The first case of a dwelling purchase related to trust lease fraud has emerged from the Korea Land & Housing Corporation (LH).

According to the National Assembly and LH on the 17th, LH is set to sign a contract on the 19th with the trust company and preferential beneficiaries to purchase 16 households that were victims of lease fraud in a multi-family dwelling located in Chimseong-dong, Buk-gu, Daegu.

Members of People's Solidarity for Participatory Democracy hold a press conference on June 30th in front of the Presidential Committee on Policy Planning in Jongno-gu, Seoul, announcing the 'Seven Major Housing and Real Estate Failures of the Lee Jae-myung Administration' and proposing policy directions for suppressing speculative demand and stabilizing housing./Courtesy of News1

This is the first purchase case concerning dwellings affected by trust lease fraud. The deposits that victims were about to lose will be partially returned using the profit derived from subtracting the purchase price from the appraised value.

After the revised special law on lease fraud was implemented in November last year, which included trust lease fraud as a target for support, LH reportedly initiated negotiations regarding purchases with the trust companies and other housing disposers.

Victims residing in the leased dwellings will be able to escape worries of forced eviction due to the loss in the eviction lawsuit raised by the trust company. The purchase process is expected to be completed next month.

Trust lease fraud is said to involve more malicious actions by landlords compared to other lease fraud cases, and the process to support victims is also known to be complicated.

If a landlord needs funds while constructing villas or other buildings, they may transfer ownership of the building to a trust company and obtain a bank loan secured by the trust company's credit. To validate the lease contract, consent from the trustee (real estate trust company) and the preferential beneficiary (financial institution) is required; however, landlords sometimes conceal their trust status and enter lease contracts.

This constitutes an illegal contract amounting to fraud, and thus it is not recognized as legally effective. Renters also do not have legal standing under the housing lease protection law, meaning if the trustee legally orders eviction, they must vacate. This is because it would legally be considered illegal occupation based on a contract with no legal effect.

The multi-family dwelling in Daegu, which has now been decided for purchase, also had the trust company file an eviction lawsuit against the tenants, resulting in a loss for the tenants. Although the ruling is not final, it has been understood that the tenants were concerned about possibly being evicted without recovering their deposits, as well as the burden of legal costs if the loss is confirmed.

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