Land parcels to be reclaimed upon detection of 'Beoltte Bidding'... 'One Company One Parcel' system to be introduced next month

[Asia Economy Reporter Kim Min-young] From now on, if a construction company is found to have engaged in fraudulent bidding by mobilizing affiliated companies such as paper companies on paper to increase the likelihood of winning public land bids, the contract will be canceled and the land will be reclaimed. In addition, to prevent the occurrence of mass bidding in advance, a "one company, one lot" system will be introduced next month, allowing only one company, including the parent company and affiliates, to participate in the lottery for one lot.

The Ministry of Land, Infrastructure and Transport (MOLIT) announced on the 26th that it will implement such measures to eradicate mass bidding.

MOLIT views that the practice of mass bidding has not been eradicated, and with the full-scale supply of large-scale public land in the 3rd generation new towns ahead, it plans to operate the land supply system more fairly and transparently.

First, the "one company, one lot" system will be introduced next month. To fundamentally block mass bidding in public land supply and establish a fair market order, the number of parent companies and affiliates allowed to participate in the lottery will be limited to one company per lot.

This will be implemented for land with more than 300 households in regulated areas where competition for public land is overheated, for three years until 2025, and the extension will be decided after performance evaluation.

In addition, by amending the Housing Act, public land suppliers such as LH will inspect whether the winning company is a paper company immediately after selecting the winning company and notify the local government of the inspection results within 30 days. The local government will then notify the land supplier, thereby strengthening the pre-verification process for paper companies.

Also, regarding the lending of housing construction business registration certificates, currently only the lender is sanctioned, but in the future, the borrower, broker, and conspirators will also be subject to sanctions by expanding the scope.

To prevent unfair support from the parent company (including other affiliates) during the land-related work process, if the winning company does not directly perform the related work, the land supply contract will be canceled and land supply will be restricted for three years.

The scope of agents who can be delegated to perform land supply contracts and related work will be limited to employees of the company (principally those employed for more than two years), and submission of supporting documents such as employment contracts along with the power of attorney will be made mandatory, improving the land supply procedures.

MOLIT expects that once these improvements are implemented, the unfair bidding practices involving mobilization of affiliates by some housing construction companies will disappear, and opportunities for construction companies with proper construction capabilities will expand, greatly contributing to improving housing quality.

On the same day, Minister Won Hee-ryong of MOLIT visited a multi-family housing complex in Wirye New Town, Songpa-gu, Seoul, to inspect the site of "mass bidding," where a few companies mobilized many affiliates to participate in the lottery.

Minister Won said, "In large-scale public land such as the 3rd generation new towns, opportunities for capable companies to participate through fair competition will expand, diversifying the construction company brands available to the public and enabling the supply of more distinctive apartments, which is expected to significantly increase consumer satisfaction."

Earlier, MOLIT inspected a total of 101 companies and 133 lots that received public land through lottery supply from LH over the past three years, checking for eligibility and whether land-related work was directly performed. As a result, suspicious signs of paper companies were found in 81 companies and 111 lots, including 10 companies that underwent on-site inspections and 71 companies that were only document-investigated.

Unannounced on-site inspections of 10 companies revealed specific evidence such as land-related work being performed by employees of the parent company or other affiliates instead of the company's own employees, or salaries of the company's employees being paid by the parent company, indicating that affiliates were formally established to secure land. Accordingly, MOLIT requested the relevant local governments to impose administrative sanctions such as business suspension under the Construction Industry Basic Act.

Separately from administrative sanctions, MOLIT plans to request police investigations into these companies, and if it is found that they did not meet registration standards at the time of contract (paper company) and thus did not qualify for first-priority subscription, the contracts will be canceled and the land reclaimed.

If land reclamation is difficult due to the formation of third-party rights depending on the land use status, MOLIT plans to consider recovering unjust profits or claiming damages to protect the buyers.

For the 71 companies suspected of mass bidding based on document investigations, specific signs such as not directly performing land-related work were found, so joint on-site inspections with LH and local governments will be conducted by the end of the year. Based on the results, police investigations will be requested and administrative sanctions will be sought from local governments. Among the total 81 suspicious companies, those violating regulations will face administrative sanctions and a reduction in incentives previously provided for pre-subscription participation.

Due to concerns that companies unfairly acquiring land through paper companies or other fraudulent methods might receive land again, companies violating regulations among those receiving pre-subscription points will have their points reduced. However, to prevent innocent victims, pre-subscription benefits for all companies will be temporarily suspended until investigations are completed.

MOLIT also plans to request the Fair Trade Commission to investigate whether indiscriminate lottery participation by mobilizing multiple affiliates constitutes collusion or unfair support, violating the Fair Trade Act. Additional institutional improvements will be prepared to fundamentally block the recurrence of mass bidding in the public land sector.