Banks "In Principle, Loans Not Allowed Under Provisional Seizure"
'Urgent Jeonse' Increase May Cause Jeonse Prices to Fall in Banpo Area
On the 7th, ahead of the announcement of the successful applicants for the subscription, 'Raemian One Pentas' in Banpo-dong, Seocho-gu, Seoul, is expected to cause confusion among prospective buyers as it is proceeding with general sales while under provisional seizure, raising the possibility of loan ineligibility.
According to related industries and Seocho-gu Office on the 2nd, the Raemian One Pentas (Sinbanpo 15th reconstruction) association received a provisional seizure approval from the Seoul Central District Court amounting to approximately 20.786 billion KRW on the 17th of last month. The association did not disclose this fact in the resident recruitment announcement that started two days later and conducted the subscription from the 29th of last month to the 1st of this month. With 134,047 applicants for 292 general sale units, it recorded a triple-digit competition rate.
The association initially selected Daewoo Construction as the contractor but terminated the contract citing increased construction costs and changed the contractor to Samsung C&T in 2019. Consequently, Daewoo Construction filed for a provisional seizure of the land at the Seoul Central District Court in May based on claims for damages, and the court approved the provisional seizure in June.
If the association signs contracts without resolving the provisional seizure status, there is a possibility that prospective buyers will be unable to obtain loans. The complex is still unregistered, so mortgage loans cannot be obtained yet, but once registration is completed, group loans (balance loans) can be possible on the condition of setting a 'subsequent mortgage' on the registered deed. However, in the case of seized apartments, banks are restricted in exercising collateral rights and do not provide loans. A representative from a commercial bank explained, "In principle, loans are not approved for apartments under provisional seizure."
In such cases, winners without cash mobilization ability will have no choice but to accept tenants and cover the balance with the jeonse deposit. If cases of offering 'urgent jeonse' at prices lower than market value increase due to balance payment pressure, it is predicted that the jeonse prices in the area could fall simultaneously.
There is also talk of possible subscription cancellations due to the provisional seizure. According to Article 16, Paragraph 1 of the Housing Supply Regulations, although the project entity secures land ownership, if real estate lease rights such as mortgages, provisional seizures, or jeonse rights are registered on the land, the relevant mortgage must be canceled before recruiting residents. However, a Ministry of Land, Infrastructure and Transport official explained, "Since Seocho-gu Office approved the resident recruitment announcement when the complex was not under provisional seizure, the possibility of subscription cancellation is low."
A Seocho-gu Office official stated, "We have requested the association to submit materials for fact-finding and legal review, and we are internally reviewing measures to protect general buyers and minimize their damages."
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