Fair Trade Commission Orders HUG to Amend Terms Cancelling Deposits Even When Tenants Are Not at Fault

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It is expected to become easier for tenants who have suffered from jeonse fraud due to the landlord's fault to recover their rental deposit through guarantees.

On the 5th, the Korea Fair Trade Commission announced that it recommended the Housing and Urban Guarantee Corporation (HUG) to amend the terms and conditions related to rental deposit guarantees for individual rental business operators.

The problematic clause allows HUG to cancel the guarantee even if the tenant (guarantee creditor) is not at fault, when the landlord (primary debtor) of a private rental housing contract commits fraud or enters into a lease contract based on false information and applies for a guarantee.

If this clause is applied, HUG can cancel the guarantee solely due to the landlord's fault without any fault on the tenant's part, making it difficult for tenants to recover their rental deposits.

The Fair Trade Commission explained that this goes against the purpose of the Commercial Act (Article 726), which stipulates that even if the policyholder commits fraud, intentional acts, or gross negligence, the insurer must pay the insurance amount if the insured is not responsible.

With this improvement in the terms and conditions, it is expected to prevent situations where tenants who have suffered from jeonse fraud due to the landlord's fault cannot recover their rental deposits even through guarantees.

The Fair Trade Commission stated, "After the correction recommendation, we will proceed with correction consultations with HUG regarding the relevant clause and plan to monitor compliance."

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