A ruling from the Supreme Court stated that if a bank lent money to a tenant who submitted a lease contract that inflated the deposit amount compared to the actual amount, the tenant would not be able to recover the funds from the Korea Housing & Urban Guarantee Corporation (HUG). This is because it falls under a false lease contract, meaning that HUG would not be liable for the guarantee according to its terms.
The Supreme Court’s third division, led by Chief Justice Lee Heung-gu, noted on the 22nd that in a lawsuit filed by Shinhan Bank against HUG, it ruled that "HUG does not have to repay tenant A's loan amount to Shinhan Bank." Following this decision, the case has been sent back to the Seoul High Court.
In 2017, A received a loan of 210 million won from Shinhan Bank, claiming to have signed a lease contract with a deposit of 264 million won. Two years later, A was unable to repay the loan by the maturity date. A bank investigation revealed that A had only provided a deposit of 230 million won to the landlord.
Commercial banks enter into a loan guarantee contract with HUG to prepare for situations where customers may not be able to repay their loans. If customers fail to repay, HUG will pay on their behalf. Although Shinhan Bank requested the loan amount from HUG for A, HUG refused. HUG's terms state that "in cases of receiving a loan through fraud or a false lease contract, they are not responsible for the guarantee."
The first trial ruled that HUG should repay the loan amount to Shinhan Bank. The court determined that "this lease contract is a valid rental agreement established based on the actual deposit of 230 million won." It found no fraudulent or manipulated actions between the lessor and the lessee during the lease contract process. The second trial also reached the same conclusion.
However, the Supreme Court sided with HUG. It stated that "the determination of the lease deposit being different from the actual paid amount is a significant contractual matter, which leads to the conclusion that HUG is not liable for the guarantee due to the falsehood."