Special Act on Jeonse Fraud Passed by Subcommittee... "10-Year Interest-Free Loan for Priority Repayment" (Comprehensive)

Existing Jeonse Loan 20-Year Interest-Free Installment Repayment
Passage in Plenary Session on 25th Expected

The scope of the special law on Jeonse fraud has been expanded to cover Jeonse deposits up to 500 million KRW, and victims who did not receive the priority repayment amount will be able to obtain interest-free Jeonse loans for up to 10 years.

On the 22nd, the National Assembly Land, Infrastructure and Transport Committee held a subcommittee meeting and approved the enactment of the "Special Act on Support for Jeonse Fraud Victims and Housing Stability (Special Act on Jeonse Fraud)." Since the bill was prepared by compromising three special laws proposed by ruling and opposition party members and the government plan, both parties intend to pass it through the full Land Committee meeting on the 24th and the plenary session on the 25th.

① Expansion of Special Law Application Targets

The special law passed by the Land Subcommittee that morning set the maximum deposit amount for Jeonse fraud victims to be protected at 500 million KRW. Initially, the ruling and opposition parties agreed on 300 million KRW, but the Jeonse Fraud Victim Support Committee revised it to allow adjustments within an upper limit of 200 million KRW, considering regional and victim circumstances.

The area criteria were also removed to expand the support targets. Legal grounds were established to enable financial support under the special law for victims of intentional gap investment or double contracts due to trust fraud.

Kim Jeong-jae, Chairman of the Subcommittee on Land Legislation of the National Assembly Land, Infrastructure and Transport Committee, is speaking at the Subcommittee on Land Legislation meeting held at the National Assembly in Yeouido, Seoul, on the morning of the 10th. Photo by Kim Hyun-min kimhyun81@

② Long-term Interest-free Loans if Priority Repayment Not Received

The special law also allows Jeonse fraud victims who did not receive the priority repayment amount to obtain interest-free loans for up to 10 years, equivalent to the priority repayment amount, when securing a new Jeonse residence. The excess portion will be supported with low-interest loans ranging from 1.2% to 2.1%. The victim's income or asset requirements are not considered.

The priority repayment amount is the sum that tenants can receive ahead of senior creditors such as banks when their residence is transferred through auction or public sale, and it varies by region. In Seoul, the scope of tenants eligible for priority repayment (deposit) is up to 165 million KRW; in the overconcentration control zones (Incheon) and Yongin, Hwaseong, Sejong, Gimpo, up to 134 million KRW; in metropolitan cities, Ansan, Gwangju, Paju, Icheon, and Pyeongtaek, up to 85 million KRW; and in other regions, up to 75 million KRW. The maximum priority repayment amounts also differ: Seoul up to 55 million KRW; overconcentration control zones, etc., up to 48 million KRW; metropolitan cities and Ansan, Paju, etc., up to 28 million KRW; and other regions up to 25 million KRW.

The ruling and opposition parties and victims' demand for a "support first, then exercise subrogation rights" method of purchasing deposit claims was not included in the special law. This method involves Korea Asset Management Corporation (KAMCO) purchasing claims and providing advance compensation for damages if the Jeonse deposit is not returned even after the lease ends, with the claim purchasing institution recovering the amount through auction, public sale, or sale procedures.

However, in the case of auction or public sale, the Korea Housing & Urban Guarantee Corporation (HUG) will act as an agent. The service fee burden ratio for agency services will be increased from the original 50% to 70% by HUG.

[Image source=Yonhap News]

③ 20-Year Grace Period for Delinquency Records

If existing Jeonse loans cannot be repaid due to Jeonse fraud, delinquency information registration will be deferred for 20 years to prevent the borrower from becoming credit impaired. Additionally, interest-free installment repayment will be possible for 20 years. The government estimates that applying the average mortgage interest rate (5.0%), a 100 million KRW Jeonse loan repaid interest-free over 20 years would provide an interest reduction benefit of 58.4 million KRW.

Furthermore, support will be provided for living expenses, medical expenses, housing costs, and education expenses for victims. Eligible recipients with 75% of the median income, assets under 310 million KRW, and financial assets under 6 million KRW can receive 1.62 million KRW for living support, up to 3 million KRW once for medical support, and 660,000 KRW monthly for housing support.

The special law is highly likely to be processed at the plenary session on the 25th. The ruling party is determined to pass the Special Act on Jeonse Fraud at the plenary session, emphasizing the urgent need for support for Jeonse fraud victims. Kim Jeong-jae, a member of the ruling party and subcommittee chair, explained in a briefing after the Land Subcommittee meeting that "the full Land Committee meeting will be held on the morning of the 24th to pass the bill." Yoon Jae-ok, floor leader of the ruling party, also emphasized after a meeting with opposition floor leaders chaired by the Speaker that "the Special Act on Jeonse Fraud will be processed by bipartisan agreement at the plenary session on the 25th."

Unresolved parts by agreement will be supplemented later. Choi In-ho, opposition party floor leader, said at a press briefing on the Special Act on Jeonse Fraud hosted by the Democratic Party, "We have also obtained a commitment from the ruling party to definitely enact supplementary legislation if many blind spots occur or if there are parts we have not yet considered when the special law is implemented." The government has stipulated that monitoring will be conducted and reports submitted to the standing committee once every six months.

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