Unstable Situation Demands Priority Sale with 35 Million Won Refund per Household
Rental Companies Must Secure Funds by Allocating General Supply to Ineligible Households
Legal and Institutional Reforms Needed to Break the Vicious Cycle
[Asia Economy Honam Reporting Headquarters Reporter Lee Hyung-kwon] Regarding the sale of Songbo Apartment located in Yeonhyang-dong, Suncheon City, some residents who received disqualification notices are strongly protesting, leading to complaints and media coverage that have prompted the city council and various other parties to summon the responsible officials.
Among the 757 households in Songbo Apartment in Yeonhyang-dong, 529 households confirmed as priority sale conversion units have an average sale price of 226 million KRW, which is 123 million KRW lower than the average general supply price of 349 million KRW. If the ownership transfer proceeds smoothly, these units are receiving much envy from the surrounding community.
Considering that the recent apartment sale prices in Suncheon have reached the 400 million KRW range, the 529 priority sale households have seen a significant price gap.
Meanwhile, the 228 households classified as disqualified and thus required to purchase through general supply are raising their dissatisfaction, stating that the average general supply price of 349 million KRW, calculated based on the appraised value, is relatively much higher than that of the priority sale units.
The voices of residents classified as disqualified, conveyed through media reports without clarification, are accumulating distrust toward Suncheon City’s administration and suspicions of preferential treatment.
In this situation, the 529 households classified as priority sale units are unable to hide their anxiety.
Resident K of the apartment, a priority sale household, said, “I was very pleased that the apartment sale price was lower than expected,” adding, “I have paid the balance and am just waiting for the ownership transfer, but the situation is becoming increasingly noisy, which is making me very uneasy.”
The reason for K’s anxiety is that if the ownership transfer does not proceed properly despite having paid the balance, the construction company might have to bear the full 72 million KRW housing and urban fund loan it took out.
The construction company effectively received 261 million KRW, which is the sum of the 72 million KRW loan and K’s deposit of 189 million KRW.
For example, in K’s case, the priority sale price was 226 million KRW, from which the deposit of 189 million KRW was deducted, leaving a balance of 37 million KRW to be paid.
To transfer ownership to K, who has paid the balance, the construction company must repay the 72 million KRW fund loan.
In other words, the construction company receives 37 million KRW from K as the balance but must repay 72 million KRW in fund loans, resulting in a shortfall of 35 million KRW per household. If all 757 households are sold at the priority sale price, 26.495 billion KRW would be required.
Therefore, it is concluded that no company would sell the apartments while returning 26.5 billion KRW, indicating a need for system improvement.
Songbo Pineville Co., Ltd. is currently in a situation where it must cover the necessary funds for priority sale households with profits earned from selling apartments to disqualified households through general supply.
In other words, Songbo Pineville Co., Ltd. is structured so that only if many disqualified households appear can it transfer ownership to priority sale households using the profits from general supply sales.
Accordingly, there is a high possibility of forcibly producing disqualified persons, and comprehensive system improvements are being called for.
If the price difference of 123 million KRW between the priority sale price and the general supply price is applied to the 228 disqualified households, the total amounts to 28 billion KRW, slightly exceeding the 26.5 billion KRW fund repayment that Songbo Pineville must make, suggesting that the number of disqualified households is smaller than Songbo Pineville initially expected.
Meanwhile, it is reported that most of the disqualified households transferred lease rights midway, so it is advised to be cautious about disqualification status when transferring lease rights for the purpose of purchasing rental apartments.
Additionally, there are criticisms that Songbo Construction approved some illegal lease right transfers, but Songbo Pineville Co., Ltd., which took over ownership, is ignoring the issue.
As the Hanultari communal housing community was divided into priority sale and disqualified households, the situation of joy and sorrow has greatly changed. The priority sale conversion of rental apartments is stipulated in Article 50-3 of the “Special Act on Public Housing,” with the president determining the necessary methods and procedures.
According to the law, the determination of priority sale and disqualified households is made by the rental business operator, but appeals can be made through status preservation lawsuits or injunctions against disposition in court.
It is reported that about 130 households classified as disqualified in Suncheon Songbo Apartment have applied for appeals.
Meanwhile, considering that recent apartment sale prices in Suncheon have reached the 400 million KRW range, some argue that offering a 15 million KRW discount per household to disqualified households residing in Songbo Apartment for general supply is rather a preferential treatment and illegal.
In the nearby city of Gwangyang, N Apartment has about 200 priority sale households out of a total of 851, while 651 households are classified as disqualified, posing an even bigger problem.
According to data released by Assemblyman Seo Dong-yong, among the 200 priority sale households, 100 have completed balance payments for priority sale, but due to the rental business operator’s lack of fund repayment resources, only 23 households have completed ownership transfer, about 77 households have not, and the remaining 100 households are waiting after being notified of their priority sale status.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
