From 15 Years to 7 Years: The Soft Punishments in Jeonse Fraud Cases

As public outrage grows over lenient sentences in major *jeonse* fraud cases, victims are expressing frustration at what they see as inadequate legal consequences for offenders.

As public outrage grows over lenient sentences in major *jeonse* fraud cases, victims are expressing frustration at what they see as inadequate legal consequences for offenders. In this post, we discuss the recent case of the so-called “Incheon Construction King,” whose prison sentence for *jeonse* fraud was halved from 15 to 7 years, sparking widespread anger.

The Sentence Reduction: 15 Years → 7 Years

The "Incheon Construction King," who defrauded approximately 191 tenants of around 14.8 billion KRW in *jeonse* deposits, had his prison sentence reduced from 15 to 7 years. This is the same landlord whose actions led to the tragic suicides of four young victims. The court based its decision on the finding that only contracts made after the landlord’s financial troubles began (amounting to 6.8 billion KRW) were deemed fraudulent. Earlier contracts were not judged to involve deliberate intent to defraud. As a result, nine accomplices, including real estate agents, received probation or were acquitted altogether.

It’s important to note that while the *jeonse* fraud conducted by the "Incheon Construction King" totals 53.6 billion KRW across 665 properties, this particular trial only addressed the 14.8 billion KRW fraud involving 191 properties.

Why Was the Sentence Reduced?

In *jeonse* fraud cases, proving the offender's intent to deceive (*mens rea*) is crucial. Not every landlord who fails to return deposits can be classified as a fraudster. The prosecution must demonstrate that the offender had a clear intention not to return the deposit from the outset, which they were unable to do in this case. Victims have reacted to this ruling with outrage, sarcastically calling South Korea the "Republic of Fraud."

Although the 7-year sentence has not yet been finalized, prosecutors have appealed to the Supreme Court, meaning the final decision on the *Incheon Construction King’s* sentence is still pending.

Lenient Laws and Public Outrage

Victims fear that other *jeonse* fraud cases could also result in reduced sentences due to the perceived leniency of current laws. They argue that the recently passed *Jeonse* Fraud Special Law offers support measures for victims but lacks preventive measures. Preventative suggestions include:

1. Mandatory Registration of Jeonse Rights – This would involve recording the tenant’s status as a *jeonse* renter on the property’s official documentation. This would allow the tenant to directly initiate a foreclosure process in case the deposit isn’t returned.

   

2. Escrow Systems– In this system, a third-party institution holds part of the *jeonse* deposit and only releases it once the lease contract is successfully completed.

How Other Countries Prevent Fraud

Other major nations have implemented various preventive measures for real estate-related crimes:

- United States: The U.S. uses an escrow system, where a third party holds the transaction funds until the conditions of the sale are met, as well as title insurance, which ensures the legitimacy of the property owner.

  

- United Kingdom: In the UK, property transactions are often overseen by conveyancing solicitors, who ensure legal protection and transparency in the transaction process.

- Australia: In Australia, a portion of the purchase funds is placed in a lawyer’s trust account before the transaction is finalized, adding an extra layer of security to real estate deals.

The recent case of the *Incheon Construction King* has reignited debates about the effectiveness of South Korea’s *jeonse* fraud laws. While some support measures are in place, critics argue that more robust preventive measures are urgently needed. In comparison, other countries have already implemented effective systems to prevent real estate fraud, offering potential models for reform in Korea.