Supreme Court Rules "Excess Amount Over Legal Standard in Rental Apartment Sale Conversion Price Must Be Returned"

[Asia Economy Reporter Baek Kyunghwan] The Supreme Court has ruled that the unfair profits gained by inflating the sale price during the conversion of rental apartments to sale apartments must be returned to the residents.

On the 23rd, the Supreme Court's First Division (Presiding Justice Lee Heung-gu) announced that it upheld the appellate court's ruling partially in favor of the plaintiffs in the unfair profit refund lawsuit filed by tenants of rental apartments against Booyoung Housing.

Booyoung Housing received approval for a public construction rental housing project in Suncheon City in May 1997 and began construction. After the mandatory rental period of five years following completion, it accepted applications from residents for sale conversion. At that time, Booyoung Housing set the sale conversion prices at 70,709,000 KRW for the first floor, 72,750,000 KRW for the second floor, 74,350,000 KRW for the third floor, and 74,900,000 KRW for the fourth floor and above.

However, the tenants filed a lawsuit claiming that Booyoung Housing set the sale conversion prices higher than the legal standards and demanded a refund of the excess amount. They argued that construction costs should be based on the actual costs incurred, but Booyoung Housing used the standard construction costs as the basis and also increased the land cost calculation ratio.

The first trial court dismissed the tenants' claims, stating it was difficult to view Booyoung Housing as having gained unfair profits. The court calculated the sale conversion price as 74,453,000 KRW regardless of floor level according to regulations. This meant that units on the first to third floors were priced lower, while units on the fourth floor and above were priced about 447,000 KRW higher. Therefore, the court did not recognize overall unfair profits by Booyoung Housing because the lower prices on floors one to three offset the higher prices on floors four and above.

The appellate court ruled that Booyoung Housing had gained unfair profits from units on the fourth floor and above separately and ordered a refund of 447,000 KRW per unit to those residents. Booyoung Housing appealed the second trial ruling, but the Supreme Court dismissed the appeal.

The Supreme Court stated, "The regulations concerning the standards for calculating sale conversion prices are mandatory laws," and "The construction costs forming the basis for calculating the sale conversion price should be understood as the actual construction costs incurred within the range of standard construction costs unless there are special circumstances."

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