[Construction/Real Estate Lawyer] What is the standard for determining a "one home per household" owner when selling a reconstructed apartment in a speculation overheated district? – Contract date vs Registration date
Hello, I am Attorney Bae Gi-hyung from Cheongchul Law Firm.
When selling a reconstructed apartment located in a speculation overheated district, the Urban and Residential Environment Improvement Act (hereinafter referred to as the ‘Urban Improvement Act’) generally stipulates that after obtaining approval for the establishment of an association, purchasing an apartment does not grant qualification as an association member to prevent speculative demand. However, in the case of selling a property owned by a 'one home per household' owner who has owned for more than 10 years and lived for more than 5 years, it is exceptionally allowed for the buyer to inherit membership of the association.
However, a tricky problem may arise here. While the seller is selling the reconstructed apartment, there may be a period during which they temporarily own two houses while searching for a new home to move into. For example, if the seller pays the remaining balance for the new house and completes the registration first, then receives the remaining balance for the sale of the reconstructed apartment and transfers the registration a few days later. Will the buyer lose qualifications as an association member due to this 'temporary ownership of two homes'? When should the seller be considered a 'one home per household' owner? Let's take a closer look at the content and meaning based on the Seoul Administrative Court's ruling 2019GuHab61700, which provides a clear standard for this important question.
[Question]
In other words, it is unfair to block the transfer of membership solely based on the fact that they were temporarily in a two-home state at the time of the transfer of ownership registration.
The core issue of this case pertains to when the time of judgment regarding the seller's qualification as a 'one home per household' owner occurs, specifically in cases where a 'temporary two homes' state arises during the process of selling a reconstructed apartment and buying a new home. If the judgment time for being a 'one home per household' is considered to be at the time of the transfer of ownership registration, this creates a practical constraint that the registration of the new home must occur after the sale of the reconstructed apartment, leading to significant repercussions.
The facts of this case can be summarized as follows:
l The housing reconstruction maintenance project association (plaintiff, hereinafter referred to as 'Association') in the D district of Gangseo-gu, Seoul, received approval for the establishment of the association from the head of the district office on April 3, 2017. Subsequently, on August 3, 2017, all of Seoul was designated as a speculation overheated district.
l F, who is a member of the association and the owner of a multi-family house within the maintenance area (hereinafter referred to as 'First Home'), entered into a contract to sell the First Home for 990 million won to couple B and C on March 26, 2018 (hereinafter referred to as 'First Sale Contract'). The contract included a special provision stating that F met the one-home-per-household requirement of owning for 10 years and residing for 5 years, and that B/C had no obstacle to the transfer of association membership.
l On the same day (March 26, 2018), F and her husband G entered into a contract to purchase another home (hereinafter referred to as 'Second Home') for 528 million won from H.
l Important timing difference: The couple F completed the registration of transfer of ownership for the Second Home (new house) on April 30, 2018, and completed the registration of transfer of ownership for the First Home (original home) to couple B on June 26, 2018. As a result, F temporarily became a two-home owner for about two months.
l The Association applied for a change of approval including B and C as members, but the district office on August 1, 2018, stated, "Since F was a two-home owner at the time of the transfer of the First Home, B and C cannot be members according to Article 39, Paragraph 2 of the Urban Improvement Act," and excluded them from the change of approval (hereinafter referred to as 'this decision').
l In response, the Association filed a lawsuit seeking to invalidate the rejection of membership for B and C.
In this regard, the Seoul Administrative Court's ruling on December 3, 2019, stated, "If an association member who owns real estate within the maintenance district conducts a cause-related act involving changes in rights, such as sale or donation regarding that home, and has met the criteria for ownership period and residency period established in Section 1, Article 37 of the Enforcement Decree of the Urban Improvement Act as a one-home-per-household owner, it is reasonable to view that the individual meets the requirements for the ‘transferor’ set forth in the exception. Therefore, even after obtaining approval for the establishment of the association, it can be seen as a case where the transferee can acquire the status of an association member," and upheld the plaintiff's claim.
In other words, the judgment criterion for Article 39, Paragraph 2, Item 4 of the Urban Improvement Act is not the 'registration date' but the 'date of signing the sales contract.'
This ruling is highly significant as it clearly establishes the judgment criterion for whether one is a 'one home per household' owner based on the date of signing the sales contract. It first mentioned the legislative purpose of the relevant provisions of the Urban Improvement Act. That is, Article 39 of the Urban Improvement Act aims to block speculative demand for real estate within speculative overheated districts while also not excessively restricting members who have been one-home-per-household owners for a long period while transferring property to move their actual residence. Hence, in cases where one accidentally becomes a two-home owner based on the timing of registrations for the property being sold and the property being purchased, it is reasonable to recognize exceptions. Legally, the position of the transferor arises at the time of the cause-related act such as a sales contract, regardless of the timing of the effectiveness of ownership change (i.e., registration date), and the transferee determines transaction conditions based on that state. Lastly, if strictly applied based on the registration date, those who become temporary two-home owners due to time differences between the contract and registration or due to other accidental circumstances would not be able to inherit membership, which would not align with the legislative intention and would unduly restrict the transferor's freedom of residence while providing unpredictable and significant harm to the transferee, making it unreasonable.
The ruling by the Seoul Administrative Court in the case 2019GuHab61700 is highly meaningful as it clarifies the judgment criterion for the exceptional requirement for inheriting membership rights when transferring a reconstructed apartment within a speculation overheated district, specifically defining it as the 'date of the sales contract or cause-related act', thereby providing a rational legal interpretation standard that matches the complex realities of real estate transactions. It is expected that this will reduce cases where well-intentioned transferors and transferees suffer from unpredictable circumstances, thereby allowing for more stable transactions.
Nevertheless, regulations regarding reconstruction remain complex and may vary in interpretation depending on individual cases. Particularly in real estate transactions involving substantial amounts, even a minor mistake can lead to significant losses. Therefore, before proceeding with related transactions, it is essential to consult with legal experts to minimize legal risks. Our law firm promises to provide the best solutions for your successful real estate transactions based on our extensive experience and expertise.
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