[Exclusive] Raemian Onepentas Union Chief Receives '5.8 Billion Won Performance Bonus'..."Successful Reconstruction"

Cooperative "Business Performance Generates 580 Billion KRW Profit, 1% Payment"
Performance Bonus Payment Plan Approved at Temporary General Meeting on 19th
Some Members Raise Issues on Calculation Criteria and Payment Timing

A proposal to pay a performance bonus of 5.8 billion KRW to the head of the association of Raemian Onepentas, which was reconstructed from the Sinbanpo 15th Apartment in Seocho-gu, Seoul, and completed last month, will be presented at the association's extraordinary general meeting. The association delegates decided to put the agenda forward on the grounds that the reconstruction project was successfully led, but some members have raised concerns that the bonus is excessive.

According to the Sinbanpo 15th association on the 5th, the association will hold an extraordinary general meeting on the 19th to decide on the payment of the performance bonus to the association head. Since the proposal to pay the bonus was approved at the delegates' meeting held the day before, the agenda will be brought to the extraordinary general meeting. The association members will decide on the payment of the bonus by vote.

The Sinbanpo 15th association evaluated, "As a result of the association head's efforts, determination, and sacrifice, the project proceeded without interruption, realizing rapid occupancy and generating an enormous profit estimated at 580 billion KRW, distributing the largest project profit in reconstruction history to the members." They added, "We intend to pay 1%, or 5.8 billion KRW, to the association head as a reward for contributing to the project's success."

Association: "Credit for highest sale price and uninterrupted project progress"

The head of the Onepentas association is a reconstruction-specialized lawyer who was elected as the Sinbanpo 15th association head in March 2017. The association cited reasons for the bonus payment including applying for approval of the management disposition plan in December 2017 to receive an exemption from reconstruction surplus profit charges, terminating the contract with Daewoo Construction at the end of 2019 and selecting Samsung C&T as the contractor, and continuing the project without interruption despite adversities such as demands for increased construction costs.

They also credited Kim, the association head, for setting the sale price at 67.37 million KRW per 3.3㎡, the highest amount since the implementation of the price ceiling system. They mentioned that the association rejected Samsung C&T's request for increased costs and completed construction at around 6 million KRW per 3.3㎡. The personal sacrifice of suspending his law practice to focus on association duties was also cited as a reason for the bonus payment.

The 5.8 billion KRW proposed as the association head's performance bonus is smaller than the amount initially discussed. Last month, Han Hyeong-gi, former head of the Acro River Park (Sinbanpo 1st) association and current secretary general of the One Bailey (Sinbanpo 3rd, Gyeongnam) association, mentioned on his personally operated YouTube channel that "Raemian Onepentas (Sinbanpo 15th) plans to propose a 10 billion KRW performance bonus for the association head at the general meeting." Han said, "The amount initially was 2.8 billion KRW but reportedly increased to 10 billion KRW. It is almost certain."

The project profit presented by the association at the delegates' meeting was a total of 578.1 billion KRW. The main profits included an estimated 220 billion KRW exemption from reconstruction surplus profit charges and an estimated 210 billion KRW increase in sales revenue. Losses from contractor replacement were estimated at 15.5 billion KRW (including increased relocation loan interest, litigation costs, increased project interest, and decreased rental income), and increased financial costs were estimated at 18 billion KRW.

Members question calculation basis and timing of payment

However, some within the association have expressed concerns about the payment of a performance bonus amounting to tens of billions of KRW. The basis for the estimated profit of 580 billion KRW is weak, and the standard of paying 1% of the profit as a bonus is unclear. Typically, discussions about performance bonuses occur before the dissolution of reconstruction associations, so raising the issue before the sales are completed is considered premature by some.

Moreover, the fact that Daewoo Construction is preparing a lawsuit for damages due to the contractor replacement is seen as a significant burden for the members. Daewoo Construction filed a lawsuit to confirm its status as the contractor and won the Supreme Court ruling at the end of last year. They are now preparing a damages lawsuit.

An anonymous member stated, "The land price applied was based on an appraisal from three years ago, resulting in a lower sale price than expected, and the sales period was delayed by more than three years, causing financial costs for that time." The general sale price of Raemian Onepentas, scheduled for sale at the end of this month, was set at 67.37 million KRW per 3.3㎡. This is about 8 million KRW lower than the price the association hoped for (around 75 million KRW per 3.3㎡). The association had the land price appraised in 2021 to promote pre-sale, and the land price for Onepentas was 41.69 million KRW per 3.3㎡. For comparison, Maple Xi's land price was 47.3 million KRW per 3.3㎡, and Raemian One Bailey (sale price 56.68 million KRW per 3.3㎡) had a land price of 41.9 million KRW per 3.3㎡. Although the association sought an official interpretation from the Ministry of Land and the Ministry of Government Legislation regarding the land price appraisal, a reappraisal was ultimately unsuccessful.

He also pointed out, "It is problematic to rush the approval of the performance bonus without a determined amount for Daewoo Construction's damages lawsuit. The 5.8 billion KRW corresponds to about 32.5 million KRW per household, and if there is no money left in the association, members might have to contribute more assets." He added, "At the delegates' meeting the day before, questions were raised about whether the bonus should be received now, and the response was that 'if more time passes and refunds are given from the association's assets, people will not agree.' This disregards the principle that the performance bonus should be accurately calculated based on standards. The evaluation of profits and losses from the contractor replacement omitted the damages lawsuit ruling against Daewoo Construction, and the basis for item classification and calculation amounts is weak."

Attempts to contact the Onepentas association head regarding this controversy were unsuccessful as he did not respond.

Controversy over association head's performance bonus continues

Recently, One Bailey also passed a proposal at its general meeting to pay a 1 billion KRW performance bonus to its association head. Although the Seoul Metropolitan Government's 'Standard Administrative Work Regulations for Maintenance Project Associations' stipulate that association executives should not receive separate performance bonuses in addition to wages and bonuses, this is a recommendation and not mandatory. When opinions are divided, disputes sometimes escalate into lawsuits. Previously, the Acro River Park association resolved to pay 20% of additional profits as a performance bonus, but the Supreme Court ruled it invalid. The High Court's retrial ruling recognized only 7% of additional profits as a performance bonus.

Song Seung-hyun, CEO of Urban and Economy, said, "While the need to pay performance bonuses to association heads when there are project achievements is somewhat recognized, it is also necessary to point out problems when there are no achievements during the project period. If the bonus is socially unreasonable or excessively high, it should be criticized."