Cases of real estate fraud against people looking for houses to rent have soared recently. According to the Korea Housing & Urban Guarantee Corporation (HUG), the number of incidents related to key money deposits, or jeonse, reached an all-time high of 468.2 billion won in 2020, and 579 billion won last year. This year, cases in the first half alone account for 340.7 billion won, which is 58.8% of last year, and if this trend continues, it is likely to hit a new high. People in their 20s and 30s, who have difficulty raising a large sum of money, are said to be particularly damaged.
Jeonse is a housing rental system in Korea. Under the system, a tenant will pay about 60 to 70% of the rental price as a key money deposit and receive full money back after the contract period. Due to the large transaction, it will do irreparable damage when a tenant is scammed. Jeonse fraud methods are becoming more sophisticated daily, and victims are helpless. Since it is a private transaction, receiving complete compensation in terms of the law is challenging. Therefore, it is necessary to look at the types of fraud and find solutions.
One of the most representative types of jeonse fraud is when the tenant cannot receive the deposit back at the end of the contract because of the landlord’s inability to return the deposit. There is also a type of fraud in which licensed real estate agents, brokers, and credit delinquents work together to steal jeonse deposits by exploiting legal loopholes. For instance, the tenant’s right related to the contract through a moving-in notification takes effect the next day, not the same day. This loophole in the law is great for bad lessors to use.
To avoid such defrauders, checking the critical terms when signing a contract (confirmation date, new address, special contract, a certified copy of the register, etc.) is essential. Also, there is a guarantee to refund the jeonse deposit through HUG. It guarantees the return of the jeonse deposit to the tenant upon the termination of the jeonse lease agreement if the landlord fails to return the deposit to the tenant. In addition, it will be helpful to check nearby jeonse prices, sales prices, and housing prices of similar sizes. In general, deposits are often the entire property of the common people, so it is urgent to come up with quick measures.