South Korean court holds real estate agents liable for up to 70% of rental fraud losses

A Seoul court has taken a tougher view of licensed real estate agents’ responsibility in rental-deposit fraud cases, ordering compensation of up to 70% of victims’ losses.

The Seoul Central District Court’s civil appeals panel ruled on two cases brought by victims against real estate agents and the Korea Association of Realtors. In one case, the court raised the agents’ liability from 40% to 60%.

The tenant in that case lived in a multi-unit house in Seoul’s Gwanak district and lost the entire 180 million won deposit after receiving no distribution in the building’s auction. The agent had provided inaccurate information about the building’s value and the deposits of senior tenants. The first trial had ordered 72 million won in compensation, but the appeals court increased the award to 108 million won.

The second case involved a lease for a tourist hotel building in Gwanak district that had a trust registration. Documents related to the trustee’s consent had been forged, but the agent did not verify them before giving them to the tenant. The tenant consequently failed to obtain legal protection against third parties and suffered a 120 million won loss. Both the first trial and the appeals court placed liability at 70%, resulting in an award of 84 million won.

A court official said the rulings expressly recognized that agents play an important role in lease agreements and therefore owe tenants a high level of care and explanation regarding a property’s condition and legal rights.

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These rulings expressly recognize that licensed real estate agents, who play a major role in leases such as jeonse contracts, owe tenants a higher duty of care and explanation regarding the property’s condition and legal rights.