Illegal 'Bokdeunggi' Rampant in Pangyo Public Rental Conversion to Sale

No Trading Rights... Pre-sale Transfers Flooding Before Conversion

Sale Prices at 60-80% of Market Value
High Possibility of Premium Transactions

Housing Owned by LH
Illegal Private Transactions Without Legal Rights
Difficult to Protect and No Punishment Measures Available

[Asia Economy Reporter Lee Chun-hee] It has been revealed that public rental apartments in Pangyo New Town, which sparked controversy over the 'appropriate sale price,' are being traded in advance even before the ownership transfer is completed. Trading these apartments as tenants without securing ownership is illegal, but the Ministry of Land, Infrastructure and Transport and Korea Land and Housing Corporation (LH), the responsible authorities, say they have no effective means to punish the parties involved in the transactions.

According to frontline real estate agencies on the 12th, the 10-year public rental apartments in the Pangyo New Town area of Seongnam City, Gyeonggi Province, are steadily undergoing the sale conversion process. From One Village Complex 12 (428 households), which began the sale conversion in September last year, to Sanun Village Complex 13 (809 households), scheduled to start conversion in the second half of this year, a total of seven complexes comprising 3,952 households will have their sales transactions freed.

During this process, it is known that sales transactions of public rental apartments subject to sale conversion are actively taking place in the Pangyo area. For example, the sale price for 101~118㎡ (exclusive area) units in One Village Complex 12, where the sale price was first determined, was set at 874.27 million to 1.01252 billion KRW. Considering that a 101㎡ unit in the adjacent One Village Complex 11 was traded for 1.38 billion KRW in February, there is a price difference of up to about 500 million KRW. LH explains that the prices are 60~80% of the surrounding market prices, making them relatively affordable.

In One Village Complex 12, five months after the sale conversion began, a 101㎡ unit was reported in actual transaction records in February at 1.12 to 1.15 billion KRW. Although this is about 300 million KRW higher than the sale price, it is still approximately 200 million KRW cheaper than nearby market prices. An industry expert analyzed, "Even considering various factors, if the price difference is this significant, it is highly likely that the transaction was made before the sale conversion with a premium added on top of the sale price."

In fact, local real estate agencies reportedly explain to buyers, "Properties that have not yet undergone sale conversion can be purchased at prices lower than market value," and "By signing a preliminary contract and sending the sale price plus a premium to the tenant, once the sale conversion is completed and LH transfers the registration to the tenant, the registration can be immediately transferred again, enabling the transaction."

This type of transaction is called a so-called 'double registration' transaction. It is an illegal transaction method where a pre-contract is made on a sale right with resale restrictions, and once the restrictions are lifted, the official registration is transferred. This practice has now spread even to public rental sale conversions.

Currently, tenants residing in public rental sale conversion housing must pay the sale price within one year from the start of the sale conversion to purchase the property. If they fail to prepare the funds, ownership remains with LH, and tenants receive only their deposit back and must vacate. For tenants without funds to convert to ownership, trading through double registration is inevitably attractive as it allows them to secure a significant amount of money.

Apartment complex in Won Village, Pangyo New Town, Seongnam-si, Gyeonggi-do.

The problem is that since the sale conversion has not yet taken place, LH still legally owns the housing. The current residents are only tenants and do not have the right to trade the property. Local agencies say, "Most nearby transactions are conducted this way," and "If you are uneasy about pre-signed sales contracts, you can take safety measures such as notarization," according to reports.

The issue is that since the contract is between parties without legal rights at the time of signing, it is uncertain whether actual protection can be guaranteed. On real estate communities, posts expressing anxiety such as "I heard you can trade through double registration, but I don't know if it's allowed" frequently appear.

LH maintains that since these are private transactions, it is difficult to intervene. An LH official stated, "The act of a tenant first converting the sale and then selling to a third party is conducted under the principle of freedom of contract," and added that LH does not have the authority to inquire into the source of the sale price.

The Ministry of Land, Infrastructure and Transport, the supervising authority, said, "We recognize the possibility of legal violations," and explained, "Real estate agents who mediate such transactions can be subject to punishment." Under the current Licensed Real Estate Agent Act, brokerage of real estate sales without ownership transfer registration is considered an act promoting real estate speculation, and licensed agents involved can face imprisonment of up to three years or fines up to 30 million KRW. However, the ministry expressed a reserved stance, stating that buyers and sellers should be judged on a case-by-case basis.

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