[Exclusive] In Cases of Jeonse Fraud in Multi-family Housing, "LH Priority" When Priority Purchase Rights Clash... Special Act Amendment Proposed

Current Law Fails to Reflect the Unique Nature of Single-Registration Multi-Family Houses
Victim Tenants’ Claims Take Precedence Even Amid Conflicting Opinions
Ministry of Land Expresses Concern Over Loss of Relief Opportunities for Multiple Tenants
National Assembly Moves to Prioritize LH’s Purchase Rights in Multi-Family Housing

The Democratic Party of Korea is seeking to revise the law so that, in the case of a conflict between the priority purchase rights of tenants and Korea Land & Housing Corporation (LH) during the auction process of multi-family housing units involved in large-scale security deposit scams, LH's rights would take precedence. This legislative initiative was prompted by concerns that, in multi-family properties with a single registration, if some tenants exercise their priority purchase rights, other tenants could lose opportunities for relief.

According to the Ministry of Land, Infrastructure and Transport and political sources on September 3, Yeom Tae-young, a member of the Democratic Party of Korea, plans to propose an amendment to the Support for Victims of Security Deposit Fraud Act that addresses these issues. The amendment stipulates that if at least two tenants in a multi-family dwelling are victims of security deposit fraud and both LH and the affected tenants wish to exercise their priority purchase rights simultaneously, the sale must be permitted to LH. A proviso will be added to the current law, which gives priority to the tenant’s rights in the event of a conflict, specifying that LH’s rights should take precedence in these cases.

This legislative move follows a case in June in Hwaseong, Gyeonggi Province, where the priority purchase rights of an affected tenant and LH came into conflict in a multi-family house. In this case, there was a default on KRW 720 million (approximately 720 million won) in lease deposits, and in 2025, four subordinate tenants, including tenant A, transferred their priority purchase rights to LH. There were a total of five affected tenants. However, on the day of the auction, tenant A suddenly exercised his own priority purchase right and acquired the house for KRW 811 million (approximately 811 million won).

As a result, other subordinate tenants who were expecting compensation for their losses through the auction surplus—on the premise that LH would purchase the property—found it difficult to recover their deposits. This is because, after the auction distribution is paid to senior creditors and tenants with higher priority, there is virtually nothing left for subordinate tenants. The Ministry of Land, Infrastructure and Transport and LH submitted an opinion to the court administration emphasizing that the opportunity for a large number of tenants to recover their losses should not be lost; as a result, the auction was withdrawn. However, tenant A continues to express his intention to acquire the property. The court has therefore postponed the auction, which was originally scheduled for the 4th.

The Ministry attributes this situation to the fact that the current law does not account for the unique characteristic of multi-family dwellings, which can have only a single property registration. According to Article 25 of the Special Act on Support and Residential Stability for Victims of Jeonse Fraud, amended in May, if both a victim and LH file a report to exercise the priority purchase right, the court must give priority to the victim. The problem is that, unlike apartments, officetels, and multi-unit dwellings where individual registrations are possible and typically only one tenant is involved, multi-family houses can have several victimized tenants living in a single property. As a result, conflicts arise when some tenants wish to transfer their rights to LH, while others want to exercise their rights themselves, raising the question of which party should take precedence.

Yeom Tae-young stated, "In cases where there are multiple victims in a multi-family dwelling, if one person exercises their right, other victims end up in a blind spot with no access to support from the auction surpluses," adding, "Since the system established to help victims is ironically excluding some of them, we aim to correct this contradiction with the latest amendment."

Yeom Tae-young, Member of the Democratic Party of Korea. The Asia Business Daily database

The Ministry of Land, Infrastructure and Transport also supports the legislative change. An official stated, "There is a consensus, as we communicate with the National Assembly, that the law should be revised to provide relief to a greater number of tenants."

However, until the bill passes the plenary session, affected tenants must rely on auction postponements to gain time. LH and the Ministry of Land, Infrastructure and Transport have submitted a request to the court to delay the auction. An LH official said, "The ministry and LH have earnestly asked the Suwon District Court to postpone the auction," adding, "How long the postponement will be granted is up to the court’s discretion."

This content was produced with the assistance of AI translation services.