Rental deposit scammers get prison time

Social Affairs

Published: 25 Apr. 2023, 17:33

Rental deposit scammers get prison time

A victim of a real estate scam breaks down in tears during a press conference last Thursday in Yongsan District, central Seoul, while pleading for a face-to-face meeting with President Yoon Suk Yeol to discuss possible relief measures. [YONHAP]

A local court Tuesday sentenced three real estate scammers to five to eight years in prison after finding them accountable for making leveraged bets on apartments using tenants’ long-term deposits.

The three defendants were part of some 140 people who were charged with real estate fraud by police in recent months and handed over to prosecutors for indictment.

Police said they believe the organization, which included real estate agents, owed nearly 60 billion won ($45 million) in jeonse deposits to 300 tenants.

Jeonse refers to long-term housing rent. Under Korea’s jeonse system, apartments are leased for a fixed term in exchange for a sizeable but refundable deposit. The lessor is free to use the money as they see fit.

Jeonse is particularly popular among young, working-class people who lack the money to buy a home and wish not to spend a large portion of their monthly income on rent.

An officer at the Gyeonggi Nambu Provincial Police Agency said additional suspects could be referred to prosecutors based on the findings of ongoing investigations.

With the rapid rise of property prices in recent years, many punters had taken advantage of the system to purchase real estate using other people’s money, taking one deposit to buy another apartment. For cheaper units known as “villa” and “officetel” in Korea, the jeonse deposit is very close to the purchase price, and sometimes higher.

The scheme works if real estate prices keep rising and if the owner can get a new tenant to replace another without any vacancy. The fraudulent cycle, however, broke last year as property and jeonse deposit prices began to fall.

Hundreds of scammers who were involved in the scheme throughout several organizations are now being investigated by police and prosecutors.

At least three tenants have committed suicide.

According to the police and prosecution, the three convicts who were sentenced to prison Tuesday owed some 7 billion won to 31 tenants. The victims were described to have signed contracts for housing units in villas and officetels from April 2020 to February 2021.

One of the convicts, who have only been identified by the surname Kwon, has been nicknamed “the villa god” by local media after it was revealed he owned more than 1,000 housing units in the scheme. His accomplices, identified by the surnames Park and Choi, were said to have owned about 900 and 260 housing units each.

Kwon, Park and Choi all denied any wrongdoing, saying they never intended to deceive the tenants and initially had the ability to return their jeonse deposits before the real estate market began to tumble.

Prosecutors earlier this month asked the court to sentence Choi to seven years in prison and Kwon and Park to five years in prison.

The Suwon District Court, however, sentenced Choi to eight years in prison, Kwon to six years and Park to five years.

The court ruled that all three defendants never had the intention or ability to return the deposits, adding that they committed “a very serious crime that has shaken the foundation of the lives of the victims, who are mainly composed of working-class and young individuals in society.”

BY CHOI MO-RAN, LEE SUNG-EUN [lee.sungeun@joongang.co.kr]