Victims of Rental Fraud Left with Nothing but Bills

In Seoul's Gangnam district, the Korea Construction Technology Association (hereafter referred to as the Association) leased an entire building to a rental company called Sovereign State, which had a capital of 10 million won. Sovereign State then entered into subleasing agreements with 28 tenants, collecting approximately 10 billion won in security deposits. The tenants, trusting the Association's credibility as a legally recognized organization under the Ministry of Land, Infrastructure and Transport, signed contracts. However, when Sovereign State fell behind on rent and the contracts were terminated, the tenants were left without their deposits and forced onto the streets. The first-instance court did not recognize the Association's liability for damages, and the victims are currently in the process of appealing.

The process that led to the victims being evicted unfolded as follows: In January 2024, the Association filed eviction lawsuits against the tenants and carried out forced evictions with the help of court officials. During this process, a notice was posted in one victim's home stating, "The debtor may use the property under the condition that the possession is released and the court official retains it, without changing the current state, and may not transfer possession to others." Additionally, the Association billed the victims for usage fees amounting to 3 million won per month after the eviction deadline.

The lives of the affected tenants have been shattered. Victim A stated, "I had nowhere to go and moved back in with my parents, but the reality of losing all my assets was enough to break me. Even when my child came to visit, I could only feel despair instead of dreaming of a future." They added, "If I had just my deposit, I could have pursued other opportunities like housing applications or rental housing, but losing that lump sum has left me with no options. I feel lost about how long my whole family will have to rely on my parents' small home."

Victim B, who had previously been declared cured of a serious illness, experienced a relapse due to the extreme stress from the rental fraud. During the ongoing lawsuit, B's health deteriorated, and they ultimately passed away in 2024. Now, their husband continues the legal battle in their stead.

Victim C moved into the building with the security deposit left by their mother, who passed away after a long battle with cancer. Seeking a safe and secure environment, C chose this building but discovered the rental fraud just a month and a half after moving in. C expressed, "I was shocked to realize that I could lose all of my mother's precious legacy and my entire fortune."

The Association's annex office building is currently accepting new tenants and operating normally. While the victims have relocated and are demanding the return of their deposits, the new tenants have signed rental agreements with the existing built-in appliances and options intact.

The management of the Association's building is currently handled by Genstar Mate, which was selected as the asset management (PM) service provider in January 2025. According to the Public Procurement Service, the Association posted a bid notice for 'Asset Management Services for the Construction Technology Association Building' on December 31, 2024, and Genstar Mate was ultimately selected through a restricted competitive bidding process.

On July 23, the Aju Economic Investigation Team conducted a rental consultation with Genstar Mate, the current management company. During the consultation, a representative from Genstar Mate stated that the building's past history of rental fraud and forced evictions was "a problem of the previous company, and we are currently in the process of resolving it."

This explanation differed somewhat from how Sovereign had previously misled tenants by claiming to be a subsidiary directly established by the Association. Genstar Mate clarified, "We are an asset management company entrusted by the Association to coordinate building contracts and management," emphasizing their role. They added, "We only review contracts or mediate; the actual contracts are signed directly with the Association, and the official seal is also the Association's."

However, the use of the term 'public' was not significantly different. A representative stated, "Since the Association is a public institution, there are no issues with the deposit," leveraging the Association's credibility to reassure tenants. Despite not being a public institution, the Association's name was used to instill confidence in tenants. While there is a structural difference as a formally contracted management company, the attitude of minimizing risk by relying on public credibility was still evident.

On July 24, the Aju Economic Investigation Team also sought rental consultation at a real estate agency in Gangnam. The agent mentioned that the office building is an 'Association building' and that the actual contracting entity is the Korea Construction Technology Association, a legal entity. They explained, "The corporation cannot lease directly; the Association has outsourced the leasing work to a third-party company." However, the Association, which started as a non-profit corporation in 1987, transitioned to a legal entity under the Construction Technology Management Act (now the Construction Technology Promotion Act) in 1995, distinguishing it from a simple private organization. Furthermore, Article 5, Section 12 of the Association's bylaws states that 'leasing and operating management of the Association's property and other facilities' is part of the Association's business purpose, so there is no legal issue with the Association being a party to the lease contract.

The agent also mentioned the past rental fraud by Sovereign, stating, "There was a previous incident related to deposits, and the company that managed the leasing stopped operations, leaving several units vacant." However, they emphasized, "That issue has been resolved, and there are currently no problems regarding deposit protection."

This explanation contrasts with how Sovereign and real estate agents previously reassured tenants by emphasizing their close relationship with the Association. Agents did not adequately inform tenants about the nature of the subleasing contracts. The combination of these two factors led tenants to enter into contracts without recognizing the risks involved. However, during the current consultation for the Association's annex office building, explanations regarding the contracting entity and contract structure were being provided. Notably, the management company and real estate agents mentioned the past rental fraud incidents involving Sovereign, explaining the building's history.

Nevertheless, there are still factual discrepancies that need to be addressed. The Association repeatedly stated, "There are no deposit issues because we are a public institution," despite not being one, and while the Association can legally be a party to lease contracts, the claim that "the corporation cannot lease directly" is also misleading. The basis for asserting safety is inaccurate, and the information asymmetry regarding the contract structure remains unresolved for tenants.

Meanwhile, it has been confirmed that Sovereign's rental business was not limited to the annex. According to a document obtained by the Aju Economic Investigation Team, the Association sent a notice to the tenant companies regarding the 'Subleasing Contract Succession Notification for the New Building of the Construction Technology Association.' The document states, "Due to the termination of the lease contract between our Association and Sovereign State (the sublessor), we intend to succeed the sublease contract through a succession agreement between your company and our Association." This indicates that Sovereign operated its rental business not only in the annex but also in the main building located in Nonhyeon-dong, Seoul.

In fact, multiple informants have claimed that the main building has also been operated under a rental structure through Sovereign, raising ongoing concerns about the connection between the two buildings. The recently confirmed document can be seen as evidence supporting these claims. Victims continue to raise suspicions of collusion between the Association and Sovereign regarding the opaque rental management system and the circumstances surrounding the incidents.

Regarding these allegations, the past contract processes, and the current rental status, a representative from the Association stated, "As this matter is currently under civil and criminal litigation, it is difficult to provide specific answers. We will be able to explain thoroughly only after the legal proceedings are concluded."

However, they maintained that the forced eviction by court officials was a "legitimate necessary measure in accordance with the prohibition of transfer of real estate possession."