Ruling and Opposition Parties Stalled on Special Act Against Jeonse Fraud... What Are the Key Issues?

Ruling and Opposition Floor Leaders Agree on Plenary Session Processing on the 25th
Differences Narrowed but Still Parallel
Democratic Party Hints at Unilateral Processing

This is already the fourth death. On the 8th, in Yangcheon-gu, Seoul, a woman in her 30s who had not received her jeonse deposit back from the so-called 'Villa King' was found dead at her home. This young woman had signed a jeonse contract worth 300 million won with the Villa King. Of this amount, over 200 million won was a loan. It is presumed that her death was due to extreme stress and fatigue accumulated from being a victim of jeonse fraud. From February to last month, three victims of jeonse fraud in Michuhol-gu, Incheon, consecutively took their own lives, making the total number of deaths from jeonse fraud victims four this year alone.

Cases of people taking their own lives due to jeonse fraud are increasing, but discussions on the National Assembly's 'Jeonse Fraud Special Act' remain at a standstill. This is because the ruling and opposition parties have sharp differences over the scope of victims and the purchase of deposit return claims. Although the ruling and opposition parties agreed to hold a plenary session on the 25th to pass the Jeonse Fraud Special Act, it is uncertain whether they will narrow their differences.

[Image source=Yonhap News]

Law Made from Victims' Deaths

This year, the National Assembly enacted three laws to prevent jeonse fraud. On March 30, the amendment to the 'Housing Lease Protection Act,' which requires landlords to mandatorily present lease information and tax payment certificates to tenants when signing lease contracts, passed the plenary session. To ensure the effectiveness of this law, the standard housing lease contract was also revised. It included special provisions allowing tenants to cancel the contract without penalty if undisclosed relevant facts are later confirmed.

On the same day, the amendment to the Licensed Real Estate Agents Act also passed the plenary session. This strengthens penalties for some licensed real estate agents found to be involved in organized jeonse fraud. If a licensed real estate agent is sentenced to imprisonment or more with a suspended sentence, they cannot work for two years even after the suspension period ends.

The legislative momentum increased after a man in his 30s, a victim of the Incheon 'Construction King' jeonse fraud case that surfaced at the end of last year, was found dead. However, two more victims took their own lives last month.

In response, on the 21st of the same month, the policy chiefs of the ruling People Power Party, the Democratic Party, and the Justice Party met to discuss measures against jeonse fraud. A bill prioritizing the repayment of victims' deposits over local taxes and increasing penalties for related parties passed the plenary session on the 27th.

The 'Local Tax Basic Act Amendment' stipulates that when a tenant's residence is auctioned or sold publicly, the tenant's jeonse deposit is repaid before local taxes imposed on the property. The intent is to protect victims by prioritizing repayment of deposits with confirmed dates over local taxes. Previously, taxes imposed on real estate were repaid first, and tenants could only recover their deposits from the remaining amount after taxes.

Alongside this, the 'Partial Amendment to the Act on Appraisal and Appraisers' also passed. The amendment cancels the qualifications of appraisers sentenced to imprisonment or more for real estate-related crimes such as jeonse fraud and allows appropriate disciplinary actions for violations. After disqualification, appraisal firms cannot employ such individuals as office staff for five years.

Key Issues of the ‘Jeonse Fraud Special Act’

However, these laws focus on preventing jeonse fraud and have been criticized for being insufficient to help victims who have already suffered. This is believed to be why victims have continued to die by suicide after the first extreme case.

Park Kwang-on, the newly appointed floor leader of the Democratic Party of Korea, is speaking as he meets Yoon Jae-ok, the floor leader of the People Power Party, at the National Assembly in Yeouido, Seoul on the 2nd. Photo by Kim Hyun-min kimhyun81@

Therefore, not only the government and ruling party but also the opposition are rushing to push a special law to support current victims of jeonse fraud. On the 27th of last month, the government and ruling party proposed the 'Special Act on Support for Jeonse Fraud Victims and Housing Stability' (led by Representative Kim Jeong-jae), the Democratic Party proposed the 'Special Act on Recovery of Deposits and Housing Stability for Tenants' (led by Representative Jo O-seop), and the Justice Party proposed the 'Special Act on Protection of Tenants of Houses with Unreturned Rental Deposits' (led by Representative Shim Sang-jung). However, due to significant differences, the legislation has been delayed. Members of the National Assembly Land, Infrastructure and Transport Committee's Land Law Review Subcommittee from both sides held three joint reviews of the three bills on the 1st, 3rd, and 10th but failed to reach a conclusion.

