Won Hee-ryong: "Tax Money Should Not Be Used to Repay Fraud Losses... Distinguish Non-Refunded Deposits"

On the 27th, Won Hee-ryong, Minister of Land, Infrastructure and Transport, stated, "The principle is that state intervention should only be made in very exceptional cases such as jeonse fraud."

At a joint briefing on 'Support for Jeonse Fraud Victims and Housing Stability Measures' held at the Government Seoul Office Complex, Minister Won said, "There has never been a precedent where the state paid damages in advance with taxes and reclaimed the amount from the debtor or through auction proceeds in cases of fraud such as stock manipulation or voice phishing," emphasizing this principle.

This reiterated the government's intention not to set a precedent for 'compensation first, then recourse claims,' as demanded by opposition parties and victims. It also justified distinguishing victims by differentiating between jeonse fraud and simple deposit non-return cases.

On the same day, the Ministry of Land, Infrastructure and Transport announced the contents of the 'Special Act on Support for Jeonse Fraud Victims,' valid for two years. The special law applies only to victims who meet all six conditions, including "having opposable rights and having received a fixed date." Recognized victims can receive various supports such as ▲application for auction suspension or postponement ▲priority purchase rights ▲financial and tax benefits when winning bids in public or private auctions.

Won Hee-ryong, Minister of Land, Infrastructure and Transport, is giving a briefing on "Support Measures for Jeonse Fraud Victims and Housing Stability" at the Government Seoul Office in Jongno-gu, Seoul on the 27th. / Photo by Yoon Dong-ju doso7@

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Below is a Q&A with Minister Won.

- This measure seems to focus more on selective relief rather than comprehensive relief.

▲ The deposit is fundamentally a creditor-debtor relationship between private parties. The principle is that the state should intervene only in very exceptional cases of jeonse fraud. When the state intervenes in auctions to grant priority purchase rights to specific individuals or when the Korea Land and Housing Corporation (LH) buys properties first, it is essentially equivalent to taking away property. Therefore, it is limited to cases equivalent to clear crimes such as jeonse fraud. Minimizing state intervention and priority rights in private rights relationships is our constitutional spirit, market principle, and a matter of public consensus.

- Looking at the six conditions to distinguish jeonse fraud victims, there seems to be a large scope for subjective judgment.

▲ Currently, the types of jeonse fraud and victim demands are very diverse. Limiting jeonse fraud to cases confirmed by courts narrows the scope too much, excluding cases where there is strong suspicion but no concrete evidence. Regulating each case by law would cause confusion, take too much time, and waste administrative resources. Therefore, only the broad principle of jeonse fraud is set, and detailed matters are left to be judged by the Jeonse Fraud Victim Support Committee within the Ministry of Land, Infrastructure and Transport. This will allow for prompt relief by considering fairness on a case-by-case basis.

For example, the condition 'risk of multiple victims' clearly refers to deposit non-return rather than jeonse fraud, such as cases where tenants lived well for 5 to 6 years before problems arose or where more than half of the deposit can be recovered through auction, but all cases are reported as fraud. This condition was included to prevent such misuse.

- The support eligibility includes "low-income rental housing considering area and deposit." Are victims who do not meet this standard excluded from support?

▲ Based on cases received so far, deposits around 300 million KRW and exclusive area of about 85㎡ are mostly included. However, if uniform standards are set based on whether the property is in Seoul or provinces or the number of family members, some may be unintentionally excluded. Therefore, unless there are major exceptions, this standard will be followed, but the Victim Support Committee can flexibly judge to prevent unfair exclusion. If there is a reason to apply different standards, the committee will be granted the authority accordingly.

- How many households are estimated to meet all six conditions as victim tenants?

▲ It is meaningless to talk about the number of jeonse fraud cases or victims. From the victims' perspective, both jeonse fraud and deposit non-return are claimed as fraud. Once the special law is implemented and detailed standards are established by cities and provinces, reports will likely concentrate in a short period, and meaningful numbers or statistics will be shared with the public then.

- The special law does not include the 'compensation first, then recourse' measure. Could the government’s position change if this is included through parliamentary committee discussions?

▲ Yesterday, I met with the policy chiefs of the Democratic Party and the Justice Party and heard their detailed claims. Even those who proposed this in discussions found it difficult to reach a conclusion, and there was tacit consensus that implementing compensation first and then recourse is nearly impossible. I will respect the parliamentary committee’s authority on this matter.

- The biggest demand from victims is the return of deposits.

▲ In the case of jeonse fraud victims in Gangseo-gu, Seoul, there was a demand for 'purchase first, then recourse.' Victims argued that the government should handle the auction process since landlords have senior secured claims except for unpaid national taxes, and the deposit should be returned later from auction proceeds. However, the government is already considering legal service support and included a landlord tax claim apportionment system in the special law. This opens many avenues for victims to recover their deposits through self-help efforts.

In the case of victims in Michuhol-gu, Incheon, due to senior mortgages held by financial institutions, even if an auction is conducted, there is no money left for subordinate creditors such as tenants. Some claims have already been transferred to collection agencies. The Korea Asset Management Corporation (KAMCO) is expected to purchase these claims, but simulations under the current system show that whether KAMCO buys directly or through collection agencies, the evaluated amount is less than 10% or at most 20% of the deposit. If KAMCO pursues collection and recourse, it would recover less than the priority repayment amount, which victims would not accept.

- Is it possible to secure funds for the special Bogeumjari Loan? There are concerns about reverse discrimination due to LTV and DSR relaxation.

▲ It is uncertain how large the support scale for jeonse fraud victims will be, but compared to the nationwide special Bogeumjari Loan support scale, it is not expected to affect the overall trend. Funding is being discussed with the Ministry of Economy and Finance, and supplying special Bogeumjari Loans to jeonse fraud victims is not expected to significantly increase the budget. Regarding fairness, since victims are in urgent crisis and require social consideration, I believe there will be no problem.

- What is the reason for limiting the special law’s duration to two years?

▲ Most lease contracts are for two years under the current lease law. Also, jeonse fraud victims mainly involve contracts that have already been made and properties whose lease terms have expired or auctions have started. The likelihood of mass jeonse fraud in contracts made from now on is low. The law does not end after two years; it means that cases confirmed as victims by the Victim Support Committee within two years of enforcement will be closed.

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