[Taemin Ryu's Real Estate A to Z] Gwangju Hwajeong I-Park Reconstruction... Contract Cancellation? Compensation?

On the 4th, at the HDC Hyundai Development Company Yongsan headquarters in Seoul, Chairman Chung Mong-gyu and Hyundai Development Company executives are greeting attendees at a press conference announcing additional measures related to the Gwangju Hwajeong-dong I-Park accident response. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Ryu Tae-min] Recently, HDC Hyundai Development Company promised to completely demolish and reconstruct the I-Park complex in Hwajeong-dong, Gwangju, where a collapse accident occurred during construction, causing deep concerns among prospective residents. This is because prospective residents can receive their existing contributions and penalties if they cancel the contract, whereas if they maintain the contract, they can receive compensation for delayed move-in.

According to regulations, prospective residents of the Hwajeong-dong I-Park in Gwangju can cancel their contracts if the move-in is delayed by more than three months from the scheduled move-in date. Since the move-in for this complex was scheduled for the end of November this year, contract cancellation will be possible from April 1 next year.

If the sales contract is canceled, buyers can receive penalties. For example, if a unit of 84㎡ was purchased for 570 million KRW, the buyer would get back the deposit and four installments of the interim payment totaling 285 million KRW, and receive a penalty of 10% of the sales price, which is 57 million KRW. They also receive interest on the deposit and interim payments already paid. Applying the commercial law interest rate of 6% from 2019 until December last year and on the interim payments until April 1 next year, the total interest amounts to 55.86 million KRW. In other words, the total amount receivable as penalty and interest is about 112.86 million KRW.

On the other hand, if the contract is maintained until the complete demolition and reconstruction are finished, compensation for delayed move-in can be received according to the contract’s late fee rate. According to the standard contract, if the developer fails to meet the scheduled move-in date, they must pay delay compensation by multiplying the deposit and interim payments by the late fee rate. If the late fee rate applied to the Hwajeong I-Park delay compensation is around 18%, as industry forecasts suggest, a person who signed a sales contract for an 84㎡ unit could receive up to 106 million KRW annually as compensation. If it takes 70 months from demolition to completion as announced by HDC Hyundai Development Company, the total compensation would be about 600 million KRW.

However, lawyer Park Jae-cheon, who is preparing a joint lawsuit related to Hwajeong I-Park, stated that the contractual delay penalty rate is about 6.23%, contrary to industry forecasts. In this case, the annual delay compensation would be about 35.51 million KRW, and calculating the completion period as 70 months, the total compensation would be around 200 million KRW.

Lawyer Kim Ye-rim of Deoksu Law Firm advised, "Since reconstruction will be done through complete demolition, the future brand value is not expected to decline significantly," and added, "If you have sufficient financial capacity, it may be advantageous to wait for reconstruction and receive compensation for delayed move-in."

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