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Litigation
"Jeonse Fraud: 84% of the Deposit Recovered!!"
2026-09-04
In an organized jeonse (lump-sum lease deposit) fraud case involving an insolvent "nominal" landlord,
a success story that recovered more than 84% of the deposit through three parallel legal procedures
Hello, this is Kwon & Partners Law Firm, a steadfast partner for those victimized by unjust jeonse (lump-sum lease deposit) fraud. In organized jeonse fraud schemes involving an insolvent landlord who lent only their name, pursuing the landlord alone often makes it very difficult to actually recover the loss.
Even in such situations, however, recovery is possible in practice by jointly pursuing the licensed real estate agent and the Korea Association of Realtors for damages and indemnity fund payments, while also making use of the auction distribution procedure and an action to confirm the right to receive a deposited fund. Today we introduce a case in which, through these three procedures in an organized jeonse fraud scheme, the client actually recovered more than 84% of an approximately 60-million-won deposit.
How the Contract Came About
The tenant, through the brokerage of a licensed real estate agent, paid a deposit of roughly 60 million won and entered into a lease agreement for a multi-family residential unit. It later emerged, however, that the registered landlord had merely lent his name, and that this contract was part of an organized jeonse fraud scheme in which multiple licensed real estate agents had colluded to cycle through thousands of properties.
Commencement of the Auction
About a year after the contract was signed, a pre-existing mortgage on the property was enforced, and the leased unit was placed into a voluntary auction procedure at the competent district court. Once matters escalated, both the landlord and the real estate agent became unreachable, leaving the tenant in a position where pursuing the asset-less landlord alone was unlikely to yield any real recovery.
Recovery Strategy
- Filed suit against the landlord seeking return of the deposit
- Filed suit against both the real estate agent and the Association for damages and indemnity fund payment
- Participated in the distribution procedure of the voluntary auction
- Filed an action to confirm the right to receive funds the Association had deposited
| ✔ In organized jeonse fraud cases involving multiple victims, the key issues are whether the licensed real estate agent engaged in deceptive conduct, and how the deposited funds should be allocated among the victims. |
1The real estate agent's deceptive conduct and the Association's liability to pay the indemnity fund
The first issue was whether the real estate agent had deceived the tenant by concealing the fact that he himself was the actual party to the transaction and the risk that the deposit would not be returned, and whether this conduct amounted to "direct dealing with a brokerage client," which is prohibited under Article 33(1)(6) of the Licensed Real Estate Agents Act. If this were established, the agent would bear liability for damages under Article 30(1) of the Act, and, under the indemnity contract provided for in Article 30(3), the Korea Association of Realtors — as the indemnity-fund operator under Article 42 — would also be liable to pay the indemnity fund.
2Q. When multiple victims share a claim to deposited funds, how is the money divided?
Where the combined losses of the victims exceed the indemnity limit, the Association will sometimes designate several victims as potential claimants and deposit the funds as a "relative uncertain-obligee" payment deposit under the latter part of Article 487 of the Civil Act. In such cases, if there is no agreement among the designated claimants, how to determine the allocation ratio becomes an important issue in practice. The Supreme Court's decision of May 17, 2017 (Case No. 2016Da270049) held that, where one of the designated claimants files an action against the others to confirm the right to receive the deposited funds, the true right-holder must be determined based on the original underlying claim relationship. In other words, within the indemnity limit, the deposited funds should be divided in proportion to each victim's actual loss.
3Whether the requisites for third-party opposability and priority repayment rights were satisfied
In the auction process for the leased property, the final issue was whether the tenant had properly satisfied the requisites for third-party opposability under Article 3(1) of the Housing Lease Protection Act and obtained a fixed date under Article 3-2(2), and whether he had made a demand for distribution by the deadline for such demands. In addition, under Article 8(1), only a small-amount tenant who satisfied the requisites for opposability before the auction application was registered can receive a fixed portion of the deposit ahead of other secured creditors.
"Who holds the right to receive the deposited funds is determined based on
the original claim relationship between the designated claimants and the depositor."
1Violation of the Licensed Real Estate Agents Act found, and the Association's liability for the indemnity fund recognized
The court found that the agent had, in fact, engaged in direct dealing with the brokerage client, prohibited under Article 33(1)(6) of the Licensed Real Estate Agents Act, and had thereby deceived the tenant. As a result, the court ordered the landlord and the agent jointly, and the Korea Association of Realtors together with the agent under the indemnity contract, to pay the tenant an amount equivalent to the roughly 60-million-won deposit.
2Allocation of the deposited funds finalized in proportion to each party's confirmed claim
When the Association, during the appellate proceedings, made a relative uncertain-obligee payment deposit of roughly 200 million won in indemnity funds, the court confirmed the principle from the Supreme Court's May 17, 2017 decision (2016Da270049) that the funds must be divided according to the original claim relationships. In the confirmation action the tenant had brought against the other designated claimants, an arrangement to divide the funds in proportion to each party's confirmed claim was finalized as a "decision in lieu of conciliation" under Article 30 of the Judicial Conciliation of Civil Disputes Act, bringing the dispute over the deposited funds to a close.
3Requisites for opposability recognized, and distribution proceeds received
In the voluntary auction proceedings, the enforcement court found that the tenant had fully satisfied the requisites for opposability under Article 3(1) of the Housing Lease Protection Act, the fixed-date requirement under Article 3-2(2), and the small-amount tenant requirements under Article 8(1). As a result, in the distribution procedure the tenant received roughly 20 million won up front — combining the priority repayment amount for small-amount tenants with the distribution proceeds based on the fixed date — recovering part of his loss.
In this way, the tenant secured recognition of both the damages liability and the indemnity fund liability, and had the allocation ratio for the deposited funds finalized as well — allowing him, combining the auction distribution proceeds and the deposited funds, to actually recover more than 84% of the roughly 60-million-won deposit.
Handling this case convinced me that the more hopeless a case looks when you pursue the landlord alone, the more important it is to dig into every possible avenue. By holding both the real estate agent and the Association accountable and by carefully following through on every step of the auction and deposit procedures, we were able to achieve a recovery rate of 84%.
If you find yourself at a loss because a landlord who lent only their name has left you unable to recover your jeonse deposit, please do not hesitate to consult directly with me, Attorney Kwon Hyuk-seong of Kwon & Partners Law Firm.
⚖️ Are you unable to recover your jeonse deposit because of a landlord who lent only their name?
For victims of organized jeonse fraud and "empty-shell" leases, Kwon & Partners reviews every available procedure together — claims for damages, claims for indemnity funds, auction distribution, and actions to confirm the right to receive deposited funds — to find the best possible path to recovery. If you are struggling to get your jeonse deposit back, please feel free to reach out to us at any time.