Multi-family House with Jeonse Fraud Sold at Auction... LH Purchases Without Tenant Consent

Even if not all tenants of multi-family houses who have suffered from jeonse fraud agree, the public sector will participate in auctions (including public sales) to purchase the affected houses, a plan that is being promoted.

The scene of a villa-dense area in Hwagok-dong, Gangseo-gu, Seoul, where jeonse fraud victims have surged. [Image source=Yonhap News]

According to the Ministry of Land, Infrastructure and Transport on the 27th, the Korea Land and Housing Corporation (LH) plans to acquire the affected houses by exercising the right of first refusal if the junior-ranking tenants of multi-family houses, who find it difficult to recover their jeonse deposits through auctions, agree.

Multi-family houses are a type of detached house under the Housing Act and are not classified as multi-unit housing, so individual registration for each tenant is not possible. Therefore, when a house affected by jeonse fraud goes up for auction, the auction is conducted on the entire building rather than by individual units.

Since repayment is made in order starting from senior-ranking rights holders with opposability upon auction winning, tenants who signed their jeonse contracts later may fail to recover their deposits.

Accordingly, senior-ranking tenants want the auction to proceed, while junior-ranking tenants do not, leading to conflicting interests that made it difficult for multi-family house victims to exercise the right of first refusal.

Therefore, the Ministry of Land decided that even without the consent of senior-ranking tenants, if the junior-ranking tenants agree among themselves, LH will participate in the auction.

For example, if among 10 tenants in a multi-family house, 4 units can recover their deposits through the auction, LH can use the right of first refusal to purchase the affected house if the 6 units that cannot recover their deposits agree.

If LH purchases the affected multi-family house and converts it into rental housing, senior-ranking tenants must receive their deposits back and vacate. Junior-ranking tenants can sign rental contracts with LH and continue living in their current homes.

If a third party wins the auction for the affected multi-family house, LH is considering leasing the house where the junior-ranking tenants reside.

If a suitable house is found where the intended occupants want to live directly, LH will sign a jeonse contract with the homeowner and then re-rent it at a lower cost using the "Jeonse Rental Housing" system.

The Ministry of Land plans to open a Jeonse Fraud Victim Support Center in Daejeon, where jeonse fraud in multi-family houses is concentrated, within this month.

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