Arrest of Gang Involved in Over 20 Billion KRW Jeonse Fraud After Purchasing Over 200 Villas Through 'Reverse Gap Investment'

"Jeonse Deposit Insurance Must Be Subscribed"

Sixty members of a jeonse (long-term lease) fraud ring, including rental business operators who bought around 200 villas in the Seoul metropolitan area with no capital and failed to return the jeonse deposits, have been referred to the prosecution.

[Image source=Yonhap News]

The Seoul Metropolitan Police Agency's Criminal Mobile Unit announced on the 18th that two rental business operators were each sent to the prosecution?one in custody and one without detention?on charges of fraud, and 14 others, including building owners and sales team leaders who received rebates, were referred to the prosecution without detention. Additionally, 44 licensed real estate agents who received commissions for brokering fraudulent properties were sent to the prosecution without detention on charges of violating the Licensed Real Estate Agents Act.

According to the police, two rental business operators, including Mr. A, are suspected of purchasing 293 villas in the metropolitan area from April 2019 to November 2022 using the methods of "simultaneous progress" and "reverse gap investment," and embezzling 18 billion KRW in jeonse deposits from 69 tenants.

"Simultaneous progress" refers to a scheme where the jeonse price is inflated to match the sale price, and the tenant's deposit is used to pay the housing purchase price. The ring used the reverse gap investment method, inflating the jeonse price above the sale price by receiving rebates from building owners, thereby signing jeonse contracts at prices higher than the actual sale price.

Police investigations revealed that Mr. A received rebates ranging from a minimum of 6 million KRW to a maximum of 27 million KRW per transaction from building owners when purchasing villas. It was confirmed that he had no significant income and did not have a concrete plan to return the jeonse deposits upon contract expiration.

Another rental business operator, Mr. B, took on the role of managing tenants on the condition of acquiring 75 villas from Mr. A.

Building owner Mr. C, who signed sales contracts with them, conspired with sales team leader Mr. D and others to pay rebates ranging from about 2 million KRW to a maximum of 18 million KRW per case to licensed real estate agents or brokerage assistants who brought in tenants.

Many of the victims were in their 20s and 30s with little experience in real estate leasing, and they claimed they were unaware that part of their jeonse deposits was paid as rebates and that the jeonse houses would become "empty shell jeonse"?where the sale price of the house is lower than the jeonse deposit?from the time of contract.

The police urged, "Tenants must be sure to subscribe to jeonse deposit insurance before signing lease contracts and check lists of malicious landlords and whether taxes are overdue."

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