Victims of Jeonse Fraud Guaranteed at Least One-Third of Their Deposits; Takes Effect Nov. 13

[Financial News] If victims of jeonse fraud recover less than one-third of their tenant deposits through an auction or public auction, the government will cover the shortfall. Victims of unauthorized contracts, including trust fraud, will receive support payments before the auction or public auction ends, with the final amount reconciled after additional recoveries are taken into account.
The Ministry of Land, Infrastructure and Transport (MOLIT) said on the 6th that the State Council approved a partial revision to the Enforcement Decree of the Special Act on Support for Victims of Jeonse Fraud and Housing Stability at a meeting held that day. The revised enforcement decree and enforcement rules will take effect on Nov. 13, together with the revised Special Act on Support for Victims of Jeonse Fraud and Housing Stability.
The revision mainly specifies the calculation methods, application procedures and payment processes for the minimum tenant-deposit guarantee system and the advance payment followed by reconciliation system.
Under the minimum guarantee system, victims of jeonse fraud receive a minimum support payment equal to the difference if the amount recovered after the auction or public auction of the affected home is less than one-third of the tenant deposit.
The minimum support payment is calculated by subtracting from the minimum guaranteed amount, which equals one-third of the tenant deposit, amounts received through opposability or preferential repayment rights, amounts repaid through a claim for the return of the tenant deposit, auction gains and rental support payments. An auction gain refers to the difference between the appraised value and the winning bid price when a public housing business operator purchases an affected home.
For example, if the tenant deposit is 150 million won and the victim recovers 20 million won in auction distribution proceeds and 10 million won in auction gains, the total recovery currently amounts to only 30 million won. Once the revised system takes effect, the victim will receive a minimum support payment of 20 million won—the difference between one-third of the deposit, or 50 million won, and the amount already recovered—bringing the total recovery to 50 million won.
The advance payment followed by reconciliation system will also be introduced for victims of unauthorized contracts, including trust fraud. Support payments will be made before the auction or public auction of the affected home is completed, and the amount will later be reconciled to reflect any additional recoveries.
The advance payment is determined by subtracting from the minimum guaranteed amount the amount repaid through a claim for the return of the tenant deposit and rental support payments received before the advance payment. If additional amounts are later recovered through an auction or public auction, the payment will be reconciled accordingly.
The Korea Land and Housing Corporation (LH) will handle the payment and reconciliation of minimum support payments and advance payments.
If a victim asks a public housing business operator to purchase the affected home, the victim may apply for the minimum support payment after the auction gain has been calculated. If no purchase request is made, the victim may apply after the disposal process for the affected home is completed. An advance payment may be requested before LH's purchase of the affected home or the disposal process for the property is completed.
LH must decide whether to make the payment and determine the amount within 90 days of receiving an application, and notify the applicant of its decision. If unavoidable circumstances arise, the period may be extended once by up to 30 days. Victims who object to the payment decision or amount may file an objection within 30 days of receiving the notice.
If grounds for repayment arise after support funds have been received, such as the additional recovery of a tenant deposit, the recipient must report the matter and return the relevant amount. Failure to return the funds within the prescribed period may result in a fine of up to 30 million won, depending on the number of violations.
The system will also be improved to encourage the purchase of affected homes. If a public housing business operator acquires an affected home through an auction or public auction and assumes the obligation to return the deposit of a non-victim tenant living in the property, the related costs may be included in the property's acquisition costs.
A legal basis has also been established for local governments to provide administrative and financial support to real estate investment companies in which cooperatives established by victims of jeonse fraud and others own at least 50% of the total issued shares.
The procedures for checking landlords' credit information needed to support victims of jeonse fraud have also been specified. The MOLIT minister may request information from a credit information concentration agency by providing the landlord's name and resident registration number, the reference date or period for the inquiry, and the purpose of use. The agency may provide information on the landlord's outstanding loans, delinquencies and unpaid credit card balances.
[email protected] Choi Ga-young Reporter