Obligation to Provide Final Payment and Mobile Defect Information After Defect Correction

Strengthening Defect Management for Gonggong Jiwon Min-gan Imdae Jutaek

[Asia Economy Reporter Minyoung Kim] The government is revising the Rental REITs Quality Inspection Guidelines to prevent poor finishing work during the construction phase. Additionally, rental business operators (Rental REITs) will withhold part of the final construction payment and only release the withheld balance once it is confirmed that there are no issues with occupancy. The progress of defect repairs will be provided to tenants through mobile applications (apps) and other means.

The Ministry of Land, Infrastructure and Transport announced on the 20th that after conducting a full survey on the defect repair status of public-supported private rental housing occupied since last October, it has prepared and will implement improvement measures containing these details.

Public-supported private rental housing: Housing that allows non-homeowners and others to live stably for 10 years at affordable rents (70% to 95% of market price) with rent increases capped at 5%. Rental REITs construct and rent these homes with investment from the Housing and Urban Fund or support from public land.

First, to prevent poor finishing work during the construction phase, the 'Rental REITs Quality Inspection Guidelines' will be revised to strengthen construction companies' process management and supervision responsibilities. Furthermore, the number of dedicated quality management personnel at HUG, the major shareholder of Rental REITs, will be increased from two to three and gradually expanded, with professional firms also utilized during inspections. At the occupancy stage, rental business operators (Rental REITs) will inspect all units for construction status and defects immediately before the move-in date. It will be clearly specified that public-supported private rental housing is included in the inspection targets of joint apartment quality inspection teams of each city and province, which previously conducted inspections at their discretion, thereby strengthening local governments' management and supervision.

After investigating the status of defect repairs, a system will be implemented to pay the final construction balance only when there are no issues with occupancy. Rental business operators (Rental REITs) will withhold part of the final payment to construction companies and release the withheld balance only after confirming through investigation that there are no problems with occupancy. The use of mobile apps and other tools will be mandated to provide tenants with information on the progress of defect repairs.

A plan has also been established to address defects within 15 days of receipt. Going forward, if tenants report defects during the occupancy phase, repairs must be completed within 15 days. Rental business operators will keep records of defect repairs and related documents for 10 years, allowing tenants to review them. Additionally, rental business operators (Rental REITs) will add defect repair-related questions to the residential service satisfaction survey conducted one month after occupancy. The results of defect repairs will be reflected in evaluations when the construction company participates in future public-supported private rental housing project bids, and construction companies with poor defect repair records will be excluded from these projects.

Minister of Land, Infrastructure and Transport Won Hee-ryong stated, "During the construction phase, we will strengthen process and quality management of finishing work, and before occupancy, conduct defect inspections for all units so that the final construction payment is made only after defect repairs. We will also establish regulations requiring defect repairs within 15 days of tenant reports during occupancy and exclude construction companies with poor defect repair records. We aim to improve quality management and defect repair systems across all stages: construction, occupancy, and residence."

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