Mandatory Online Subscription for Officetels and Residential Lodging Facilities with Over 50 Units

Ministry of Land, Infrastructure and Transport Improves Building Sale System Centered on Demanders
Construction Resumption if Over 80% of Buyers at Halted Sites Request
Improvement of Design Change Consent Requirements and Introduction of Sale Report Content Change Procedures

[Image source=Yonhap News]

From now on, construction can be carried out on projects where construction has been suspended or delayed for more than six months if more than 80% of the buyers request it and the trust company agrees.

Also, in regulated areas, when selling 50 or more officetel or residential lodging facilities, subscription through the Korea Real Estate Board's 'Chungyak Home' will be mandatory.

On the 3rd, the Ministry of Land, Infrastructure and Transport announced that it will significantly improve the building sales system to the level of apartments to protect the rights of buyers of officetels, residential lodging facilities, etc., establish order in the sales market, and reduce the burden on developers.

The Ministry explained that the system improvement was prompted by ongoing concerns about repeated damages to buyers due to long-term construction suspensions and delays in refunding subscription deposits, as well as the recent expansion of income-type real estate supply such as officetels and residential lodging facilities, and the emergence of new types of real estate products such as section offices (modular) and shared offices, which increased the need to supplement the building sales system.

With this system improvement, in cases where construction has been suspended or delayed for a long time, sales management trust projects will also be able to resume construction through the succession of developer status by the trust company.

Until now, unlike 'land trusts' or 'sales guarantees,' sales management trust projects were practically unable to liquidate or carry out construction on the building if construction was suspended or delayed without the developer's bankruptcy or insolvency.

However, even for projects where construction has been suspended or delayed for more than six months, if more than 80% of the buyers request and the trust company agrees, construction can be carried out.

The regulations on subscription deposits will be specified. To prevent recurrence of delayed refunds of subscription deposits, which have been problematic in some overheated officetel sales markets, refunds must be made within 7 days (excluding holidays) after selecting buyers.

Although the amount, payment method, and refund timing of subscription deposits are stipulated to be included in the sales announcement, there have been controversies related to refund delays due to the lack of detailed regulations on amounts and refund deadlines. To improve this, a revision bill of the 'Building Sales Act' regulating the refund deadline and procedures for subscription deposits has been proposed.

Also, to protect the sales payments made by buyers, sales developers will be required to receive sales payments only through designated accounts stated in sales advertisements (announcements) and sales contracts.

The exceptions to resale restrictions, currently recognized only for inheritance, will be expanded to cases where resale is unavoidable, such as ▲property division due to divorce, ▲auction or public sale due to debt default, ▲unemployment, ▲bankruptcy, and ▲partial transfer of shares to a spouse.

To prevent collateral rights from being established or disposed of by auction on the sales building or the relevant land before completion, collateral rights on the sales building will be restricted from the sales report date until 60 days after the date when ownership transfer registration can be applied for.

In speculative overheated districts or adjusted areas (hereinafter 'regulated areas'), the reference date for determining residents eligible for priority sales within 20% of the sales building will be improved from the sales report date to the sales advertisement (announcement) date, as with housing, to prevent confusion among buyers.

For management associations that must be established and convened by law under the 'Condominium Act' after building use approval and preservation registration, sales advertisements and contracts will be improved to provide detailed guidance on the establishment of the management association and the obligation of the manager to report (such as external audit results) so that buyers can be properly informed.

Furthermore, important matters for buyers such as loan support details, prior building visits, and defect liability periods will be included in sales announcements and contracts.

The scope of buildings subject to mandatory online subscription will be expanded. From now on, in regulated areas, when selling 50 or more officetel or residential lodging facilities, subscription through the Korea Real Estate Board's 'Chungyak Home' will be mandatory.

Currently, mandatory online subscription applies only to officetels with 300 or more units, but due to recent overheating in subscription competition for officetels and residential lodging facilities, causing controversies such as delayed refunds of subscription deposits and irregularities in the sales process, the scope of online subscription will be expanded to include residential lodging facilities and lowered to 50 units or more in speculative overheated and adjusted areas.

To eradicate false or exaggerated advertisements, sales developers must submit a copy of the advertisement for the sales building to the permitting authority (mayor, county, or district office head) when intending to display or advertise. The permitting authority must keep it for two years after the building use approval.

Most buyers learn the actual condition of the building just before or after completion, making it difficult to verify falsehood or exaggeration in advertisements such as flyers at the time of sale. However, by requiring submission of advertisement copies to the permitting authority, false or exaggerated advertisements can be blocked in advance or easily detected afterward.

Under the 'Act on Fairness in Display and Advertising,' false or exaggerated advertisements are punishable by imprisonment of up to two years or fines up to 150 million KRW.

? Reduction of burden on sales developers

The consent requirements and notification methods for design changes will be improved. Currently, to make design changes on important matters such as price increases, reduction of exclusive area, changes in interior/exterior materials, or changes in total floor area by 10% or more, consent from all buyers is required. Going forward, this will be relaxed to require consent from 80% or more, the same level as the Housing Act.

Also, notification methods to buyers for minor design changes, including structural changes within 3% of total floor area, adjustments in building layout without area changes, or changes in total floor area less than 10%, will include electronic methods such as email.

Until now, even if most buyers agreed, failure to obtain unanimous consent sometimes hindered smooth project progress. This improvement is expected to prevent abuse of regulations by imposing excessive consent conditions on sales developers.

Additionally, by adding electronic methods to the previously recognized direct delivery or registered mail (certified mail) for design change notifications, buyers will be notified more quickly, and the burden on sales developers will be reduced.

To eliminate the inconvenience of having to resubmit the initial sales report and attachments when there are changes in reported items, a change report procedure will be introduced.

The approving authority (mayor, county, or district office head) will decide on approval within 5 days for important matters and process minor matters immediately, reducing the burden on developers.

Kim Hyung-seok, Director of Land Policy at the Ministry of Land, Infrastructure and Transport, said, “This sales system improvement focuses on protecting the rights of general building buyers to the level of apartment residents while also considering the establishment of order in the sales market and alleviating inconveniences for developers.”

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