[Exclusive] Suspicious rental house in Jeonju is still ‘for sale’
2024-07-09
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Suspicions of a large-scale charter fraud are being raised in Jeonju, Jeollabuk-do.
〈Current Affairs IN〉 tracked down the building owned under a borrowed name by Mr. Kwak, the landlord, based on the testimonies of tenants and real estate listings for lease.
A large-scale case of non-return of rental deposits occurred in Jeonju, Jeollabuk-do. Tenants who have not received their deposit back are raising suspicions of lease fraud and taking legal action, including registering their lease. The lessor is Mr. Kwak. As a result of 〈Current Affairs IN〉 coverage, the real estate estimated to be owned by Mr. Kwak, the landlord, amounts to 89 multi-family houses (6 buildings) in Jeonju alone and 94 multi-family houses (6 buildings). Among the rental households for which 〈Sisa IN〉 checked copies of the registers, 34 had already established lease registration (a device to protect tenants who did not receive their deposit back). This is the first time that a large-scale non-return of rental deposit occurred in the Jeonju area of Jeollabuk-do.
Jaehyung Lee (pseudonym, 30), an office worker living in Jeonju, Jeollabuk-do, moved to A multi-family house in Wansan-gu, Jeonju, close to his workplace in June 2021. The rental deposit was 85 million won and the contract period was 2 years. They said I could not sign up for the rental deposit return guarantee. The owner listed on the register (certificate of all registered details) was Mr. Kim, but the actual lessor was played by Mr. Kim's son, Mr. Kwak. Mr. Kwak said, "I became a credit delinquent while running a business 10 years ago. The only person I could use was my mother's name, so I used my mother's name."
Before signing a lease contract, Jaehyung Lee asked real estate agent Mr. Kim whether the building was safe. A mortgage of 538 million won was placed on the building that Mr. Kwak purchased for 750 million won in his mother's name in November 2020. Broker Mr. Kim told the anxious Mr. Lee, “Mr. Kwak, the landlord, has a large business and has a lot of real estate, including buildings, so you don’t have to worry about returning the deposit.” Not only Mr. Lee, but also six neighboring tenants who signed a contract with Mr. Kwak through real estate agent Mr. Kim, heard the same story. Most of them are young people around Lee’s age, in their 20s and 30s.
One year and nine months have passed since Jaehyung Lee signed a lease contract. In March of last year, three months before the lease contract expired, Mr. Lee told the landlord, Mr. Kwak, that he would move to another place when the contract ended. Mr. Kwak also answered that he understood. However, no new tenant was found. The landlord, Mr. Kwak, explained to Mr. Lee that this was because a tenant named Mr. Cho (31), who lived in the same building, had registered the lease in April of that year.
Tenants who have not received their deposit back on the contract expiration date can apply for a lease registration order from the very next day. A house with a lease registration registered means that the landlord has not returned the deposit. As a tenant looking for a new home, you have no choice but to be reluctant. In early June 2023, the landlord, Mr. Kwak, said to Mr. Jaehyung Lee, “Please wait two more months.” ‘Building H in Deokjin-gu, Jeonju was auctioned off for 4.5 billion won, but the money is tied up there. He was persuaded that a loan would be issued from Building H in two months, around August 2023. Mr. Lee didn't quite understand, but when he said there were circumstances, he replied, "I'll just wait two months."
“Turn 4.5 billion won into 18 billion won.”
It was only later that I learned that Mr. Kim, the real estate agent who had persuaded me that ‘there is no problem in returning the deposit’, was intertwined with financial interests with Mr. Kwak, the landlord. According to the landlord Mr. Kwak's explanation to
Landlord Kwak acquired Building H in the name of R Company for 4.5 billion won in April 2023, while Jaehyung Lee was waiting for the return of the rental deposit. Mr. Kwak told 〈Sisa IN〉, "Originally, I am a person who works in the rental and interior design business. Due to the 'Villa King, lease fraud incident', the number of (lease) demand has decreased. So I changed my business direction. I used the jeonse money to sell a building worth 15 billion won at an auction for 4.5 billion won, and then remodeled it to make 18 billion won. I have the ability to repay. Paying off the 1 to 2 billion won in jeonse is difficult. “It’s nothing,” he claims.
Tenant Lee Jae-hyung’s story is different. From July 2023, the landlord, Mr. Kwak, did not answer the phone often. I had to leave text messages saying ‘Please call me’ repeatedly on July 10th, July 24th, and July 25th. Even in August 2023, when the deposit was scheduled to be returned, it was difficult to contact them. Mr. Kwak asked Mr. Lee to wait a little longer as he would give him the loan interest. The date on which Mr. Kwak promised to return the deposit was postponed one after another.
