[Exclusive] Hannam 2 District Union Chief Faces Lawsuit Amid Member Qualification Controversy

Hannam New Town Panorama

[Asia Economy Reporters Cha Wanyong and Hwang Seoyul] The redevelopment project of Hannam 2 District in Yongsan-gu, Seoul, which had announced full-scale development after selecting a construction company, is once again stirring controversy. This is due to disputes over the division of shares by the union president and the legality of union member qualifications. Additionally, internal and external audits are underway regarding the appropriateness of the promotional target service contract and the execution of service fees, with controversies continuing unabated. Ultimately, more than 100 union members have filed administrative lawsuits against the union and its president, leading to legal battles.

Father's Ownership Divided and Transferred to Union President Siblings

According to Asia Economy's investigation on the 15th, Park and 100 other union members (hereinafter plaintiffs) submitted a lawsuit titled “Confirmation of Non-Existence of Union Member Qualification and Sales Agency Status” against the Hannam 2 Redevelopment Promotion District Housing Development Union and Union President Lee Myunghwa on the 5th.

According to the complaint obtained, the plaintiffs argue based on Article 76, Paragraph 1, Item 6 of the Urban and Residential Environment Improvement Act that since only one sales right is recognized, the union president cannot be recognized as a union member or have an independent sales right because the property ownership was transferred from the mother after the union establishment approval.

Article 76, Paragraph 1, Item 6 of the Urban and Residential Environment Improvement Act states that if one household or one person owns more than one house or land, only one house is supplied; if two or more persons not belonging to the same household share one house or land, only one house is supplied.

Verification of the real estate registration certificate shows that the union president received half (50%) ownership of land and buildings at 240-21 Bogwang-dong, Yongsan-gu, Seoul, as a gift from the mother on December 13, 2019, and completed the ownership transfer registration on the same day. The other half was gifted to the union president’s older brother, Lee, on the same day.

Previously, the mother had acquired the land and buildings from her husband, who is also the union president’s father. The father currently owns the land and buildings at 240-20 Bogwang-dong, Yongsan-gu, Seoul, and holds the status of a representative of Hannam 2 District. Originally, both 240-20 and 240-21 Bogwang-dong land and buildings were solely owned by the father.

The Urban and Residential Environment Improvement Act stipulates that union member occupancy rights in redevelopment areas are counted as one landowner if one person owns multiple properties within the district. Especially, if multiple people own properties transferred from one landowner after union establishment approval, the number of union members is counted as one. In overheated speculation zones, transfer of union member status is generally restricted after union establishment approval.

Based on this, the plaintiffs argue that since Hannam 2 District received union establishment approval on June 1, 2012, the union member status should not be granted to the union president siblings. Also, since both 240-20 and 240-21 Bogwang-dong were originally solely owned by the father, only one union member should be recognized, and even if divided shares are acknowledged, only one representative union member can be registered.

One union member from the plaintiffs stated, “The union president siblings and their father can only receive one housing unit,” adding, “Due to the division, one sales right has been split into two, causing damage to the property rights of union members.” He further said, “The lawsuit seeking confirmation of non-existence of union member status for Lee Myunghwa, who lacks union member qualification, is necessary as a requirement for rights protection.”

Unclear Regulations and Divergent Legal Interpretations

Complaint for Confirmation of Non-Existence of Cooperative Membership and Status as a Sales Agency Obtained by Asia Economy / Photo by Chawan Yong yongcha@

On the other hand, the plaintiffs’ claims also have room for controversy. First, the restriction on transfer of union member status excludes transfers due to inheritance or divorce involving cohabitants. In this case, verification of cohabitation status seems necessary.

Moreover, regulations are unclear on whether union member status is granted when one lot number is divided and inherited, as in the case of the union president siblings. The Yongsan District Office, the competent authority, has granted union member status to the siblings.

