The Supreme Court ruled that a credit guarantee institution that guaranteed a jeonse (lump-sum deposit lease) loan may not be liable for the guarantee if the jeonse deposit was inflated. The rationale is that the jeonse deposit is a material term of the lease contract, and if it is false, the guarantee institution bears no responsibility.

The Third Civil Division of the Supreme Court (Presiding Justice Lee Heung-gu) reversed the lower court's partial ruling in favor of the plaintiff in a guarantee debt lawsuit filed by Shinhan Bank against Korea Housing & Urban Guarantee Corporation (HUG) and remanded the case to Seoul Central District Court on May 29 with the intent of ruling against the plaintiff (2023Da244871).

In August 2017, a tenant entered into a housing lease contract with a jeonse deposit of KRW 264 million, then obtained a jeonse loan of KRW 210 million from Shinhan Bank that same month. Shinhan Bank entered into a guarantee contract with HUG for this loan. However, the actual jeonse deposit paid by the tenant to the landlord was only KRW 230 million.

The Supreme Court overturned the lower court's decision, ruling that since material terms of the contract were false, there is no guarantee liability. The Court explained that "the falsity of the jeonse contract underlying the guaranteed loan must relate to material matters that could affect whether the guarantee contract is concluded or the scope of the guarantee," and that "the jeonse contract in this case, where the deposit amount was inflated, should be considered a false jeonse contract as it contains falsity regarding material matters."