Supreme Court Rules "Owners of Public Apartments on Jongno National Land Do Not Have to Pay Land Use Fees"

Supreme Court, Seocho-dong, Seoul.

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] Korea Asset Management Corporation (hereinafter referred to as the Corporation) filed a lawsuit against the owners of public apartments newly built on state-owned land in the 1960s, demanding land usage fees, but lost in the Supreme Court.

The Supreme Court's First Division (Presiding Justice No Tae-ak) announced on the 21st that it overturned the lower court's ruling in favor of the Corporation in the unjust enrichment refund claim lawsuit filed against the current and former owners of an apartment in Jongno-gu, Seoul, and remanded the case to the Seoul High Court.

The Corporation filed a lawsuit against 61 defendants, claiming a total of over 700 million KRW in unjust enrichment and interest, ranging from about 660,000 KRW to 14.3 million KRW depending on the apartment holding period. The first and second trials had ruled in favor of the Corporation, but the Supreme Court reversed the decision.

The court stated, "The lower court's judgment contains errors that affected the verdict by misunderstanding the legal principles regarding the burden of proof for unjust enrichment and failing to conduct necessary hearings," as the reason for overturning and remanding the case.

Seoul City received permission to use 3,274㎡ (approximately 990 pyeong) of state-owned land in Jongno-gu, then built public apartments and sold them in 1962. Registration for the apartment buyers was completed in 1973, but only ownership transfer registration for the exclusive parts of the building was done; the land, which was not originally included in the sale, was neither registered for ownership transfer nor subject to a separate usage contract.

The land in question was originally administrative property but was deregulated in July 1989, with the managing authority changing from the Ministry of the Interior to the Ministry of Finance, and later to the Ministry of Strategy and Finance.

The Corporation, entrusted by the Minister of Strategy and Finance with the authority to manage and dispose of the state-owned apartment land, imposed compensation fees on apartment buyers and those who purchased apartments from them in 2010, claiming they used the land without occupancy rights.

However, the apartment owners lost the lawsuit to cancel the compensation fee imposition in 2012.

The court ruled that Seoul City implicitly consented to the buyers' possession or use and enjoyment of the land by building the apartments on the state-owned land and selling them to the buyers, and that the state implicitly allowed the buyers to possess and use the land even after deregulation.

The Corporation filed another unjust enrichment refund claim lawsuit in 2018.

The first and second trials reached conclusions opposite to the previous administrative lawsuit results.

The first trial court stated, "The defendants only purchased or received exclusive parts of the apartments, so unless there are special circumstances indicating that the defendants have the right to occupy and use the land free of charge, the defendants caused damage to the plaintiff equivalent to the land usage fee and gained benefits of the same amount. Therefore, the defendants are obligated to pay the plaintiff unjust enrichment equivalent to the land usage fee and delayed damages," fully accepting the Corporation's claim.

In the trial, the defendants argued that ▲the difference between the sale price in the sales contract and the sale price in the deed could be considered the land sale price or usage fee, ▲Seoul City, as the project entity for apartment construction and sale, likely received land development rights from the state including free occupancy and usage rights for the buyers, ▲the sales contract clause stating "the buyer cannot transfer the house to others until full payment is made" implies that buyers or purchasers have free occupancy and usage rights to the land, and ▲the buyers or purchasers have never been charged land usage fees or compensation fees by the state, implying implicit consent for free occupancy and usage of the land. However, none of these arguments were accepted.

The second trial court reached the same conclusion.

In particular, the appellate court cited Supreme Court precedents and detailed the burden of proof in unjust enrichment refund claims.

The court emphasized, "Cases where the right to claim unjust enrichment refund arises can be divided into two types: unjust enrichment from improper provision and unjust enrichment from infringement. In the infringement type, where the claim is based on gaining benefits by infringing on another's property rights, the defendant (in this case, the apartment owners) bears the burden of proving that they have legitimate grounds to retain the benefits."

It found that the evidence submitted was insufficient to prove that the defendants had legitimate grounds to occupy and use the land free of charge.

However, the Supreme Court's judgment differed.

The court stated, "The lower court accepted the plaintiff's claim on the grounds that the defendants only purchased or received exclusive parts (buildings) and did not purchase or lease the land, thus lacking the right to occupy and use the land, and rejected the defendants' claim of having the right to occupy and use the land free of charge due to lack of proof. However, it is difficult to accept the lower court's judgment as is."

The court pointed out, "This apartment was built and sold by Seoul City on state-owned land to provide public housing at affordable prices to low-income citizens without homes, aiming to contribute to the stability of citizens' housing life and the promotion of public welfare." It added, "The state permitted Seoul City to use and enjoy the state-owned land for this purpose, so when Seoul City built the apartment and sold it to the initial buyers, it implicitly consented to the buyers' possession, use, and enjoyment of the land, and such consent likely extends to those who purchased the exclusive parts of the apartment from the initial buyers."

It concluded, "Therefore, it would be difficult to find that the defendants, as apartment buyers, occupy the land without legitimate grounds and bear the obligation to return unjust enrichment to the plaintiff."

The court further stated, "Given these circumstances, the lower court should have comprehensively examined the apartment sale process, the purpose and legislative intent of related laws, and the attitudes of the state and Seoul City before and after the apartment sale to determine whether the state consented to the apartment buyers' free use and enjoyment of the land, and if so, whether such consent remains effective as of the date of the lower court's final hearing, thereby deciding whether to recognize the plaintiff's unjust enrichment refund claim against the defendants."

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