Victims of 'Kkangtong Jeonse' Trapped Without an Exit

Incheon District Court Jurisdiction Over High-Damage Areas
Expansion of 4 Auction Divisions as of July
Listings Accumulate, Repeated Auction Failures
"Hard to Endure Snowballing Interest"

As the number of properties for court auctions, the 'last resort' for victims of jeonse fraud to recover their deposits, rapidly increases and the avoidance of auctions for apartments and villas with jeonse deposit return issues becomes prominent, victims of jeonse fraud are expressing difficulties.

Although they have put villas and other residences they lived in up for auction to recover their deposits, the oversupply of properties has delayed auction procedures and added interest burdens. There has been no clear progress in discussions to amend the Special Act on Jeonse Fraud to support victims' housing through auction profits from houses, increasing the economic and psychological burdens on victims.

[Image source=Beomryul Newspaper]

According to court statistics on the 16th, as of June, there are 96,808 properties currently under auction nationwide. The numbers were △59,297 in 2021 △59,466 in 2022 △81,620 in 2023, showing a sharp increase in auction properties since jeonse fraud cases began to emerge in earnest in 2022. In the case of the Incheon District Court, where fraud cases are concentrated, the number of ongoing auctions reached 8,886 as of June, leading to the expansion of four auction divisions last month.

With the surge of properties flooding the auction market and the avoidance of villas, the winning bid rate (the ratio of the winning bid price to the appraised value) for non-apartment properties such as villas continues to decline. According to auction data specialist Gigi Auction, last month the winning bid rate for villas in Seoul was 81.8%, down 0.8 percentage points from 82.6% the previous month.

As apartments and villas repeatedly fail to sell, victims of jeonse fraud who reluctantly participate in bidding for houses that have gone to auction complain of double burdens such as interest payments.

Victims who participate in the auction of the house they live in must pay 10% of the minimum sale price as a bid deposit, and since most raise the deposit through loans, the longer the auction is delayed, the greater the interest burden becomes. Many have already exceeded the DSR (Debt Service Ratio) limit on jeonse loans and have had to secure deposits through high-interest credit loans.

Jeonse fraud victim A said, "Because of the benefit of tax reductions upon winning the auction, I am just waiting for the auction to conclude, but the interest already paid amounts to 12 million won," adding, "The interest burden is snowballing, and I worry whether I can endure any longer."

Victims who hope for the auction to end as soon as possible are mostly limited to those with senior lease rights. About 70% of jeonse fraud victims are junior leaseholders, who often receive only part of their deposit or nothing at all and are evicted even if a new landlord appears.

To reduce such damages, the Special Act on Jeonse Fraud passed last year included a provision allowing temporary suspension of public auctions (gyeonggongmae) that victims do not want. However, after one year of enforcement, suspension measures are gradually being lifted. Recently, cases of victims reluctantly 'self-winning' their damaged houses after receiving auction commencement notices have increased.

According to the office of Democratic Party lawmaker Bok Ki-wang of the National Assembly Land, Infrastructure and Transport Committee, 57 houses in Michuhol-gu, Incheon, including Mr. B last month, were auctioned off because requests for re-suspension of public auctions were not accepted.

Mr. B, a jeonse fraud victim in Michuhol-gu, Incheon, was notified in May that the one-year suspension period for his damaged house had ended and that the auction must proceed. Despite appealing for an extension due to his circumstances, the request was denied. Ultimately, Mr. B took on the damaged house at about 56% of the appraised value and completed the final payment in July.

According to the Special Act, if the victim's situation is unresolved, the court may extend the suspension either ex officio or upon the victim's request, but there is no unified standard within the court, and decisions are left to the court's discretion, raising concerns about effectiveness. An official from the Incheon District Court explained, "The Ministry of Land, Infrastructure and Transport has issued a notice to apply suspension extension measures, but judgments may vary by auction division."

As the suffering of jeonse fraud victims deepens, attention is focused on whether the amendment to the Special Act on Jeonse Fraud will pass during the August session. The government and ruling party's proposal centers on LH purchasing damaged houses and supporting victims by providing auction profits in the form of rent.

Victim groups predict that even if the amendment is implemented, the relief effect will be limited. Lee Cheol-bin, co-chairman of the National Countermeasures Committee for Jeonse Fraud and Empty Jeonse Victims, said, "There are houses that LH legally cannot purchase, and for multi-family houses, consent from all residents is required, so purchases may not proceed smoothly." He added, "Unless the criteria for recognizing jeonse fraud are relaxed, confusion like this will continue to occur," and emphasized, "A detailed survey of victim types and measures to assist victims whose auctions have already concluded are also needed."

Reporter Yoo Ji-in, Legal Newspaper

※This article is based on content supplied by Law Times.

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