A tenant received the security deposit from Seoul Guarantee Insurance instead of the landlord and moved out. Seoul Guarantee Insurance operates a system in which it first provides the security deposit to tenants who have not received their jeonse security deposit, and later retrieves the amount from the landlord. Seoul Guarantee Insurance had to force the house into auction due to not receiving the deposit from the landlord.
Subsequently, Seoul Guarantee Insurance filed a lawsuit against the person who won the new bid for the house, demanding the return of the security deposit. However, the Supreme Court ruled that the new landlord was not obligated to return the security deposit. It concluded that the tenant lost the right to assert the lease relationship, or the opposition power, as they moved out before the leasehold registration was completed.
According to the legal sector on the 11th, the recent Civil Division 2 of the Supreme Court (Chief Justice Kwon Young-jun) annulled the second instance ruling in favor of Seoul Guarantee Insurance in the security deposit return lawsuit against Mr. Lee and sent the case back to the Seoul Central District Court. Mr. Lee is the new owner of the house that went to forced auction.
In February 2017, tenant Mr. A moved into a house owned by Mr. B on a jeonse basis. Later, Mr. A entered into an insurance contract with Seoul Guarantee Insurance. Two years later, the lease agreement expired, but Mr. A did not receive the security deposit back from Mr. B. Accordingly, Mr. A received 95 million won from Seoul Guarantee Insurance and moved out.
Seoul Guarantee Insurance attempted to collect money from landlord Mr. B, but Mr. B had no funds and transferred the house to a forced auction. The majority of the winning bid was received by Mr. C, who lent Mr. B 66 million won using the house as collateral. Seoul Guarantee Insurance only received about 12 million won back. Subsequently, Seoul Guarantee Insurance filed a lawsuit against Mr. Lee, demanding the remaining security deposit of over 80 million won.
Both the first and second instances favored Seoul Guarantee Insurance. It was stated that the rights of tenant Mr. A were succeeded by Seoul Guarantee Insurance, thus Mr. Lee was obligated to return the security deposit to Seoul Guarantee Insurance.
However, the Supreme Court held that the second instance should have assessed how long the rights of tenant Mr. A would remain in effect. The Supreme Court pointed out that Mr. A moved out before completing the leasehold registration. It stated that 'the opposition power of a tenant is extinguished when they lose possession of the dwelling.' Furthermore, it noted that 'from the time Mr. A moved out, possession of the house was lost, and thus the opposition power was also extinguished.'