[The Editors' Verdict] Jeonse Fraud Prevention Law Passed in Just 7 Minutes

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"Please vacate the house as I need to move in after the expiration of the jeonse contract."

Three months before the expiration of the jeonse contract, I received a call from the landlord's spouse. They notified me that the landlord would evict the tenant to live in the property themselves. Although I considered this a 'trick' to nullify the so-called '2+2 Housing Lease Protection Act,' which was revised under the Moon Jae-in administration to allow tenants to stay for an additional two years after living for two years, the 'jeonse refugees' who move every two years quietly decided to find a new home. The landlord's spouse, who is a licensed real estate agent, kept recommending unwanted listings, saying, "If you find a house before the contract expires, I will return the deposit early."

The landlord changed their stance starting last month, about a month before the move. To return the jeonse deposit, the landlord couple listed the apartment they were living in as a jeonse property, but due to the real estate market slump and a major jeonse fraud case, no transactions were made, and the return of the deposit was postponed. Although the tenant found a suitable property, the moving date was repeatedly delayed due to the burden of loan interest for returning the deposit.

Following the nationwide uproar caused by the 'Villa King' jeonse fraud case last year, legislation was strengthened to protect tenants from losing their jeonse deposits, but the landlords' 'jeonse power play' secured by the deposit remains unchanged. This is because there are no penalties for landlords who do not return the deposit after the jeonse period expires. Although jeonse-related laws were revised twice this year, they have no practical effect in the rental market.

The amendment to the Special Act on Private Rental Housing, passed by the National Assembly in February this year, requires landlords who fail to return jeonse deposits to have their personal information disclosed. The disclosure applies only if the landlord has been subject to forced execution or preservation measures under the Civil Execution Act two or more times in the past five years for failing to return deposits. This is a measure to protect landlords who have unavoidable reasons for not returning deposits, but it is merely a belated remedy targeting malicious landlords who habitually withhold jeonse deposits. The recently passed Housing Lease Protection Act requires landlords to present tenants with information on prior priority deposits and tax payment certificates when signing a lease contract, but it lacks institutional measures to ensure timely return of jeonse deposits.

There have been legislative attempts. In December 2021, Rep. Lee Yong-ho of the People Power Party proposed an amendment to the Housing Lease Protection Act that would require landlords to return the full deposit by the contract expiration date and pay a 20% annual delayed interest if they fail to do so. However, this was not reflected during the National Assembly discussions. According to the minutes of the first subcommittee of the Legislation and Judiciary Committee, the government’s proposal to prevent the 'Villa King' jeonse fraud was the main focus. Instead of fundamental measures to prevent loss of jeonse deposits, only measures targeting the highly publicized Villa King case were expedited. Even this was approved in the full committee meeting without debate in just seven minutes.

In the past five years, the amount of damages from non-payment incidents under the Jeonse Deposit Return Guarantee Insurance increased about eightfold, from 52.5 billion KRW in 2017 to 404.7 billion KRW by August 2021. When the lease period expires but the deposit is not returned due to no subsequent lease contract, the tenant’s only option is to wait for the landlord’s goodwill. This is why effective legislation that can prevent jeonse fraud in advance, rather than superficial laws pushed by public opinion, must be enacted promptly.

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