The Jeonse Contract in Korea: The Korean Home Rental Scheme in Conflict

In recent times, the Korean contract known as “Jeonse” (전세) has gained a lot of attention due to three young men in the South Korean city of Incheon who decided to take their own lives after falling victim to a scam that used as means this exclusive legal figure of Korea.

Currently, an important part of the housing contracts in Korea are concluded under this figure, which has its roots in the 19th century during the period of colonization and subjugation by Japan on the Korean Peninsula.

But what exactly is the contract? or outline jeonse? It is a form of housing rental in which the tenant delivers to the owner, in the form of a deposit, a representative sum that ranges between 50% and 90% of the total value of the property.

In exchange for this, the owner rents the house to the person who deposits that money for a period of two years. At the end of this period, the owner must return the amount deposited and the tenant must deliver the property. It can also be agreed that, in addition to the initial deposit, the tenant a monthly sum of money, which is less than the normal rental fee due to the initial deposit.

What happens with the deposit delivered at the beginning of the contract is that the owner can reinvest that money in other properties or simply take advantage of the interest and profits that this capital produces when entering the financial market.

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Although the Jeonse contract is an exclusive figure of Korea, we can find variations or similar forms in other legislations, for example, the Civil and Commercial Code of the Argentine Republic recognizes a similar form called “antichresis” in article 157. It is a real right of guarantee accessory to a credit that allows the creditor to use an asset and receive its benefits to allocate them to the credit that he owns.

This form of hiring generates certain complications when looking for a home, since the tenant must have a considerable sum for the initial deposit of the contractual relationship. Although there are bank loans that are intended to face the payment of these deposits, the tenant must later face the interest associated with said loan.

In addition, the greatest risk faced by those who make this type of deposit is the subsequent activity that the owner carries out with that sum, since it must be returned at the end of the contract.

The advantage that we can find is that the tenant can use that deposit as savings to later be able to access their own home, which is so difficult to obtain in the entire world.

In recent months, three people committed suicide after being victims of scams related to this type of contract, after the auction process of the homes in which they resided by guarantee institutions began.

In this context, South Korean President Yoon Suk-yeol, together with the economic authorities and the banking industry, has ordered the suspension of home auctions for those who have been victims of scams under this system for a period of six months. , while working on new measures to prevent fraudulent transactions.

Recent events generated a call to the authorities to implement measures that safeguard the rights of tenants and prevent fraudulent practices in the housing market. It is essential to establish clear and effective regulations that provide security and transparency to both owners and tenants, promoting a fair balance in contractual relationships.

Law student at the National University of Cuyo, Argentina; member of the research seedbed of this university. He currently collaborates as a student researcher in research projects at the Faculty of Political and Social Sciences and in projects at the Faculty of Law. Collaborator at ReporteAsia.com