The opposition demands expanding the scope of victims, increasing repayment amounts, and applying special provisions such as purchasing deposit return claims to broaden victim relief. On the other hand, the government and ruling party advocate amendments granting victims priority purchase rights and long-term leasing by the Korea Land and Housing Corporation (LH).

Initially, regarding the scope of victims, the government and ruling party defined tenants who meet all six conditions: ▲tenants with opposable rights and confirmed dates, ▲cases where auction or public sale (including execution orders) of the leased property has begun, ▲consideration of area and deposit amount for low-income tenant housing, ▲cases judged to have intent of jeonse fraud such as investigation initiation, ▲risk of multiple victims, and ▲risk of substantial deposit non-return.

Later, on the 1st, the subcommittee removed the housing area requirement. The deposit level was set at 300 million won as a standard, but the Jeonse Fraud Victim Support Committee within the Ministry of Land, Infrastructure and Transport can adjust the deposit scale within a maximum of 150%. All cases where the deposit was not fully or partially repaid were included, and even if auction or public sale had not started, cases where the landlord initiated bankruptcy or rehabilitation procedures were included as victim criteria. On the 10th, the subcommittee submitted an amendment to include victims of 'capital-free gap speculation' in the special law. This adds cases where multiple houses are acquired and leased without the ability to return the deposit.

However, the Democratic Party believes the scope of victims should be broader. Maeng Seong-gyu, head of the Democratic Party's Jeonse Fraud Task Force, told Asia Economy in a phone interview, "Although the scope has been expanded, it needs to be expanded further," adding, "We need to carefully consider how to handle cases of fraud before sale or situations where the property was transferred to a trust company without the tenant's knowledge. There are still many issues to resolve."

Deposit return measures are also a challenge to solve. On the 11th, Lee Jae-myung, leader of the Democratic Party, posted on his Facebook, "The government insists that 'fraud victims cannot be helped' and 'just borrow money and buy the house,'" urging, "The government should immediately accept the deposit return measures proposed by the opposition." This refers to the 'advance support and subsequent subrogation' approach, where Korea Asset Management Corporation (KAMCO) and others first purchase deposit return claims and later recover costs through subrogation claims. The government and ruling party oppose this, citing fairness with other crime victims. Instead, they propose granting victims priority purchase rights, with LH purchasing these rights and then leasing the properties long-term.

Deadline Set for the 25th... Agreement or Unilateral Passage?

As the number of jeonse fraud victims increases, the ruling and opposition parties agreed to pass the Jeonse Fraud Special Act at the plenary session on the 25th. If differences over victim support scope and deposit return measures narrow, the bill is likely to be finalized after the subcommittee discussion on the 16th, followed by the full Land Committee meeting, the Legislation and Judiciary Committee, and then the plenary session. A National Assembly Land Committee official explained, "Considering the subcommittee progress and the agreement by the floor leaders to handle the bill on the 25th plenary session, it is highly likely that after coordinating issues at the subcommittee on the 16th, the bill will be passed at the full committee."

However, there is still a possibility of delay in the subcommittee process due to the need to review the Democratic Party's demands for retroactive priority repayment and expanded target groups. In that case, the floor leadership is expected to attempt an agreement. On the 11th, Yoon Jae-ok, floor leader of the People Power Party, said at a brown bag meeting with reporters, "The Democratic Party has proposed several new suggestions, so the government needs time to review them, causing delays," adding, "We will try our best, and if it is difficult at the committee level, the floor leadership will step in to reach an agreement."

Both sides have shown willingness to pass the Jeonse Fraud Special Act, but if they fail to reach an agreement, the Democratic Party has hinted at unilateral passage. On the 11th, Kim Min-seok, head of the Democratic Party's Policy Committee, held a press conference at the National Assembly Communication Office regarding the Jeonse Fraud Special Act, stating, "Since the opposition has consistently proposed deposit compensation measures, if the government has no plan, they should accept it, but they continue to delay the agreement," adding, "If the government and ruling party do not present progressive measures by the 16th, we will consult with the Justice Party to take measures to respond to the urgent demands of victims." On the same day, Lee Jae-myung also said, "People pushed to the edge cannot wait any longer. I hope the government and ruling party will present a progressive stance by the next Land Committee subcommittee meeting on the 16th," adding, "Otherwise, the Democratic Party will actively exercise the authority entrusted by the people to respond to the victims' desperate cries."

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