What is this that redevelopment tenants receive but reconstruction tenants do not?

Constitutional Court Upholds Article 81(1) of the Provincial Road Act
Reconstruction Associations Have No Obligation to Compensate Tenants
Demolition of Bangbae 6 District to Begin as Early as July
Project Delays Prevent Avoidance of Price Ceiling System

Constitutional Court / Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Onyu Lim] Ahyeon 2 District, Bangbae 6 District... The commonality between these two associations is that they faced tenant opposition during the process of promoting single-family house reconstruction. Unlike redevelopment, reconstruction does not impose a compensation obligation on the association towards tenants. Some tenants, who are not legally protected, attempted to 'hold out' during the relocation process. In the case of Ahyeon 2 District, construction began last year, but Bangbae 6 District has not completed the relocation procedures, resulting in about two years of project suspension. Some have argued that since reconstruction and redevelopment are similar urban maintenance projects, reconstruction associations should also compensate tenants. However, the recent Constitutional Court ruling that the current law is constitutional has put a pause on the controversy.

According to the Constitutional Court on the 2nd, the court ruled on the 23rd of last month with an 8 to 1 opinion that Article 81, Paragraph 1 of the Urban and Residential Environment Maintenance Act (UREMA) is constitutional. This clause specifies compensation only for tenants in redevelopment areas, meaning reconstruction associations have no obligation to compensate tenants. With this constitutional decision, reconstruction area tenants will not receive compensation for losses unless there is an agreement with the association or intervention by local governments, except in cases of natural disasters.

The law was brought before the constitutional review in 2018 when the Seoul Central District Court, which had jurisdiction over the eviction lawsuit between the Bangbae 6 District association and tenants, requested a constitutional review. The Seoul Central District Court viewed Article 81, Paragraph 1 of UREMA as violating the principle of equality. At that time, the court argued, "Distinguishing redevelopment and reconstruction projects based on the condition of maintenance infrastructure may violate the principle of equality, and the provision that tenants cannot receive compensation in reconstruction projects has the potential to be unconstitutional."

However, according to the Constitutional Court decision obtained by Asia Economy, the majority of justices saw a clear difference between redevelopment and reconstruction. The justices explained, "Unlike redevelopment, where becoming a member of the association is mandatory regardless of consent, reconstruction has weaker compulsion," and "Considering the complex circumstances of tenants when even landlords are uncertain about becoming members of the reconstruction project association is very inefficient." They also noted, "Since it takes years to approve the management disposition plan, tenants renting buildings scheduled for or undergoing reconstruction could anticipate suspension of use and enjoyment and reflect this in the lease contract rent."

With the constitutional ruling, the eviction lawsuit between the Bangbae 6 District association and tenants, which had been suspended, is expected to conclude in May. Kang Dongwon, lead attorney at Law Firm Justice, said, "The Constitutional Court's decision makes the defeat of Bangbae 6 District tenants almost certain," but also evaluated it as "a conservative ruling considering social trends such as the implementation of the reconstruction excess profit recovery system."

Although Bangbae 6 District is about to proceed with construction procedures after many twists and turns, it has suffered huge losses. This is because compensation was already paid to tenants in accordance with the single-family house reconstruction tenant measures implemented by Seoul City in April last year. Seoul City promised an increase in floor area ratio as an incentive, but there are concerns about deteriorating profitability due to project delays. A representative of the Bangbae 6 District association said, "After appraisal, about 6 billion KRW in subsidies were paid to tenants," adding, "Interest alone due to project delays amounts to 1.3 billion KRW per month." Furthermore, due to the delay in the project schedule, the private land price ceiling system, whose grace period expires in July, cannot be avoided.

This content was produced with the assistance of AI translation services.