Supreme Court: Brokerage of 'Pre-sale Rights' Is Brokerage of 'Buildings'... Not Brokerage of 'Certificates' Under the Licensed Real Estate Agents Act

The Supreme Court has ruled that even if a licensed real estate agent intermediated the sale of apartment pre-sale rights that were prohibited from being resold, they cannot be punished under the Licensed Real Estate Agents Act provisions that penalize brokering the sale of 'certificates' related to real estate whose transfer is prohibited.

This is because, once the prospective buyer is selected or the sales contract is signed for a specific building and unit number of an apartment, brokering transactions such as sales before the apartment is completed does not constitute brokering of a 'certificate' but rather brokering of a 'building.'

Supreme Court, Seocho-dong, Seoul.

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According to the legal community on the 27th, the Supreme Court's Third Division (then presided by Justice Noh Jeong-hee) overturned the original ruling that sentenced A and B, who were indicted for violating the Housing Act and the Licensed Real Estate Agents Act by brokering the resale of apartment pre-sale rights prohibited from resale, and remanded the case to the Uijeongbu District Court. A was fined 7 million won, and B was fined 3 million won in the original ruling.

Previously, the appellate court found both defendants guilty of violating the Housing Act and the Licensed Real Estate Agents Act, but the Supreme Court's remand ruling indicated that the violation of the Licensed Real Estate Agents Act should be acquitted.

The court stated, "The original court's judgment contained errors affecting the verdict, such as misinterpreting and misapplying the scope of Article 33, Clause 5 of the Licensed Real Estate Agents Act."

A, the actual operator of a real estate agency office in Namyangju, Gyeonggi Province, and B, a licensed real estate agent, were prosecuted for brokering five resale transactions of pre-sale rights for apartment C in Dasan New Town in June 2016, where resale was prohibited under the price ceiling system.

Apartment C is a public housing site developed by lifting development restrictions on more than 50% of the area in the metropolitan area, subject to the price ceiling system. The resale or brokerage of resale rights for housing subject to the price ceiling system and the status of those selected as residents was prohibited by presidential decree from June 14, 2016, to June 13, 2017.

However, from June 14 to 16, 2016, the two received pre-sale contracts and other documents from five pre-sale right holders in front of the apartment model house, transferred the pre-sale rights to buyers for premiums ranging from 10 million to 30 million won, and received a commission of 2 million won per transaction from the buyers.

The prosecution charged them with violations of the Housing Act and the Licensed Real Estate Agents Act.

At that time, Article 41-2, Paragraph 1, Subparagraph 2 of the Housing Act prohibited resale or brokerage of resale rights for housing subject to the price ceiling system and the status of those selected as residents before the period specified by presidential decree. Violations were punishable by imprisonment of up to three years or fines up to 30 million won under Article 96, Subparagraph 2 of the same law.

Also, Article 33, Clause 5 of the Licensed Real Estate Agents Act prohibited licensed real estate agents from brokering or engaging in the sale or exchange of certificates related to real estate whose transfer or brokerage is prohibited by relevant laws. Violations were punishable by imprisonment of up to three years or fines up to 20 million won under Article 48, Clause 3 of the same law.

The first trial court found both charges guilty and sentenced A to a fine of 7 million won and B to a fine of 3 million won.

They appealed, but the appellate court upheld the same judgment.

In their appeal, the defendants argued that the prosecutor applied a different provision of the Licensed Real Estate Agents Act than the one originally stated in the indictment, violating the principle of 'no disadvantage or advantage' (불고불리).

However, the court rejected this claim, citing Supreme Court precedents that state, "If there is no substantial disadvantage to the defendant's right to defense, the court may recognize some different facts or amend the applicable law without changing the indictment, without violating the principle of no disadvantage or advantage."

The court judged that since the provision initially cited by the prosecutor was clearly inapplicable to this case, and the indictment included the allegation that "the defendants conspired to broker the sale of certificates related to real estate whose transfer or brokerage is prohibited," it was unlikely that the defendants suffered substantial disadvantage in exercising their defense rights.

The defendants also argued, "We only brokered the sale of 'pre-sale rights,' but the first trial court found us guilty of brokering the sale of 'certificates' related to real estate whose transfer is prohibited."

However, the court stated, "There is no textual or logical difficulty in interpreting pre-sale contracts as 'certificates related to real estate whose transfer or brokerage is prohibited by relevant laws' under Article 48, Clause 3 and Article 33, Clause 5 of the Licensed Real Estate Agents Act, and there is no reason to limit the interpretation of 'certificates' in these provisions to documents such as resident savings certificates under Article 65, Paragraph 1, Subparagraph 2 of the Housing Act," rejecting the defendants' argument.

However, the Supreme Court's judgment differed. The Supreme Court stated, "It is difficult to accept the original court's judgment as is."

First, the court cited Supreme Court precedents, stating, "Criminal laws, especially administrative penal laws enacted to achieve administrative objectives and ensure their realization by punishing violations, require strict interpretation of the text. Therefore, interpreting 'certificates, etc.' in Article 33, Clause 5 of the Licensed Real Estate Agents Act to include pre-sale rights, which are entirely different in form from certificates, solely based on the need to regulate real estate speculation, is not permissible."

It continued, "Therefore, brokering the sale of apartment pre-sale rights cannot be considered as brokering the sale of 'certificates, etc. related to real estate whose transfer or brokerage is prohibited by relevant laws' as stipulated in Article 33, Clause 5 of the same law."

The court further stated, "The defendants receiving pre-sale contracts and other documents from pre-sale right holders and delivering them to buyers can be seen as part of the process of brokering the sale of apartment pre-sale rights."

It added, "Moreover, interpreting 'certificates, etc.' in Article 33, Clause 5 of the Licensed Real Estate Agents Act to include pre-sale rights, which are entirely different in form from certificates, is not permissible. In cases like this, where the sale of apartment pre-sale rights for a building to be constructed in the future with specific building and unit numbers is brokered, it should be regarded as brokering the building itself, which is the subject of brokerage under the Licensed Real Estate Agents Act, rather than focusing solely on the aspect that 'pre-sale contracts, etc.' are delivered to the buyer during the sale process and considering it as brokering the sale of 'certificates related to real estate whose transfer or brokerage is prohibited by relevant laws' under Article 33, Clause 5 of the Licensed Real Estate Agents Act."

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