Construction Association: "Real Estate Trust Companies' Power Abuse Against Contractors Is Severe"

Proposal to Fair Trade Commission and Others for Improving Unfair Practices

The Korea Construction Association stated on the 24th that "construction companies are suffering continuous damages due to unfair practices by trust companies that hold a superior position in real estate trust relationships," and proposed measures to improve the unfairness of trust construction contracts to the Fair Trade Commission and other related agencies.

Real estate trust company-ordered construction projects amount to about 6 to 7 trillion won annually and are on an increasing trend each year.

The Construction Association claimed, "Trust companies shift risks onto construction companies through unfair clauses such as non-adjustable contract amounts conditioned on winning the construction bid, priority collection of trust company profits, and restrictions on the exercise of construction company rights in case of construction suspension."

According to the Construction Association, most trust companies currently use land trust agreements and special provisions, as well as construction contracts, that include numerous clauses such as ▲clauses invalid under civil law for being against public order or unfair legal acts, ▲unfair clauses invalid under the Act on the Regulation of Terms and Conditions, and ▲clauses invalid under the Framework Act on the Construction Industry regarding construction contracts.

Due to these clauses that infringe on the essence of the contract, there have been continuous damages caused by unilateral unfair acts of trust companies, including ▲cases where construction companies did not receive proper payment from trust companies, ▲cases where forced termination and damage compensation lawsuits were filed even when contract amounts and construction periods were extended due to design errors by the client, and ▲cases where trust fees were excessively collected in advance after the trust contract and construction costs were paid in kind.

The Construction Association emphasized, "Trust companies are not complying with recommendations to correct unfair terms and special provisions, making additional measures by the Fair Trade Commission urgent," and added, "effective measures by the Financial Services Commission are also necessary."

The Construction Association also stated, "We proposed to the Fair Trade Commission effective sanctions against unfair terms and conditions, the implementation of a fact-finding survey on unfair agreements, and the establishment of a standard land trust agreement."

Kim Sang-soo, President of the Korea Construction Association, said, "Improving unfair practices will reduce damages to construction companies related to real estate trusts and enable fair risk and responsibility sharing between contracting parties," adding, "If this proposal is accepted, it will greatly contribute to establishing a sound trust business structure."