South Korea is tightening enforcement nationwide to tackle the growing fallout from housing rental schemes that scammed millions of euro from more than a thousand tenants.
The Korean National Police Agency said they’re bolstering their investigation into suspected rental fraud cases on Thursday, including expanding inquiries into real estate brokers tied to potential fraud. The ruling party also said it will seek to confiscate all assets tied to such cases, and the government asked lenders on Wednesday to suspend the auctioning of homes where tenants were scammed.
The moves come after a third person – a woman in her 30s – died by apparent suicide this week in connection to one of several such alleged scams that left tenants penniless. That was just a few days after a man was found dead in his home, also connected to a related case.
The scheme uses a traditional Korean rental payment system called jeonse. Unlike other parts of the world where rent is paid monthly, jeonse has tenants pay at least half the value of the property up front – often hundreds of thousands of euro – and tenants get the money back at the end of their lease term. In the interim, the landlord invests the funds or buys more property.
In the rental schemes, landlords didn’t return the funds to tenants. In one case, an owner of more than 1,000 properties died, leaving tenants in limbo.
President Yoon Suk Yeol has promised to crack down as a growing number of people fall prey to these landlords – dubbed “villa kings” because of the large number of properties they own. These funds often represent life savings for renters in Korea.
So far, more than 1,700 tenants have lost an estimated 309.9 billion won (€213 million) and about half of the victims were in their 20s and 30s, according to a statement from the national police force. Since July, law enforcement has charged 2,188 people involved with the rental scams and arrested 209.
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Jeonse has been particularly popular among younger Koreans, who use the system as a stepping stone to home ownership. The recent deaths linked to the rental scheme have been people in their 20s and 30s, a group that president Yoon Suk Yeol has been catering to recently.
The cases involve almost exclusively villas, low-rise properties that are cheaper and have fewer amenities than other Korean apartments. The cases have also centred around Incheon, an area just outside of Seoul, one of the most expensive cities in the world.- With assistance from Myungshin Cho and Shinhye Kang. ©2023 Bloomberg L.P.