Korean housing deposit fraud guide book: Protect Your Jeonse Deposit

Reading a book about protecting jeonse and monthly-rent deposits

Over the past few years, large-scale jeonse (lump-sum lease) scams—including the 2019 Villa King case, the 2021 three-mother-and-daughter case, and the 2022 Villa King case—have run rampant, sending jeonse phobia soaring. This has caused a new shift in real estate: people prefer apartments to villas, and monthly rent to jeonse. (Ah, seriously... these jeonse scammers... those XXs deserve divine punishment... the laws in Korea are far too weak.)

According to an article from today, HUG (Housing & Urban Guarantee Corporation) paid back a whopping ₩2.2 trillion last year for jeonse deposit guarantee claims caused by fraud. HUG's subrogation payments surged 1,000-fold, from ₩3.4 billion in 2017 to ₩3.5 trillion last year.

Search “jeonse fraud” on Naver and the news still pours in; the articles quickly spread concern and fear.

The book I read this time is the textbook Protect Your Jeonse and Monthly Rent Deposit, which explains how to protect your deposit from the terror of jeonse and monthly-rent scams.

Its author, Deokbang Research Institute (Deokbang Yeonguso), is a licensed real-estate agent working in the field and a real-estate knowledge YouTuber of more than 10 years. As jeonse and monthly-rent scams spread, the channel has communicated with subscribers through YouTube about safely finding a jeonse home, spotting jeonse scammers, and responding when a deposit is not returned. In particular, it has shared a wide range of jeonse scam cases for people with no experience in real-estate transactions—what the book calls “housing beginners.”

This revised edition of Protect Your Jeonse and Monthly Rent Deposit was a great opportunity to study ways to prevent jeonse scams and protect my money, my deposit, through more detailed explanations and materials than could be covered on YouTube.

Protect your jeonse and monthly-rent deposit from apartment, villa, studio, and officetel scams.

Jeonse scam cases that are chilling from the table of contents alone

• Part 1. Please return my deposit: a case involving a newlywed couple in their 30s; move quickly.
• Part 2. Jeonse fraud: you are no exception: the setup is already in place; there are more jeonse scams targeting tenants.
• Part 3. Jeonse scam prevention guide for housing beginners: housing beginners, check before signing; putting my seal on the contract.

The table of contents clearly lays out everything from chilling jeonse scam cases where the setup is already complete, to how to respond once it happens, how to identify scammers, and a prevention guide for leases requiring you to prepare and check, check again, and check-check-check again. Just reading the contents made me empathize with the scammed tenants already—it gave me chills.

Anyone can fall victim... to jeonse fraud...

Jeonse scams played out in a prearranged setup

“I thought my jeonse deposit would be safe.”

Some people look at jeonse scam victims and say, “Why would anyone fall for that? Why would they even take on the property after it goes to auction?” But in reality, jeonse scammers have already arranged the whole setup and dump overpriced homes on tenants.

A newly built property owner, a deposit set higher than market value, a sale to a straw owner, a fall in market prices, a tenant unable to recover the deposit, and a case in which the tenant ends up taking on the jeonse home through auction. By the time a tenant discovers that the jeonse deposit they paid—even after taking out a jeonse loan—has been moving through other people's hands, the damage has already happened. (Seriously, at this point it is enough to make you lose your mind and jump up and down.)

If you cannot get your deposit back after the contract ends

What if the contract has expired and the landlord's side simply acts as if it is none of their business? Panic for a moment, then move quickly.

Immediately state that you will not renew the contract. Do not stop at sending a KakaoTalk message or text; get a reply from the landlord confirming that they agree to the refusal to renew. If you cannot reach them, the book urges you to send a certified letter or arrange service by public notice.

What tenants absolutely must do

• Make sure to complete resident registration and maintain possession. If an auction proceeds after you fall victim to jeonse fraud, opposability, preferential repayment rights, and top-priority repayment rights may allow you to receive at least part of the deposit first, so be sure to remember this.
• Be sure to enroll in jeonse deposit guarantee insurance through HUG (Housing & Urban Guarantee Corporation), HF (Korea Housing Finance Corporation), or SGI Seoul Guarantee.
• About once a month, check the real-estate registry record for your residence.
• Consider a deposit-return lawsuit and payment-order procedures.

Understanding jeonse scammers' behavior and patterns

Understanding methods and types of jeonse fraud, and the behavior and patterns of jeonse scammers.

It begins with an agent—likely an illegal broker—who introduces listings with increasingly better conditions than the first property you saw. They set a high sale price to make the jeonse deposit appear to match market value, then entice you by saying you can move in with a loan. (They even dangle interest support for the loan as bait.)

You hand over a small provisional contract deposit. (By this point, you have taken the bait.)

The full scheme of jeonse fraud is explained in the illustration below. An illegal sales company and a builder set the jeonse deposit above market value and use the difference as a rebate. Every bit of it is the tenant's hard-earned money. After the lease is arranged, they shift ownership to a pre-recruited straw owner with not a penny to their name.

Since the new owner has no money... the result is that the deposit cannot be returned.

The book also explains in detail many other cases: studio jeonse scams in which dozens of studios are bought cheaply and set up as jeonse rather than monthly rentals to collect deposits; malicious landlords who take out loans after the contract but before resident registration; trust scams; and joint collateral for mortgage liens in registry records. It also provides guidance on preventing these abused practices, so I think housing beginners in particular should definitely read it closely at least once.

Deokbang Research Institute says that traps targeting tenants' deposits exist everywhere, and that tenants, including housing beginners, must avoid them one by one to find a safe home. It adds that the time and process required to find a safe jeonse home rival many certification exams, and that every tenant in South Korea must know what is in this book. (p. 267)

Why I want to recommend it to housing beginners

Many books about jeonse and monthly-rent real estate and leases have been published lately, but Protect Your Jeonse and Monthly Rent Deposit felt particularly realistic. That is because the book fully captures not only author Deokbang Research Institute's career as a licensed agent working in the field, but also the long history of communicating with subscribers as a YouTuber about damage caused by jeonse scams.

Scammers with malicious intentions are everywhere, setting up jeonse and monthly-rent scams while slipping through legal loopholes. It would be nice if the social system filtered them out, but unfortunately reality is not so ideal.

Protect Your Jeonse and Monthly Rent Deposit offers a whole host of useful tips for protecting our precious money—our deposits. It is written clearly and is easy to read, so I recommend reading this deposit-fraud prevention guide closely: one book to help protect your deposit.