After continuously trying to contact Mr. Lee Jae-hyung, he met the landlord, Mr. Kwak, on November 11, 2023. By the end of December of that year, Mr. Kwak wrote a memorandum saying, “I will immediately return the entire deposit of 85 million won.” Mr. Lee believed the memorandum written by Mr. Kwak. On December 1st of that year, I signed a contract for a new house. The down payment was 26 million won. However, as the deposit return date approached, it became difficult to talk to Mr. Kwak again. ‘Please call me (December 4th)’ ‘Please call me (December 5th)’ ‘Why aren’t you calling me? (December 6th)’ I left a message to Mr. Kwak. Only on December 7 did Mr. Kwak send a text message saying, ‘Please extend the period by two months.’
‘No. ‘I no longer trust the boss.’ If the deposit was not returned, the 26 million won down payment Mr. Lee paid would also be lost. Instead of avoiding calls from Lee Jae-hyung, Mr. Kwak only left a text saying, ‘Something bad is happening at home,’ ‘I am in mourning, so I am not in a good mood,’ and ‘I will pay interest, so please extend the period for six months.’ Mr. Lee said this, recalling the situation at the time. “It was so hard. I couldn’t sleep, so I drank a lot every day. Then I developed acute pancreatitis. I was diagnosed with depression by a psychiatrist, and I endured it by taking depression medication and sleeping pills. Once I started taking sleeping pills, I couldn’t stop taking them, so I’m still taking them.” Unable to wait any longer, Mr. Lee began legal action, including filing for provisional seizure of real estate on December 12, 2023, and filing a lawsuit requesting the return of the deposit.
Need to save the landlord?
Lee Jae-hyung is not the only tenant who cannot contact his landlord, Mr. Kwak. Mr. Kwak's tenants often visit in front of Building H, located in Deokjin-gu, Jeonju. Mr. Shin, who is self-employed near Building H, said, "One day, young people in their 20s, who looked to be around 30 if they had eaten a lot, came to the store. They asked if the owner (Mr. Kwak, the landlord) would come out here (Building H). I lived in a studio near Jeonju University and signed a contract for another place on the move-in date, but the owner said he would not take out the deposit. They said they would have to receive it to move out, but the owner did not answer the phone."
On February 22nd of this year, it was decided to start a compulsory auction for the multi-family house A where Jaehyung Lee lives. It was only at the end of February that Jaehyung Lee learned that the building was in danger of being auctioned off. This is because a ‘Housing Auction Process Commencement’ notice was attached to the front door of each household. In response to Mr. Lee's question about what happened, the landlord, Mr. Kwak, said, "Anyway, when the loan (for Building H) comes out in March, everything will be settled, so don't worry. The bank has decided to contact you the day after tomorrow with the loan amount and timing," and asked Mr. Lee to even collect all the auction notices posted in front of the other tenants' front doors. Mr. Lee thought that other tenants should know as well, so he refused, saying he couldn't do that.
The promise of Mr. Kwak, the landlord, who told us not to worry, that he would settle the loan once the loan came out in March, was not kept. As a result of 〈Current Affairs IN〉 coverage, Mr. Kwak had not been able to decide on a bank from which to receive a loan until recently. In a phone call with
In mid-May, 10 tenants of Jaehyung Lee’s building gathered together and created a group KakaoTalk room. There is a mix of tenants who have not received their deposit back even though their lease has ended and tenants who still have remaining contract terms. Mr. Lee suggested that he consider filing a group complaint, but so far the prevailing opinion is to ‘wait a little bit’. Some tenants say, ‘Mr. Kwak is a hard-working person who runs several businesses. He also argued, “This is what happened because the business went wrong, so let’s wait a little longer.” Broker Mr. Kim also emphasized this point and defended Mr. Kwak. Mr. Kim, a broker, told
Jaehyung Lee said he understands the cautious attitude of other tenants. “Mr. Kwak didn’t ask me to just wait, but explained the situation, so I waited at first. I kept waiting a little more, a little more, and then a year passed. At first, I really, really denied that this had happened to me. Then I got angry, and then I was depressed. I thought a lot, ‘What is real?’ The last step was giving up.”
