Strengthened Membership Eligibility Restrictions Cause Market Confusion... Concerns Over Retroactive Application

Concerns Over Damage Including Blocked Sales by Small-Scale Union Members Despite Speculation Prevention Measures

[Asia Economy Reporter Kim Hyemin] The government and Seoul Metropolitan Government's decision to advance the timing for acquiring association member status in redevelopment and reconstruction projects is causing increased market confusion. This is because no concrete explanation has been provided regarding when and to which maintenance districts this will apply. A major point of controversy is whether reconstruction will uniformly apply after passing the safety inspection, and redevelopment after the approval of association establishment.

According to the Ministry of Land, Infrastructure and Transport and Seoul Metropolitan Government on the 11th, this regulation is expected to be used as a kind of supplementary provision. The current timing for restricting association member qualifications will be followed as a basic rule, but it can be advanced if necessary.

A Seoul city official explained, "The timing for restricting association member qualifications will not be uniformly advanced. It means that if speculation is detected, the acquisition of association member status can be restricted even before that." According to the current Urban and Residential Environment Maintenance Act, the transfer of association member status is basically restricted after the approval of association establishment for reconstruction, and after the approval of management disposition for redevelopment. If a house is purchased after this point, the buyer cannot receive association member pre-sale rights for the new apartment.

However, if the law passes, the timing when association member pre-sale rights cannot be received may be advanced to a specific point after passing the safety inspection for reconstruction, and after the approval of association establishment for redevelopment. The city plans to apply this to areas where abnormal transactions are detected and where overheating in housing prices is expected. This includes reconstruction complexes that passed the safety inspection before the law amendment but have not yet received association establishment approval. A total of 46 locations fall under this, including Eonma Apartments in Gangnam-gu, Mokdong New Town 6 Complex in Yangcheon-gu, and Yeouido Sibeom Apartments.

Simply put, although associations have not yet been established in these complexes, if abnormal transactions are detected, the Mayor of Seoul can advance the timing for restricting acquisition of association member status and announce it separately. However, it is unlikely that the timing will be set retroactively to past abnormal transaction periods. It means that the regulation will apply only to transactions after the law amendment, and the announcement date will not be set retroactively to apply to previous transactions. The official said, "It seems impossible to set the date of transfer restriction to a past period when many abnormal transactions occurred."

The intention behind advancing the timing for restricting association member qualifications is to prevent speculation. Seoul Metropolitan Government explained, "This is to prevent speculative activities from restricting transactions by actual demanders and causing problems with property rights."

However, there are concerns that artificially blocking transactions could create unintended victims, such as small-scale association members who have no additional capacity to bear costs and are forced to sell their homes. Yoon Jihae, Senior Researcher at Real Estate 114, said, "While it may have the effect of blocking speculative demand, there could be a phenomenon where demand concentrates and prices surge during the preliminary safety inspection process before the regulation."

Although the law allows the mayor or governor to set the timing to prevent uniform application, this itself raises concerns about increasing uncertainty. A Seoul city official said, "The timing for restricting association member qualifications can be set for the entire city, by region, or only for specific maintenance districts," adding, "It is a matter requiring the mayor's policy judgment." Ultimately, if precise criteria are not established, there could be fairness controversies over the market arbitrarily setting the timing.