Supreme Court: "No Need for All Households to Exercise Right to Request Sale in Reconstruction Consent"

The Supreme Court has made its first ruling that the exercise of the right to request a sale, which forces a unit owner who did not agree to the reconstruction resolution under the Act on Ownership and Management of Buildings to sell their unit ownership at market price, does not require all other unit owners holding the right to request a sale to exercise it together.

Unit ownership refers to owning exclusive parts separately when a single building can structurally be used as multiple independent buildings. Apartments or multi-family houses with several households in one building are typical examples.

Supreme Court, Seocho-dong, Seoul.

According to the legal community on the 21st, the Supreme Court's Third Division (Presiding Justice Oh Seok-jun) upheld the lower court's ruling in favor of the plaintiffs in the final appeal trial of a lawsuit filed by eight unit owners of a multi-family house against Mr. Lee, requesting transfer of ownership registration.

The plaintiffs are unit owners of a two-story above ground and one basement floor multi-family house located in Wolgye-dong, Nowon-gu, Seoul. This multi-family house was divided into nine units owned separately, and due to building aging, a management meeting was held on June 12, 2018, where a reconstruction resolution was made.

However, the issue arose because one day before the management meeting, Mr. A, who owned 102 basement unit, transferred his 29% share to Mr. Lee.

The reconstruction resolution was made with the consent of all units, including Mr. A who held 71% of the 102 unit's shares, except for the eight plaintiffs. Mr. Lee, who acquired part of the shares of unit 102, insisted on buying his shares at 40 million KRW, which was more than 5 million KRW above the market price.

Eventually, in September 2018, the plaintiffs and Mr. A urged Mr. Lee to respond whether he would participate in the reconstruction. When no response was received within two months, they filed a lawsuit demanding that Mr. Lee transfer his shares to the plaintiffs and Mr. A in equal ninths and deliver unit 102, exercising the right to request a sale.

Article 48 of the Act on Ownership and Management of Buildings stipulates that when a reconstruction resolution is made, the person who convened the meeting must request in writing a response from unit owners who did not agree to the reconstruction about their participation. The unit owners must respond within two months, and if they do not respond within the period, they are deemed to oppose the reconstruction. In this case, unit owners who agreed to the reconstruction or responded that they intend to participate may request the unit owners who expressed non-participation, did not respond within two months, or their successors to sell their unit ownership and land use rights at market price.

The first trial ruled in favor of the plaintiffs. The court ordered Mr. Lee to pay 34.8 million KRW to the plaintiffs and simultaneously transfer his shares in ninths to the plaintiffs.

Mr. Lee argued procedural issues with the plaintiffs' lawsuit in the appellate court.

He pointed out that during the first trial, Mr. A transferred his 29% share of unit 102 to Mr. B and withdrew the lawsuit, and that Mr. B, who received Mr. A's shares, applied for and then withdrew participation in the lawsuit succession.

Mr. Lee claimed that the right to request a sale under Article 48 of the Act on Ownership and Management of Buildings is a constitutive right (the effect of sale occurs upon exercising the right), and that the plaintiffs' lawsuit to request a sale is an essential joint lawsuit requiring unity, so since Mr. A withdrew the lawsuit during the trial, the plaintiffs' lawsuit is improper.

However, the court did not accept Mr. Lee's argument.

The court stated, "An essential joint lawsuit is when multiple people must jointly manage or dispose of a single substantive right or legal relationship, that is, when the management and disposal right is jointly held." It added, "Therefore, it presupposes that the constitutive right is held by multiple people or is directed at multiple people."

Then the court noted, "However, Article 48, Paragraph 4 of the Act on Ownership and Management of Buildings only stipulates that 'after the two-month period of Paragraph 2, each unit owner who agreed to the reconstruction resolution or responded that they intend to participate may exercise the right to request a sale,' so it is difficult to see that the constitutive right to request a sale is jointly held by all unit owners and must be exercised jointly."

The right to request a sale is individually vested in each unit owner, so it can be exercised by some or all of them.

Finally, the court concluded, "Even if the right to request a sale is not exercised jointly, it is difficult to see that the legal relationship becomes too complicated or that an inequitable result occurs," and "therefore, it cannot be considered an essential joint lawsuit where all plaintiffs who agreed to the reconstruction must jointly sue all other unit owners who did not agree."

However, considering that the number of plaintiffs decreased by one due to Mr. A's withdrawal, the appellate court ruled that Mr. Lee must pay the sale price (34.8 million KRW) and simultaneously transfer his shares in eighths to the plaintiffs.

The Supreme Court also agreed with this appellate court ruling.

The court stated, "The purpose of Article 48 of the Act on Ownership and Management of Buildings is to exclude unit owners who do not participate in reconstruction from the unit ownership relationship so that all unit owners can form a state of participation in reconstruction. It allows unit owners participating in reconstruction to request the sale of unit ownership and land use rights of non-participating unit owners, and considering cases where unit owners have difficulty bearing financial burdens, third parties with financial capacity may also exercise the right to request a sale if designated by the agreement of all reconstruction participants."

It continued, "In light of the wording and purpose of Article 48 and the right to request a sale, the right to request a sale stipulated in Article 48 is vested individually in each right holder, and each right holder may exercise it alone, jointly with some, or all together."

This means that exercising the right to request a sale and the subsequent claim for transfer registration do not necessarily require all right holders to act jointly.

A Supreme Court official said, "This ruling is the first to explicitly state that under the Act on Ownership and Management of Buildings, when there are multiple right holders to request a sale, the exercise of each right does not have to be done jointly, and the lawsuit seeking enforcement of ownership transfer registration is not an essential joint lawsuit."

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