Mr. Kwak, the landlord, said, “I started this business in the winter of 2020.” This is a method of purchasing old multi-family houses or multi-family houses, decorating them, and then renting them out at a higher price than the sale price. Mr. Kwak said, "Because of the interior cost, it is not suitable for monthly rent. It is all leased. Tenants come and sign contracts after seeing that we have raised the value with the interior." 〈Sisa IN〉 tracked down the building actually owned by Mr. Kwak based on the real estate listings put up for lease on a real estate platform by broker Mr. Kim and the testimonies of tenants. As a result of 〈Current Affairs IN〉 coverage, Mr. Kwak purchased 6 multi-family houses and 6 multi-family houses over a period of about 2 years from November 2020 to October 2022. If you count the number of households, the total number is 183 (see
Many questions remain about Mr. Kwak's real estate purchase process. The biggest problem is purchasing under a borrowed name. In the process of purchasing these houses, Mr. Kwak additionally used the names of other people as well as his mother Mr. Kim. Mr. Kwak explains, "(The people listed as owners) are acquaintances. It is like that because of the employment registration tax. I do all the management." Mr. Kim, the broker who brokered Mr. Kwak's real estate sale, also testified that these houses were in fact owned by Mr. Kwak.
Many of these houses already had lease registration. The total number of lease registrations established from February 13 last year to June 20 this year is 34. The total unreturned rental deposit, which can be confirmed by the register copy and the leasehold registration amount, is 2.3431 billion won. It is estimated that the unreturned amount of the rental deposit, for which no lease registration has been established and legal action has not yet been taken, is larger than this.
Although the situation is this serious, the landlord, Mr. Kwak, and the real estate agent, Mr. Kim, actually criticize the tenants who registered their lease as “selfish.” Mr. Kim, a real estate agent, said, "Some tenants only think about themselves and apply for a lease registration order. I told them not to do it. If they complete the lease registration, the lease money loan will not be available and the landlord will not be able to afford it. We need to ease the burden on the landlord. This is one know-how that can help me get back the lease deposit I earned while working in real estate for 20 years."
Among the multi-family houses owned by the landlord Mr. Kwak (in a different name), the I multi-family house is the only one that does not have a lease registration. Mr. Kim, a broker, said, "I explained and persuaded the tenant of the multi-family house that a lease registration order was not the answer. I suggested a way. I multi-family house selected a new tenant (in April of this year) and returned the deposit (via brokerage)." It is said that he persuaded them by saying that if they waited patiently, they could bring in other tenants and collect the rental deposit from them and get it back. This also means that the house owned by Mr. Kwak (a borrowed name) is still for sale in the local rental market. In fact, as a result of the
Some tenants are crying and deciding to extend their lease even after realizing too late that they had signed a lease at a too high price in the first place. A tenant living in a multi-family house owned by Mr. Kwak under a borrowed name extended the deposit return due date one more time on the condition that Mr. Kwak takes responsibility for the interest on the lease deposit loan. A tenant who signed a lease contract for 80 million won said, "The difference between the current publicly announced price of the apartment (14 million won) and the deposit deposit is 66 million won, which is too large. I realized that it would be difficult to get the entire rent back even if I put it up for auction with the power to fight back, so I am holding back tears and trying to resolve the issue in any way possible while accommodating the landlord's situation. It's not because I trust the landlord. It's the situation that made me like this. “It is,” he said.
Although the multi-family house where Jaehyung Lee lives is a single-family house by law, multiple households (up to 19 households) live in one building, and the priorities of tenants vary depending on the move-in report and confirmation date. If there is a lien that secures a bank loan as a senior, the bank loan claim is first priority. Tenants are then ranked up to 20th in order of confirmation date. Therefore, before renting a multi-family house, you must know the amount of the bank loan and the deposit (senior rent) of the tenants who live first. In some cases, the lessor's delinquent taxes have priority over the lease deposit, so you must also check the tax payment certificate.
Attorney Kim Tae-geun (Chairman of the Steering Committee of ‘Tenant 114’, a legal support center for residential tenants) explains that in the case of multi-family housing, a lease fraud is established when the mortgage and deposit are greater than the house sale market price. A multi-family housing lease fraud occurs when the total of the senior deposit is hidden and the total of the mortgage and deposit exceeds the housing market price. Jae-Hyung Lee's contract stipulates that 'the contract will be made after confirming the establishment of a mortgage and the details of the deposit for each household', but Mr. Lee said that he did not receive an explanation for this.
However, the landlord, Mr. Kwak, claims that the current situation in which he cannot return the deposit is not a ‘lease fraud.’ The logic is that because Mr. Kwak spent 25 to 30 million won per household on the interior design, the market price has risen and it is not a ‘can rent’. Mr. Kwak’s calculation method is as follows. “A multi-family house was purchased cheaply for 750 million won (mortgage 538 million won). (In addition to the purchase price), registration tax and interior design costs amounted to 1.4 billion won. If you do the calculation, the sale price is actually about 1.8 billion won. (A multi-family house) The deposit is about 1 billion to 1.1 billion won, so even if you pay all the deposit, it will not amount to this amount.”
