The Public Rental Housing Special Act That Kept Me Awake Just Before Buying My Own Home

First, prospective tenants for sale conversion... Not in line with legal fairness
Ministry of Land's retroactive interpretation... Rental company preparing lawsuit

[Asia Economy Honam Reporting Headquarters Reporter Lee Hyung-kwon] The Public Housing Special Act (hereinafter referred to as the Special Act), which was amended on December 22 last year and came into effect on the 23rd of last month, along with the Ministry of Land, Infrastructure and Transport's (hereinafter referred to as MOLIT) authoritative interpretation, is causing distress to tenants of rental apartments who are on the verge of owning their homes.

The priority purchase conversion candidates of Suncheon Songbo Apartment, who are facing the conversion after five years of tenancy, stated, "The Special Act, which is making the dream of homeownership for ordinary people even more difficult, should be re-amended to reflect reality or MOLIT's authoritative interpretation should be corrected."

A representative of the Songbo Apartment tenants' association, Mr. A, said, "The company says it has no money," adding, "We tried to wrap things up through general sales, but the Special Act has made it even more difficult."

He continued, "We foresaw the problem," and said, "We tried to speed up the sales and registration process, but the obstacles were too severe, making it difficult."

Before the amendment of the Special Act, on December 18 last year, Suncheon City approved the priority purchase conversion, and on January 15 this year, it also approved general supply for the remaining units.

The priority purchase conversion units number 529, with an average conversion price of 226 million KRW for an exclusive area of 84㎡.

The general supply price for the remaining units is an average of 349 million KRW, based on the appraised value.

Considering that the supply price for apartments in Suncheon City recently reached the 400 million KRW range for an 84㎡ exclusive area, it seemed that the 529 priority purchase conversion units had been worth waiting for over five years.

However, due to the effect of the amended Special Act from the 23rd of last month, both the rental company and tenants have found themselves in a situation where they can neither proceed nor retreat.

In other words, the rental company, Songbo Pineville Co., Ltd., intended to repay the fund loan from the ownership transfer of the priority purchase units using the proceeds from the general sales of the remaining units, but a red light has been turned on.

Article 50-3 (Priority Purchase Conversion of Public Rental Housing, etc.) Paragraph 4 of the Special Act was amended on December 22 last year and came into effect on the 23rd of last month, stating, "After the priority purchase conversion supply, the remaining housing supply may be sold to a third party by the public housing operator at a price not exceeding the conversion price."

MOLIT sent an authoritative interpretation to Suncheon City stating, "All public rental housing must be converted or sold to a third party at a price not exceeding the approved conversion price by the relevant city, county, or district."

According to MOLIT's interpretation, Songbo Apartment cannot conduct general sales at 349 million KRW after the 23rd of last month.

If the rental company violates this, it must pay a fine equivalent to twice the profit.

Criticism has been raised regarding MOLIT's authoritative interpretation.

Specifically, there is a view that applying the amendment retroactively to public rental housing that had already received conversion approval before the law was amended is problematic.

Accordingly, a rental company official said, "We are preparing for litigation," which inevitably increases the worries of tenants who are about to convert their leases.

Meanwhile, if the rental company were to conduct general sales at the average priority purchase conversion price of 226 million KRW, it would have to pay about 28 billion KRW, but it has no money.

Songbo Pineville Co., Ltd., which purchased Songbo Apartment ahead of the conversion from Songbo Construction Co., Ltd., the builder of the apartment complex, is a company with only a few hundred million KRW in capital.

Tenants said, "Asking the rental company to pay 28 billion KRW is like pushing them toward bankruptcy."

If the rental company goes bankrupt, the priority purchase candidates are expected to bear a fund loan of 72 million KRW per household and an already paid balance of 40 million KRW.

Furthermore, tenants raised concerns about the Special Act and MOLIT's interpretation, stating, "There is no equity," and criticized, "Have MOLIT officials and lawmakers ever lived in public rental housing?"

Tenants pointed out that if the sales price to priority purchase candidates who have faithfully complied with the Special Act for five years and to third parties (including ineligible persons) is below the conversion price, it is unfair.

In other words, according to MOLIT's interpretation, even if public housing tenants lose their priority purchase qualification (become ineligible) by acquiring a house or sales rights, they can still purchase at the priority purchase conversion price through collective bargaining, etc.

They argue that if third parties purchasing through general sales receive the units at the priority purchase price, it is unfair to the residents who have maintained their priority purchase qualification for five or ten years in public rental apartments.

Accordingly, public rental housing tenants facing priority purchase conversion hope that MOLIT will pursue a correct authoritative interpretation and re-amend the law to reflect the legislative intent.

Meanwhile, there are also claims that the method of calculating the priority conversion price for public rental housing facing conversion after ten years should be improved.

For public housing converted after ten years, the price is set only below the appraised value, leading to claims that the conversion price guarantees only the builder's profit.

In other words, if the sales price is determined solely by the appraised value without including the construction cost at the time of building ten years ago, and apartment prices continue to rise as they do now, the builder's profit becomes excessively large.

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