 cases, and the total amount of guarantee accidents reached 109.8 billion KRW, both the highest since the product was launched in September 2013. Based on cumulative data from January to September this year, the accident amount was 646.6 billion KRW and the number of accidents was 3,050 cases, already surpassing last year’s total cumulative figures (579 billion KRW, 2,799 cases), marking an all-time high.

The Jeonse deposit return guarantee insurance works by having these institutions pay the deposit to the subscriber (tenant) if the landlord fails to return the Jeonse deposit on time after the contract period ends, and then exercising the right of recourse to claim the amount from the landlord later. The accident amount for HUG’s Jeonse deposit return guarantee insurance exceeded 100 billion KRW for the first time in history in August, reaching 108.9 billion KRW. The number of guarantee accidents also exceeded 500 cases for two consecutive months, with 511 cases in August.

The explosive increase in guarantee accidents is due to the housing market downturn, which has caused both sale and Jeonse prices to fall, resulting in more cases of ‘empty shell Jeonse’ where landlords cannot return the deposit to tenants. Additionally, since last year, Jeonse fraud cases where deposits are set higher than the sale price and landlords disappear have surged, further increasing the damage.

Meanwhile, the subrogation amount that HUG paid on behalf of landlords to tenants due to guarantee accidents also reached a record high for a single month last month, at 95.2 billion KRW (445 households), approaching 100 billion KRW. The cumulative subrogation amount by HUG up to September this year totaled 529.2 billion KRW (2,446 households), already surpassing the previous record of 504 billion KRW (2,475 households) paid in the entire last year.

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