Lump-sum “jeonse” deposits on rental properties will only be protected through insurance if the amount is less than 90 percent of the property’s value starting in May.
According to the land ministry and related agencies on Thursday, the housing price-to-deposit ratio for the Korea Housing and Urban Guarantee Corporation's insurance eligibility will be lowered from 100 percent to 90 percent.
The measure comes in the wake of increasing jeonse fraud, in which landlords lacking sufficient capital offer rental agreements with lump-sum deposits equivalent to the property's full value for hundreds or even thousands of units and then fail to return the deposit to tenants.
In the case of a “villa king” surnamed Kim, whose sudden death wreaked havoc on deposit returns for many of those renting one of his one-thousand-139 multiplex housing and studio apartment units, the average housing price-to-deposit ratio was 98 percent.
As of last year, out of 237-thousand-800 housing units subscribed to the guarantee insurance, of which 24 percent surpassed the 90-percent ratio.