Dunchon Jugong, Conflict Reignites Between Contractor and Association Emergency Committee Over Pre- and Post-Sale Methods

Conflict Between Construction Team and Union Members Over Acceptance of General Sale Price
Construction Team Issues "Work Suspension" Warning Letter to Union
Pressures to Confirm General Sale at Next Month's General Meeting
Union Members Oppose: "Significant Difference from Post-Sale Profits"

[Asia Economy Reporter Donghyun Choi] The Dunchon Jugong reconstruction project in Gangdong-gu, Seoul, has once again been engulfed in turmoil as the construction companies and the union members belonging to the emergency countermeasure committee of the union clash over the acceptance of the general sale price. Two weeks before the general meeting of union members to decide the sales method, the construction consortium announced that it would halt construction if pre-sale does not proceed. While the union executive committee intends to negotiate with the construction consortium, the emergency countermeasure committee members are strongly opposing, calling it an obstruction of decision-making and threatening legal action.

According to the maintenance industry on the 25th, the Dunchon Jugong construction consortium, consisting of Hyundai Engineering & Construction, HDC Hyundai Development Company, Daewoo Engineering & Construction, and Lotte Engineering & Construction, warned in a letter sent to the Dunchon Jugong union the day before, stating, "If the general sale schedule is not confirmed according to the results of the general meeting on July 9, construction will be stopped." The consortium emphasized, "All legal and financial responsibilities arising from this will rest entirely with the union and its members."

The reason the construction consortium issued an unusual warning ahead of the union members' general meeting scheduled for the 9th of next month is due to the growing possibility that the normal sales schedule will not proceed because of conflicts over the sale price. The union initially demanded a general sale price of 35.5 million KRW per 3.3㎡, but the Housing & Urban Guarantee Corporation (HUG) proposed a price in the 29 million KRW range, widening the gap and deepening internal conflicts between the union and its members.

Accordingly, the Dunchon Jugong union plans to decide at the general meeting on the 9th of next month whether to accept the sale price based on HUG’s high-price project review criteria. If the project plan based on HUG’s proposal is rejected at the meeting, two options will arise: either to sell under the private land sale price ceiling system, which will be implemented from the end of July, or to switch entirely to post-sale.

However, the union executive committee and the union members belonging to the emergency countermeasure committee have differing views, making a final decision difficult. Above all, the union and the emergency committee are also in conflict over the simulation results regarding the application of the price ceiling system. The union executive committee commissioned the Korea Future Strategy Institute to conduct a simulation, which showed that a sale price review application is possible up to 35.61 million KRW (median price 31.83 million KRW), but the emergency committee claims this is unreliable. The union executive committee believes that, contrary to the simulation results, the sale price could be lower than HUG’s proposed amount if the price ceiling system is applied. In response, the emergency committee argues, "If the union executive committee does not trust the survey they commissioned themselves, how can anyone trust them?"

Many union members belonging to the emergency countermeasure committee insist on post-sale. They question why the union insists on a lower sale price when post-sale could yield a higher price. In the case of pre-sale, the sale price may change according to the "average sale price of private housing in Seoul," announced by HUG on the 15th of each month, but it is unlikely to exceed 30 million KRW. The emergency committee expects that if post-sale proceeds, the sale price could be raised to 40 million KRW. A representative of the Dunchon Jugong emergency countermeasure committee warned, "The construction consortium’s decision ahead of the general meeting constitutes obstruction of decision-making," and cautioned, "If construction is halted, lawsuits will follow."

The construction consortium is aware that post-sale could increase sales revenue, but it appears to have made this decision due to the astronomical financial costs associated with project delays. In the letter, the consortium expressed concern that "the longer the general sale schedule is delayed, the exponentially higher the financial costs related to project delays and the financing costs for upfront construction expenses will become." Dunchon Jugong, with about 12,000 households, has a project cost of about 3 trillion KRW. Moreover, Hyundai Engineering & Construction, the main contractor of the consortium, recently won the contract for Hannam New Town 3 District, known as the largest redevelopment project in northern Seoul with a project cost of 7 trillion KRW, raising red flags over financial risk management.

The union executive committee is also trying to persuade the emergency committee members, arguing that sales should be expedited according to the sale price proposed by HUG. Choi Chanseong, head of the Dunchon Jugong union, said, "The government has recently introduced strong policies such as the June 17 real estate measures as Seoul housing prices rose," adding, "We must hurry the project to avoid the price ceiling system." He further stated, "Even in the worst case, construction must not be halted," and "We will negotiate again with the construction consortium."

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