The Jeonsegwon (Korean lease on a deposit basis) originated from Korean customary practice and was incorporated into the Civil Act as a real right, currently being characterized as a heterogeneous real right encompassing both usufructuary power and se...
The Jeonsegwon (Korean lease on a deposit basis) originated from Korean customary practice and was incorporated into the Civil Act as a real right, currently being characterized as a heterogeneous real right encompassing both usufructuary power and security power. However, difficulties in interpretation are prominent in the legal relationships surrounding Jeonsegwon, particularly in scenarios involving various dispositional acts where the parties change, such as the transfer of the Jeonse object, sub-lease (Jeonjeonse), transfer of the Jeonsegwon, and transfer of the Jeonse deposit return claim. This study identifies the following two key factors as the primary causes of these difficulties. First, the judiciary has applied the special rules from the Housing Lease Protection Act (HBLPA) and the Commercial Building Lease Protection Act (CBLPA)—specifically, the legal effect of the transferee of the leased object succeeding to the lessor's position and undertaking a novatory assumption of the deposit return obligation—directly to Jeonsegwon. This is not only difficult to reconcile with the general principles of security real rights but is also inappropriate for the protection of the Jeonsegwon holder. Second, Jeonsegwon under the Civil Act essentially incorporates both erga omnes usufructuary power and preferential reimbursement power, which are considered essential elements. The simultaneous operation of the inherent attributes of a usufructuary real right and a security real right within a single, unified right creates internal tension and conflict. The study concludes that these two factors are the main reasons why Jeonsegwon in the Korean Civil Act has failed to achieve a systematic and consistent interpretation. Furthermore, it proposes that the future direction for Jeonsegwon should focus on establishing its consistent status as a real right, separating the regulation of usufructuary Jeonsegwon and security Jeonsegwon, and recognizing its potential as a means of asset securitization.