It has been confirmed that a complaint was filed with the Yongsan District Office’s Redevelopment Project Division regarding this matter. The complaint argues that the union member number assigned to the Lee siblings when processing the union establishment approval (change) application in May 2020 should be corrected before the management disposition approval stage.

A Yongsan District Office official said, “The complaint will be reviewed and responded to at the district office level,” adding, “It is difficult to disclose detailed information such as whether any problems were found related to the complaint.” However, he noted, “The union change was processed after reviewing relevant regulations at the time.”

Due to the unclear and complex regulations, legal interpretations by redevelopment and reconstruction specialized lawyers also vary.

Kim Yerim, a lawyer at Law Firm Simmok, said, “Since the law itself is unclear, dividing inheritance shares is not illegal,” adding, “Lower court rulings differ when multiple persons receive the property, but since sales qualification affects union members’ rights and obligations, restricting it could lead to controversies over property rights infringement.”

In contrast, Lim Sangyoung, lead lawyer at Law Firm Theo, explained, “The Urban and Residential Environment Improvement Act aims to prevent an increase in union members after union establishment approval, so the plaintiffs’ claims are reasonable,” adding, “Originally, only one occupancy right could be received, but if gifting allows receiving an additional one, the legislative intent could be undermined.”

Repeated attempts to contact the union president for comments on the lawsuit were unsuccessful.

Questionable Service Contract Also a Problem

Audit report and service contract for the construction company selection general meeting agency obtained by Asia Economy / Photo by Seoyul Hwang chestnut@

Additionally, the plaintiffs also filed a lawsuit seeking confirmation of non-existence of sales agency status. Amid rumors among union members about issues in the selection process of the construction company selection general meeting agency, an internal audit was conducted from the 11th to the 30th of last month. According to the audit report, the main audit points were ▲appropriateness of service contract and service fee execution resolutions ▲compliance with the obligation to maintain fairness in selecting the service provider ▲whether the principle of prioritizing union members’ interests was violated.

To select the agency for the construction company selection general meeting, the union held the 9th board meeting at the end of last November and finalized detailed bidding announcement details and selection criteria through the “Delegation of Agency Selection and Contract Conclusion” agenda. The bidding closed between December 5 and 10. On December 10, two companies were selected to be submitted to the delegates’ meeting, and at the 3rd board meeting held this year, the agenda to delegate agency selection and contract conclusion to the board was presented.

However, the previous executive was dismissed in December last year, and a new executive was elected on April 9 this year. The agenda was reconsidered at the 5th delegates’ meeting held in July, and the agency was finally selected as “Seoyoung D&C.”

The internal audit concluded that there was no effort to reduce costs throughout the entire process of selecting the general meeting agency, contract conclusion, and post-management. It also found that since the selection criteria and service fees were set by the former union, contract and management were poorly conducted, leading to increased union costs.

Specifically, the audit pointed out the inappropriateness of the scoring evaluation method and the lack of transparency in the scoring criteria table. Instead of a lowest-price method, a comprehensive evaluation method including non-price factors such as performance and financial status was chosen, which could set criteria favorable to a specific company. Also, the price evaluation scoring gave higher scores to prices close to the average price, raising the possibility of high-price bidding.

Furthermore, the audit stated that the board resolution and bidding announcement process violated the Urban and Residential Environment Improvement Act. The scoring criteria table and bidding announcement should have been conducted after the delegates’ meeting resolution, but bidding was carried out after the 9th board meeting resolution last year without this procedure. Other issues pointed out include ▲excessive bidding amount guidelines ▲lack of transparency in the bid opening process ▲procedural defects in contract conclusion ▲poor contract content.

Meanwhile, as controversy over the union president’s qualification arises, Hannam 2 District redevelopment union members appear to be divided. Moreover, with the union president’s term ending in April, conflicts among union members are expected to intensify. If this happens, problems may arise in signing the main contract with the construction company selected last November by August next year (including a three-month provisional contract period).