[Asia Economy Reporter Kim Hyung-min] The Constitutional Court has ruled that there is no constitutional issue even if a bona fide third party who repurchased a house, whose supply contract was canceled due to 'disruption of the supply order,' suffers damages.
On the 31st, the Constitutional Court, by a 7 to 2 decision, upheld the constitutionality of Article 39, Paragraph 2 of the former Housing Act (before the January 2016 revision), which was challenged for violating the principle of proportionality.
The petitioner, Mr. A, signed a contract to purchase an apartment in Seocho-gu, Seoul, in May 2015 and bought a newly built apartment. However, it was later revealed that Mr. B, who sold the house to Mr. A, had paid the Seoul Housing and Communities Corporation (SH) fifteen days earlier, received an apartment in Seocho-gu, Seoul, registered it, and then resold it to Mr. A. Observing this situation, SH determined that Mr. B's actions constituted 'disruption of the supply order,' which is prohibited under the Housing Act, and decided to cancel the supply contract.
Article 39, Paragraph 2 of the Housing Act allows the Ministry of Land, Infrastructure and Transport or the housing supply entity to cancel an already concluded housing supply contract if it is judged to disrupt the supply order.
Mr. A, the petitioner, claimed that he was a 'bona fide third party' in Mr. B's supply contract, and even if the supply contract was canceled, its effect should not extend to him, filing a lawsuit. However, he lost in the first trial, and the Seoul High Court, which handled the second trial, decided that the constitutionality of the Housing Act provision should be challenged and requested a constitutional review.
The Constitutional Court stated, "To achieve the goal of the housing supply system, which prioritizes supplying houses to genuine demanders who are homeless and low-income citizens, it is especially important that procedures and processes at the supply stage are operated transparently and fairly," and ruled that "allowing the supply entity to cancel housing supply contracts concluded with those disrupting the supply order is an appropriate measure."
It added, "The provision under review states that 'housing supply contracts may be canceled,' leaving open the possibility for the supply entity to maintain the effect of the housing supply contract by considering the need to protect bona fide third parties."
A Constitutional Court official explained, "The Housing Act revised in March 2021 introduced provisions to protect bona fide third parties," and "these revised provisions apply only to those who disrupted the supply order after September 10, 2021, so they do not apply to this case."
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