Attorney Lee Ha-neul (Daeryun Law Firm), who reported landlord Mr. Kwak to the police on behalf of the tenants, has a different opinion. Last May, lawyer Lee Ha-neul reported the landlord, Mr. Kwak, Mr. Kwak's mother, and the real estate agent, Mr. Kim, to the police on charges of lease fraud (fraud and violation of the Act on Registration of Names of Owners of Real Estate Owners). Attorney Lee said, “(Excluding the mortgage from the sale price), the actual value of the building around November 2020, the date of ownership acquisition, was only 220 million won. A multi-family house is already a so-called ‘tin can building’ that cannot guarantee the entire deposit.”
The landlord, Mr. Kwak, still insists that he has the ability to repay the rent. It is claimed that a loan of approximately 7 billion won is expected to be issued from Building H, and that the current inability to return the deposit is due to a temporary fund crunch. According to broker Mr. Kim, Mr. Kwak continued to sign a lease contract last April when he failed to return the lease money of other tenants. Mr. Kim, a real estate agent, told
However, it has been confirmed that the landlord, Mr. Kwak, is currently unable to return the deposit even in cases where he lost in court. Mr. Amugae Cho (31), a tenant who registered the lease for multi-family house A in April last year, recently won a lawsuit against Mr. Kwak for the return of the rental deposit. On January 17, the Jeonju District Court ruled that landlord Mr. Kwak must pay 60 million won in rent to Mr. Cho, the tenant of multi-family house A. Mr. Cho, who had moved his workplace from Jeonju to Daejeon while filing the lawsuit, was unable to move his house because he did not receive his deposit back, so he commuted from Jeonju to Daejeon every day for three months. Jo's father said, "From our perspective, raw money is being taken away. Our blood is drying up every day."
“The lease scam in Michuhol-gu, Incheon was the same.”
There was also a case where a tenant living in a house owned by Mr. Kwak (a different name) was recognized as a ‘victim of a lease fraud.’ An official from the Housing and Construction Department of the Jeonbuk Provincial Office said, "Early this year, one application for damage to a multi-family house B lease fraud was received, and the person was recognized as a victim. At the end of May, two cases were also filed for a multi-family house A, but no decision has been made yet (whether or not to be recognized as a victim)." According to the current standards, a person is recognized as a victim of lease fraud when the following four requirements are met. When a move-in report is completed and a confirmed date is provided, when the rental deposit is 300 million won or less (maximum 500 million won or less), when damage has occurred or is expected to occur that prevents multiple tenants from receiving the rental deposit, and when there is significant reason to suspect that the tenant intends not to return the rental deposit.
Among the tenants living in houses owned by Mr. Kwak under borrowed names, there are many tenants who say they will wait longer for the situation of the landlord, Mr. Kwak, to improve. Lee Won-ho, chairman of the ‘Civil Society Countermeasures Committee to Resolve the Problem of Jeonse Fraud and Tin Lease,’ said, “Incheon’s Michuhol-gu Construction King, a representative Jeonse Fraud, also presented the logic at trial (like Mr. Kwak, the landlord), saying, ‘He did not intend to commit fraud. It is a temporary problem as sales are not taking place due to the current economic situation. Otherwise, it can be resolved.’ In this situation, tenants are bound to be confused, ‘Am I a victim of Jeonse Fraud?’ “There is no need to be recognized as a victim of lease fraud in order to receive support under the changed system.” Previously, an official from the Jeonbuk Provincial Office's Housing and Construction Department explained, "First of all, you have to report it to the police. Among the requirements for being recognized as a victim of a rental fraud, we look at whether an investigation into the landlord has been initiated. The most important thing is whether an investigation has been initiated."
The Jeonbuk Police Agency has been looking into this case since June 13. To date, 〈Sisa IN〉 has identified 12 residential buildings (183 households) belonging to Mr. Kwak (owned under a borrowed name) through register copy verification, inquiries, and various reporting processes. Since the building is purchased under someone else's name, there may be more houses that Mr. Kwak actually owns in addition to the buildings that 〈Sisa IN〉 itself confirmed. An official from the Jeonbuk Police Agency's anti-corruption and economic crime investigation unit said, "We are currently collecting cases. We plan to investigate quickly after determining the extent of the damage." Jaehyung Lee said, "It's been six months since I filed a lawsuit requesting the return of the deposit, and there's still no deadline. I feel sick and frustrated." A week after my interview with Mr. Lee, I contacted him again. “Reporter, do you know where to apply for damage from lease fraud?”
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