[The Editors' Verdict] Why Tenants Suffer More in the Reverse Jeonse Crisis

Reverse Jeonse Crisis. This term first appeared during the housing price crash right after the 1997 Asian financial crisis. Except for localized Jeonse price drops (close to stabilization) around the move-in period of the first-generation new towns in the Seoul metropolitan area, there was no factor that could cause a market-wide reverse Jeonse crisis before then. Of course, nearly 25 years have passed since, but no reverse Jeonse crisis severe enough to throw the market into chaos has occurred.

Steep interest rate hikes have brought the reverse Jeonse crisis back into focus. There are reports that “landlords are screaming because they cannot return the fallen Jeonse deposits.” When a tenant’s contract ends, landlords need to raise funds equivalent to the amount the Jeonse price has dropped over two years to return the deposit, but they are struggling to do so.

But are landlords really the ones crying out? In reality, that is not the case. The ones actually suffering and crying out in the market are not the landlords who cannot return the money, but the tenants who cannot get their deposits back.

Returning the deposit at the end of a lease contract is not optional but a natural obligation as a contracting party. Many landlords delay returning the deposit, citing reasons such as “I won’t take out a loan,” or “I will return it only after finding another tenant.” On the one hand, it is understandable that landlords are struggling due to the steep drop in Jeonse prices. However, that cannot justify delaying the deposit return after the contract ends and shifting the burden onto tenants.

Why are tenants still the ones suffering the most in a reverse Jeonse crisis where Jeonse prices have dropped by hundreds of millions of won? The reason is simple. If landlords hold out, most tenants have no way to respond. There are many tenants who have been unable to get their deposits back from landlords for months, growing increasingly anxious. When Jeonse prices surged, tenants even took on debt to rent, but now that prices have fallen, they cannot even afford to be relieved.

In the housing market, landlords have always been the ‘gap’ (dominant party) except in rare special circumstances. The Jeonse price graph has steadily trended upward, so tenants have always been in the ‘eul’ (subordinate party) position, watching landlords’ moods at every contract. Although the government enacted the Housing Lease Protection Act in 1981 to strengthen tenants’ rights and has continuously reinforced it since, the balance of power has remained tilted toward landlords.

There are means to pressure landlords who delay returning deposits. One is the ‘Imchagwon Deunggi Myeongryeong’ (Order for Registration of Leasehold Rights). Without the landlord’s consent, tenants can obtain this order from the court and register it on the official registry, allowing them to protect their deposits even if they move out. Tenants can also demand 12% annual interest from landlords for the delayed deposit return period. However, for this order to have practical effect, tenants must vacate the property. Legally, the return of the deposit and the return of the leased property are simultaneous obligations. Tenants cannot take significant action against landlords unless they vacate the house.

Ultimately, while the Imchagwon Deunggi Myeongryeong is powerful in theory, only a very small number of tenants can actually exercise it. Among tenants in South Korea, how many have tens of millions of won in spare funds or can take out loans to move while still not having received their Jeonse deposits?

The government must seriously consider the market where tenants remain the ‘eul’ despite various legal protections. Even if there are multiple layers of protection, if they do not function properly in the market, they are nothing more than ‘false hope’ that is worse than having no protection at all.

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