Court: "Promise to Refund Regional Housing Association Contributions is 'False', Contract is 'Void'"

Seoul Central District Court / Photo by Moon Honam munonam@

[Asia Economy Reporter Seongpil Cho] A local housing cooperative's written confirmation promising to refund members' contributions and administrative fees if the apartment construction failed was deemed false, and the related contract was ruled invalid by the court.

On the 28th, according to the legal community, Judge Kangmin Park of the Seoul Central District Court Civil Division 46 ruled in favor of plaintiff A in a lawsuit demanding the return of unjust enrichment against housing cooperative B. The court stated, "It is reasonable to conclude that the defendant deceived the plaintiff into signing the cooperative membership contract by implying that the full contribution would be refunded if the project failed," adding, "Since the plaintiff lawfully canceled the membership contract by expressing their intention, the defendant is obligated to return the contributions."

In January 2019, A paid 37 million KRW, including member contributions and administrative fees, to cooperative B, which was promoting the construction of an apartment in Paju-si, Gyeonggi Province, and signed a membership contract. The condition was that A would be allocated one unit upon completion of the apartment. At the time of the contract, cooperative B issued a confirmation letter promising to refund the full amount of contributions and administrative fees if the project failed due to their fault.

After cooperative B failed even to obtain approval for the establishment of the cooperative, the first step of the project, A filed a lawsuit demanding the return of contributions and administrative fees, stating their intention to withdraw from the cooperative. A argued, "Since cooperative B did not obtain approval for the establishment of the local housing cooperative, I can withdraw from the cooperative at will," and "Cooperative B is obligated to return the contributions." A also claimed, "Cooperative B lacks the ability to fully refund the contributions, so the confirmation letter is false," and "Cooperative B engaged in deceptive practices related to the assurance confirmation."

The court found all of A's claims valid. The court stated, "The plaintiff likely would not have joined the cooperative if the assurance confirmation letter had not existed," and "The defendant induced the plaintiff to sign the membership contract with an invalid confirmation letter that did not go through a general meeting resolution." The court further noted, "Local housing cooperatives spend funds contributed by members on expenses and have no separate profit activities, so they do not have the capacity to fully refund contributions if the project fails," and "The defendant did not clearly inform the plaintiff of this fact."

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