SEOUL– South Korea’s finance minister said Thursday the government will work closely with related authorities to root out scams surrounding the country’s unique “jeonse” housing rental system, while offering support to the victims.
The remark came after the combined value of disputes surrounding the jeonse system reached 1.2 trillion won (US$980 million) in 2022, doubling from a year earlier, according to the finance ministry. The number of jeonse fraud cases also shot up to 618 cases from the previous year’s 187 cases.
“Amid the recent adjustment of housing prices, the security in jeonse deposits, which are effectively the entire asset of tenants, has been damaged significantly due to scams,” Finance Minister Choo Kyung-ho said during a press briefing.
Under South Korea’s jeonse system, tenants pay a large lump-sum deposit, known as key money, to the landlord, which is then returned at the end of the rental agreement, usually lasting two years. During the lease period, the tenants do not pay monthly rent.
Tenants, however, may also be unable to get their deposit back if landlords conceal their mortgage. On some occasions, the price tag on a house may even fall below the deposit.
Last month, the police arrested 78 people in a massive housing rental scam that caused a combined unpaid sum of 8 billion won in deposits belonging to dozens of tenants. The tenants were unable to reclaim their housing deposits, as scammers bought houses without any funds through a series of jeonse contracts.
In line with efforts to protect the tenants, Choo vowed to offer low-interest loans to the victims of jeonse scams while offering them houses to live in temporarily.
“We also plan to extend our special crackdown (on jeonse scams) while rolling out planned investigations to track and punish violators until the end, and root out jeonse scams,” Choo added.
The decades-old system, meanwhile, is popular here for many homeowners as well, as they can purchase properties with jeonse tenants, allowing them to pay just the “gap” between the market value and the deposit.
It is especially attractive during a boom in the market, as they will have no problem finding new tenants while housing prices continue to go up.
During a slump, however, the system is risky as landlords may fail to find another jeonse tenant willing to pay as much as the previous dwellers.
Source: Yonhap News Agency