[Ha Hee-bong, Managing Partner at Lopid Law Firm] If a landlord fails to return the jeonse deposit, a tenant who has purchased guarantee insurance may file a claim with the Korea Housing and Urban Guarantee Corporation (HUG) requesting payment on their behalf. If the Corporation delays payment beyond the deadline specified in the terms and conditions, the tenant may also claim late payment damages for that delay. However, there is a condition regarding late payment damages. According to a ruling by the Supreme Court, the Corporation is not liable for late payment damages even if it delays the deposit payment until the tenant has vacated the property or is in the process of doing so.

A tenant in an apartment complex in Namdong-gu, Incheon, signed a two-year jeonse contract in April 2021 with a security deposit of 340 million won and also entered into a guarantee agreement with HUG. Although the contract expired in April 2023, the landlord did not return the security deposit. After completing the registration of the tenancy rights, the tenant filed a lawsuit against HUG in September of that year, demanding payment of the security deposit.

The trial court dismissed the claim, ruling that the tenant had failed to meet the claim period specified in the terms and conditions (two months from the date of the guarantee incident). The appellate court, however, held that the claim could not be barred on the basis of this time limit and ordered the payment of the 340 million won security deposit plus late payment damages accruing from October 14, 2023. Even a simple calculation based solely on the portion subject to the 6% annual interest rate yields over 46 million won. The Supreme Court upheld the portion regarding the security deposit but reversed the portion regarding the late payment damages, remanding the case to the Seoul High Court (Supreme Court Decision No. 2026Da201978, rendered on June 24, 2026).

When a lease ends, the tenant must vacate the premises, and the landlord must return the security deposit. These two obligations are in a relationship of simultaneous performance (Civil Code Article 536). Therefore, until the tenant vacates the premises or notifies the landlord that they are prepared to do so (offering performance), the landlord is not liable for any delay in returning the security deposit.

The issue at hand was whether this rule also applied to the guarantee agreement. The Corporation was not a party to the lease agreement; its obligation arose from the guarantee agreement entered into with the tenant. The Supreme Court ruled that while the Corporation’s obligation was, formally, a payment obligation under the guarantee agreement, “in substance, it is merely a variation of the obligation to return the security deposit under the lease agreement at issue and can therefore be regarded as identical to the landlord’s obligation.” Article 10, Paragraph 1 of the guarantee terms and conditions also established a relationship of simultaneous performance between the Corporation’s guarantee obligation and the tenant’s obligation to surrender the premises. Therefore, the Corporation is not liable for delay until the tenant surrenders the premises to the landlord or offers to perform that obligation. It is irrelevant whether the Corporation separately raised this point in the litigation (Supreme Court Decision No. 2023Da289720, rendered on February 29, 2024, etc.).

The record in this case contained no evidence that the tenant had surrendered the property or attempted to do so. Nevertheless, the lower court ordered the payment of damages for delay without examining this issue. The Supreme Court viewed this as a misapplication of the law and an inadequate examination of the facts. Upon remand, the Seoul High Court must first reexamine whether the tenant actually surrendered the property or offered to do so.

A jeonse guarantee is a mechanism designed to ensure that the tenant receives the security deposit in lieu of the landlord if the landlord fails to return it. According to the Supreme Court’s ruling, when determining damages for delay, the Corporation’s legal status is no different from that of the landlord. Just as a tenant who has not vacated the premises cannot hold the landlord liable for delay, the tenant cannot hold the Corporation liable either.

There is one point that should not be misunderstood. The fact that the property was not handed over does not mean the security deposit itself cannot be recovered. In this case as well, the ruling that the construction company must pay the 340 million won security deposit remains final. What changes is the starting point for calculating late payment damages.

One point that tenants often confuse is the registration of leasehold rights. Leasehold registration is a mechanism that allows tenants to retain their right of opposition and priority in repayment even after they move out (Article 3-3, Paragraph 5 of the Housing Lease Protection Act). The cancellation of leasehold registration may be done after the security deposit has been returned (Supreme Court Decision 2005Da4529, rendered on June 9, 2005). However, simply completing the leasehold registration does not constitute the handover of the property. To claim damages for delay, you must have evidence showing that you either handed over the property or intended to do so. If you kept the keys when moving out, a dispute may arise over whether the property was actually handed over. It is advisable to keep records such as proof of handing over keys or access codes, or a certified letter stating your intention to vacate the property.

■ Attorney Ha Hee-bong △ Department of English, Hankuk University of Foreign Studies △ Chungbuk National University Law School △ 4th Bar Exam △ Court-Appointed Representative, Patent Trial and Appeal Board, Korean Intellectual Property Office △ (Current) Court-Appointed Attorney, Supreme Court and Seoul Central District Court △ (Current) Court-Appointed Representative, Seoul High Court △ (Current) Director, Korean Bar Association △ (Current) Managing Partner, Lopid Law Firm