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W459.9b house rental fraud busted

Of 3,000 victims, over half are in their 20s or 30s

June 8, 2023 - 15:51 By Son Ji-hyoung
This photo shows housing rental scam victims calling for the passage of a law to ensure a rescue plan by the government near the National Assembly on May 11, the day one of the victims was found dead. The law passed the parliament and came into effect on June 1. (Yonhap)

South Korea has so far busted a total of nearly 1,000 housing rental fraud cases that left about 3,000 victims nationwide suffering from 459.9 billion won ($352.2 million) in damages, the national law enforcement said Thursday, disclosing the preliminary results of an ongoing investigation.

This means the victims -- over half of which are either in their 20s or 30s -- have lost what in most cases constituted their life savings due to scammers disguised as landlords in false jeonse contracts. These scams have even claimed the lives of five citizens, with four dying by apparent suicide.

Half of such scams took place in Seoul, Incheon and southern Gyeonggi Province, according to the law enforcement, as a result of an ongoing crackdown which began 10 months ago.

The results announced Thursday were from a 10-month period of an ongoing joint operation that also includes the Land Ministry and prosecution service. The government filed 12 reports with the police, and the police joined forces with the prosecution to arrest 288 scammers out of 2,895 detained. The joint probe is aimed at streamlining the process to put more scammers in jail. At present, the probe is set to continue indefinitely.

"What victims suffer is brutally incurable because once targeted, they are exposed to the threat of losing all their earned money and a place to live," Hwang Byung-ju, assistant prosecutor general of criminal department at Supreme Prosecutors' Office said in a briefing at the Government Complex Seoul.

Under a typical two-year jeonse contract, a tenant pays a lump sum of money, part of which is often borrowed from a third party, to the landlord. The landlord would then return the lump sum upon the contract’s expiration. A jeonse contract is a go-to alternative to a monthly rental one, as it can be more financially advantageous for the tenant.

But the popular housing plan for ordinary Koreans is now being plagued by groups of scammers -- often comprised of a buy-to-let property investor, a figurehead disguised as a normal landlord, a document forger for loan approval, a realty broker and an appraisal officer – all working in tandem.

These scammers act in concert to swindle tenants out of what is supposed to be a jeonse deposit. The fraudsters often hide their proceeds and put the houses up for state auction in order to shirk liability for returning the jeonse deposits to tenants.

Yoon Seung-young, director general for investigation at the National Office of Investigation (left); Hwang Byung-ju, assistant prosecutor general of criminal department at Supreme Prosecutors' Office (second from left); and Nam Young-woo, director general of the land policy bureau at the Ministry of Land, Infrastructure and Transport, deliver a briefing at the Government Complex Seoul Thursday. (Yonhap)

"Over the past few years, the overheated housing market and the sharp rise in the amount of jeonse deposit required to rent a house have spawned buy-to-let property investors who spent nothing to buy a house and rent it out," said Nam Young-woo, director general of the land policy bureau at the Land Ministry.

"Loopholes in the jeonse system have caused a sharp rise in scams, and their schemes are becoming more and more sophisticated, triggering housing instability among the younger generation."

The police said it has so far busted 31 such crime rings across the country. Over 10,000 houses were affected by 10 groups.

The police and the prosecution teamed up to categorize six of the groups as organized crime offenders, which would facilitate a process for law enforcement to collect damages.

According to the police, nearly 60 percent of the scams happened to tenants living in low-rise apartment units locally known as "villa." A villa is a type of residence believed to be more likely appraised at an inflated amount upon deliberation, according to Yoon Seung-young, director general for investigation at the National Office of Investigation.

The announcement came a week after Korea promulgated a special law to aid victims who would be evicted from their homes once the homes are auctioned off. Beginning on June 1, victims will be given priority in being able to purchase their current residence at auctions, backed by the state-sponsored low-interest loan. This new law amended the previous situation in which banks who lent money to a fraudulent landlord had first dibs over tenants in debt claims.

Nam of the Land Ministry, however, noted that the fallout from such scams is unlikely to recede in the near future, given that many fraudulent contracts have yet to expire. He added that while legally a fraudulent contract can only be prosecuted against upon expiration, there are also cases where tenants learn about the fraudulent status of their contracts beforehand.