Supreme Court: "The 'No Homeownership' Requirement for Transferees of Leasehold Rights in Rental Housing Is Based on 'Registration'"

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The Supreme Court has ruled that whether a person qualifies as a 'homeless household member' eligible to receive a leasehold under the Rental Housing Act must be determined based on the registry at the time of the leasehold transfer.

Even if the transferee had already entered into a contract to sell a house and could be considered effectively homeless, if the ownership transfer registration has not yet been completed, the leasehold transfer is invalid.

The Supreme Court's Second Division (Presiding Justice Cho Jae-yeon) announced on the 16th that it overturned the lower court's ruling in favor of plaintiff A in the ownership transfer registration lawsuit against public construction rental housing operator B and remanded the case to the Daejeon District Court.

On May 30, 2016, A entered into a sales contract to sell an apartment located in Jung-gu, Daejeon, where he had been living, to C. Then, on June 17 of the same year, with the consent of rental operator D, he acquired a leasehold for a public rental housing unit in Sejong City from E.

Starting from July 15, 2016, A completed the move-in registration for the rental housing and began living there. On July 25, in accordance with the sales contract, he transferred ownership registration of his Daejeon apartment to C.

On December 5, 2017, B purchased the rental housing where A was living from D, completed the ownership transfer registration on January 5, 2018, thereby succeeding the rental operator status, and on September 13 of the same year, signed a new lease contract with A under the same conditions as before.

The mandatory rental period for the rental housing where A lived was until September 30, 2019. Starting January 2018, B began discussions with representatives of rental housing tenants regarding early purchase conversion procedures, and tenants submitted early purchase conversion application confirmation letters to B in November of the same year.

A also submitted an early purchase conversion application confirmation letter on November 5, 2018, but B requested additional explanations in December and, despite A's explanations, issued a final disqualification on January 29, 2019.

The reason was that A was registered as the owner of the apartment in Daejeon at the time of acquiring the leasehold, thus not qualifying as homeless and failing to meet the eligibility for purchase conversion.

A, who was denied the public rental housing purchase conversion, filed a lawsuit against B.

The key issue in the trial was whether A could be considered homeless under the Rental Housing Act.

At the time A acquired the leasehold, Article 19 of the Rental Housing Act (completely revised in 2015 as the Special Act on Private Rental Housing) restricted tenants from transferring or subleasing leaseholds to others, allowing exceptions only with the rental operator's consent in cases prescribed by Presidential Decree.

Article 18, Paragraph 1, Subparagraph 1 of the Enforcement Decree at that time stipulated that tenants could transfer or sublease leaseholds to 'homeless household members' when relocating due to work, livelihood, or medical treatment.

The first and second trials ruled in favor of A.

The second trial court stated, "In our legal system, where registration is a requirement for establishing real rights in real estate, the plaintiff was the owner of the existing house until July 25, 2016," but added, "Due to the principle of registration establishment, interpreting that a tenant who has entered into a sales contract to sell the existing house but has not completed the ownership transfer registration within a reasonable period after the transfer date is not a 'homeless tenant' is excessively formalistic and inconsistent with the purpose of the Rental Housing Act, which aims to stabilize citizens' housing."

However, the Supreme Court's judgment differed.

The Supreme Court ruled that whether one is homeless must be judged based on the registry, and therefore A was never qualified to receive the public rental housing leasehold.

The court stated, "The Rental Housing Act and related laws generally prohibit the transfer of leaseholds by tenants but allow exceptions if the transferee is a 'homeless household member' and the rental operator consents after verifying the transferee's housing ownership. The purpose is to prevent rental housing supplied for public housing stability from being traded for speculation or investment, thereby securing housing rights for homeless low-income citizens."

The court further explained, "A 'homeless household member' who is exceptionally allowed to transfer leaseholds under the Rental Housing Act means a member of a household where no member owns a house at the time of the leasehold transfer. The ownership of a house should be interpreted universally according to the common understanding of homelessness in society and must be determined based on whether the house is registered in the building registry unless there are grounds for nullity or other special circumstances."

Additionally, the court concluded, "Since the plaintiff did not complete the ownership transfer registration of the existing house when acquiring the leasehold from the previous tenant of the rental apartment, it is clear from the building registry that he owned the existing house. Unless the registration is null or there are special circumstances, it is difficult to consider him a homeless household member eligible to receive the leasehold of this rental apartment."

It added, "If the plaintiff was not a homeless household member at the time of the leasehold acquisition, the leasehold transfer contract between the plaintiff and E violates the Rental Housing Act and related laws and cannot be recognized as valid. The fact that rental operator D consented to the transfer or that the plaintiff later became a homeless household member while actually residing in the rental apartment cannot change this."

A Supreme Court official stated, "This ruling clarifies that the criterion for determining 'housing ownership' in the requirement for homeless household members eligible to acquire leaseholds of public construction rental housing under the Rental Housing Act is the possession of real rights (ownership) as a substantive legal right. It is the first ruling to declare that leasehold transfer contracts violating this are invalid. We expect this to serve as a standard for lower courts in similar cases in the future."

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