Subrogation Payment Amounts Soar to Record 95.2 Billion Won

Subrogation payment amounts, offered by Korea Housing and Urban Guarantee Corp. (HUG) instead of house owners, and jeonse deposit money return guarantee incidents, logged the biggest-ever figure in September.

Cumulative subrogation payment amounts and jeonse deposit money return guarantee incidents during the first nine months of this year surpassed those recorded for the whole of last year, triggering fears of uncollectable jeonse deposit money.

Figures, released by HUG on Oct. 19, showed that subrogation payment amounts came to 95.2 billion won, paid to 445 households, the biggest-ever monthly figure.

Cumulative subrogation payment amounts came to 529.2 billion won, paid to 2,446 households during the first nine months of this year.

The figures surpassed those recorded for the whole of last year - subrogation payments amounting to 529.2 billion won to 2,475 households in 2021.

The number of jeonse deposit money subrogation cases and subrogation payment amounts came to 523 and a combined 109.8 billion won, respectively the most-ever since the related guarantee product made its debut in September 2013.

The cumulative number of jeonse deposit money subrogation cases and cumulative subrogation payment amounts came to 646.6 billion won and 3,050, respectively, surpassing those logged during the whole of last year: 579 billion won and 2,799 cases.

Rising jeonse deposit money subrogation cases and cumulative subrogation payment amounts were attributable to a rise in uncollectible jeonse deposit money, caused by rising interest rates, declining housing prices and the sagging jeonse market.

Some owners of multi-unit housing and villas in newly built housing complexes disappeared after signing contracts to put jeonse deposit money higher than current unit selling prices, leaving lessees worried about uncollectable jeonse deposit money since last year.

Jeonse deposit money return guarantee product is a policy in which lessees can be subrogated for jeonse deposit money.

If house owners fail to return jeonse deposit money after the termination of their contracts, the guarantee institution subrogates it to lessees instead of the owners and later exercises the right to indemnity to the owners.

Kim Ok-joo, head of the Asset Management Division at Korea Housing and Urban Guarantee Corp. (HUG), poses with President Lee Nam-cheol of the Korea Association of Beommusa Lawyer after they signed an MOU on supporting jeonse cheating victims at the latter’s association hall in Gangnam-gu, Seoul, on Oct. 20. (Photo: HUG)

Lessors’ Information to be Divulged Transparently to Lessen Damages

Figures on multi-unit debtors’ jeonse deposit money subrogation cases and subrogation payment amounts, submitted to Rep. Suh Il-joon by HUG recently, showed that uncollectable jeonse deposit money cases were on a sharp rise.

There were such 15 cases (3 billion won) in 2018, 256 cases (49.4 billion won) in 2019, 933 cases (184.2 billion won) in 2020, and 1,663 cases (351.3 billion won) in 2021.

Uncollectable subrogation payment amounts owed by multi-unit housing debtors surged to 351.3 billion won in 2021, a 117-fold jump from 3 billion won in 2018.

Rep. Suh said such uncollectable subrogation payments recently occurred due to declining housing prices, but there were rising cases of multi-unit housing debtors’ abusing of a jeonse loan regime.

He called for related authorities to conduct an intensive investigation and management to prevent such uncollectable subrogation payment cases.

Rep. Suh said the problem is that multi-unit housing debtors’ uncollectable subrogation payment amounts incur tens of billions of won in losses every year, exacerbating taxpayers’ burden.

He called for transparent management of information related to lessors, on whether they had taxes in arrears when they sign contracts to prevent uncollectable subrogation payment cases and lessees’ damages.