The plan to extend the effectiveness of the 'Special Act on Jeonse Fraud' for victims of jeonse fraud by two years has passed through the National Assembly's Legislative and Judiciary Committee and the plenary session.
There is a positive response that the two-year extension of the Special Act on Jeonse Fraud will allow for more victims to receive relief, but there are also criticisms that it has limitations as a fundamental preventive measure against jeonse fraud.
The National Assembly held a plenary session on 1st and decided on the 'Amendment to the Special Act on Support for Jeonse Fraud Victims and Housing Stability,' which extends the expiration date of the Special Act on Jeonse Fraud, set to expire on May 31, to May 31, 2027, by two years.
The Special Act on Jeonse Fraud includes measures where, if the dwelling where the victim resides goes to auction, the Korea Land and Housing Corporation (LH) can take over the right of first refusal from the victim, purchase the property, and either lease it to the victim or return the profits to the victim.
From June 1, 2023, the Act was temporarily implemented for two years, and as of June 1, victims of jeonse fraud were unable to receive recognition as victims or support under the Special Act.
As a result, there have been calls from organizations representing victims of jeonse fraud to extend the validity period of the Special Act. As of April 16 this year, the number of recognized victims of jeonse fraud by the Jeonse Fraud Victims Support Committee was recorded at 28,899.
The amendment decides that only tenants who signed their initial contracts before May 31 will be recognized as victims eligible for the Special Act. This is because the Special Act on Jeonse Fraud is a temporary law aimed at providing relief for collective fraud victims.
Real estate experts have evaluated that when the amendment to the Special Act on Jeonse Fraud passes the plenary session, there will be positive effects as victim relief will increase due to the extended expiration period.
Professor Seo Jin-hyung of Korea University's Department of Real Estate also noted, "I believe it is necessary to extend the Special Act on Jeonse Fraud to remedy the damages related to housing for the common people."
Organizations demanding measures against jeonse fraud have expressed relief that more victims will be able to recover their jeonse deposits.
Chairperson Ahn Sang-mi of the Jeonse Damage Response Committee stated, "It is fortunate that the expiration period of the Special Act on Jeonse Fraud, which had been temporarily implemented for two years, has been extended by another two years," adding, "By having LH purchase the housing affected by jeonse fraud and use it as rental housing while returning the jeonse deposit to the victim, cases of relief are expected to increase."
However, some opinions suggest that even though about three years have passed since jeonse fraud emerged as a social issue, effective preventive measures are still lacking.
Chairperson Ahn pointed out, "The measures the government has proposed to prevent jeonse fraud have been limited to providing slightly more information about landlords," and emphasized that insuring under the Housing and Urban Guarantee Corporation (HUG) will not keep the public safe from jeonse fraud, as ultimately, taxpayer money is being used to compensate for the damages.
Professor Park Hap-soo of the Korea University Graduate School of Real Estate stated, "In the current depressed real estate market, cases where jeonse deposits are not returned in multi-family dwellings and villas will continue to arise," adding, "The extension of the Special Act on Jeonse Fraud is merely a remedy that comes after the fact, and it does not provide measures to prevent jeonse fraud in advance."
The jeonse fraud victim organizations argue that in order to strengthen tenant protection, a scheme should be introduced wherein the landlord bears the principal debt when taking out jeonse loans, while the tenant assumes the interest debt.
Chairperson Ahn stated, "If the landlord is responsible for repaying the principal debt and the tenant is responsible for the repayment of the interest, we can prevent jeonse fraud."
There are also opinions that the penalties related to jeonse fraud should be strengthened further. Professor Park noted, "To be recognized as jeonse fraud, it must be proven that the landlord had the intent to deceive the tenant by deliberately failing to return the jeonse deposit, but proving this has been difficult and there are currently not many cases leading to punishment," urging that in the future, regulations on penalties for jeonse fraud under criminal law should be made more detailed and considered for enhancement to a level of serious crime.