Death of 'villa king' leaves hundreds with empty pockets

Bae, a 29-year-old jeonse tenant in Seoul is at risk of losing the 200 million won ($154,000) deposit she paid to the landlord surnamed Kim who was found dead in October.

“My husband and I took out bank loans to rent the jeonse apartment after we got married. We thought it was a safe jeonse contract because there were no mortgage loans secured on this house. I never imagined that I may not get my deposit back because the landlord died,” said Bae, who tied the knot last year.

Jeonse is a housing lease system unique to Korea whereby tenants pay a lump-sum deposit, which is usually about 70 to 90 percent of the sale price, instead of monthly rent, on a two-year contract.

Even though she had insurance with the Korea Housing & Urban Guarantee Corporation in case her landlord failed to return the deposit, the agency’s compensation process has been stalled because the deceased landlord’s immediate family refused to inherit the house, a procedural requirement for the insurance coverage, she added.

Bae is among nearly 400 jeonse tenants across the country whose deposit money has been forfeited upon the sudden death of Kim, a man in his 40s now commonly known as the "villa king" who purchased 1,139 villas and officetels, or studios, across the country beginning in 2020, according to the National Police Agency.

His properties have been confiscated by the local court due to his comprehensive real estate taxes worth 6.2 billion won in arrears, casting a cloud over the victims' retrieval of deposit money.

Kim had been investigated by the police on suspicion of fraud involving jeonse contracts before he was found dead on Oct. 12 in a hotel room in central Seoul's Jongno District. The police believe that he died of chronic illness as there were no signs of homicide or suicide.

The troubled villa king reportedly made “gap investments" to buy homes, which means he purchased homes occupied by jeonse tenants, who paid a lump-sum deposit that must be refunded when the lease expires, so he only had to pay the seller the difference between the price of the home and the amount of the deposit.

For instance, if an apartment costs 500 million won and the jeonse deposit is 400 million won, the purchase can be made with just 100 million won of cash.

Meanwhile, the local police have been investigating whether Kim had an accomplice in the fraud by tracing his bank accounts.

“We concluded that it would have been difficult for Kim to buy more than 1,000 villas by himself. Although the suspect related to the case is dead, the investigation will continue to see whether he had an accomplice,” a police officer told reporters last week.

In October, a man surnamed Kwon and two accomplices were arrested and indicted for jeonse fraud in which they allegedly collected deposits from tenants of nearly 3,500 homes and never paid the deposit back.

Kwon, known as the “villa god” among his victims and people in real estate, and the two others stole at least 4.37 billion won in deposit money from 20 tenants, the police said in a press conference at the time.

It was the nation’s largest ever jeonse fraud through “gap investment” without any capital, and an organized crime ring is suspected to be behind it as all the suspected accomplices were using burner phones with the number 2400, according to the police.

In regard to the rise in jeonse fraud, President Yoon Suk-yeol has vowed to launch a task force jointly operated by the Ministry of Land, Infrastructure and Transport and the Ministry of Justice that offers legal aid and temporary accommodation for the victims.