Last year, A, in his 40s, who intended to enter into a jeonse contract at the Olympic Park Foreon in Gangdong-gu, Seoul, where the sale price ceiling system was applied, tried to join the jeonse deposit return insurance, but was rejected by the Housing and Urban Guarantee Corporation (HUG). The reason was that, in the case of a sale price ceiling apartment where the '3-year actual residence obligation' was deferred, recovering the deposit through auction, etc., is difficult even if warranty accidents occur due to ownership transfer issues. Apartments subject to the sale price ceiling where the actual residence obligation has been deferred, making it difficult for people like A to join the jeonse deposit return insurance, amounted to 50,000 households.
The government will improve the system so that tenants of sale price ceiling apartments in the metropolitan area can also join the jeonse deposit return insurance. After guarantee institutions repeatedly rejected requests for jeonse deposit return insurance for newly built apartments under the sale price ceiling last year, the government sent an official document to the guarantee institutions, taking measures to enable tenants to join the insurance. However, as these temporary measures alone did not eliminate the reasons for rejecting insurance membership and led to the problem of lower possibilities of recovering deposits in the event of warranty accidents, it was decided to thoroughly amend the Housing Act enforcement decree.
On the 31st, the Ministry of Land, Infrastructure and Transport will promote amendments to the Housing Act enforcement decree to include HUG in the list of financial institutions that can auction for the protection of tenants in sale price ceiling apartments in the metropolitan area. Currently, the ministry has announced plans for legislative notice of such amendments to the Housing Act enforcement decree by March 5.
According to Article 73-6 of the current Housing Act enforcement decree, if the owner of a sale price ceiling apartment in the metropolitan area fails to fulfill his debt obligations to the state, local governments, and financial institutions, and a court auction is held, they can sell the property with the consent of the Korea Land and Housing Corporation (LH). If the enforcement decree is amended, in the case where the occupant of the sale price ceiling apartment in the metropolitan area does not return the jeonse deposit to the tenant, HUG will also be included among the financial institutions that can conduct auctions under the Housing and Urban Fund Act to recover the claims.
The Ministry of Land, Infrastructure and Transport is promoting this amendment to the enforcement decree because last year the 3-year actual residence requirement for sale price ceiling apartments in the metropolitan area was deferred, making it difficult to join the jeonse deposit return insurance. In February last year, the amendment to the Housing Act, which eased the actual residence requirement for sale price ceiling apartments in the metropolitan area from 'the date of first occupancy' to 'within 3 years of occupancy,' was approved. As a result, owners of sale price ceiling apartments in the metropolitan area can immediately lease the property without moving in. Instead, if they do not fulfill the actual residence period, they will face a 'transfer restriction' on selling the house, which has become an obstacle to joining the jeonse deposit return insurance.
HUG's structure is such that after joining the jeonse deposit return insurance, if the landlord fails to return the deposit, recovery can be pursued through auction, etc. However, ownership transfer was impossible due to the transfer restriction regulation, leading to reluctance to join the insurance. Under the current Housing Act, if the buyer fails to fulfill his debt obligations to the state, local governments, and financial institutions, they can proceed with an auction with the consent of LH. At that time, HUG concluded that it was not included among the financial institutions specified in the law, resulting in a low probability of recovering the deposit.
As issues of tenant protection due to the rejection of jeonse deposit return insurance arose and the difficulties faced by landlords in leasing increased, the Ministry of Land, Infrastructure and Transport conducted a legal interpretation. Subsequently, they sent an official document to guarantee institutions, including HUG, requesting their active cooperation in joining the insurance.
The Ministry of Land, Infrastructure and Transport judged that merely these temporary measures would decrease HUG's motivation to join the insurance and that the recovery of claims would also be limited, leading to the decision to amend the Housing Act enforcement decree itself. Measures to protect tenants of sale price ceiling apartments in the metropolitan area are also expected to be strengthened.
A Ministry of Land, Infrastructure and Transport official noted that 'while the sale price ceiling apartments can have lease contracts for three years, the situation is that HUG does not qualify as a financial institution capable of conducting auctions when the leaseholder defaults on debts.' They explained, 'Since there are no means to recover claims even if warranty accidents occur, we added HUG among the financial institutions capable of conducting auctions.' The official further stated, 'Existing tenants can also join the jeonse deposit return insurance.'