Up to 450 Million KRW Per Person... Examining Expected Charges for Seoul Reconstruction Apartments

68 Nationwide Reconstruction Levy Expected Complexes
19 out of 31 in Seoul with Over 100 Million KRW Burden Per Person
Levy Payment Due by August 27
Imposition Delayed Due to Government and Ruling Party's Push to Repeal 'Jaechohwan Act'

Among the 31 apartment complexes in Seoul required to pay the reconstruction excess profit charge, 19 complexes must pay more than 100 million KRW per person. The highest expected charge per person is 450 million KRW. Although the government and the ruling party are pushing to repeal the 'Reconstruction Excess Profit Recovery Act (Jaechohwan Act),' no complexes have actually paid the charge yet.

According to the bill review materials from the National Assembly Land, Infrastructure and Transport Committee's Land Law Review Subcommittee on the 10th, as of June, there are 68 complexes nationwide required to pay the reconstruction charge. The average charge per person is 105 million KRW. Among these, Seoul has the highest number with 31 complexes, followed by Gyeonggi with 14, Daegu with 11, Busan with 3, Incheon, Daejeon, Gyeongnam, and Gwangju each with 2, and Jeju with 1.

Among the 31 complexes in Seoul, the highest charge per person is 450 million KRW. The lowest charge among these complexes is about 100,000 KRW. The average charge for the 31 complexes in Seoul is 166 million KRW, and 19 complexes have charges exceeding 100 million KRW per person.

In Gyeonggi Province, the average reconstruction charge per person among 14 complexes is 57 million KRW, with the highest charge being 200 million KRW per person. Additionally, in Daejeon, there is a complex where residents must pay 310 million KRW per person.

The reconstruction excess profit recovery system recovers 10-50% of the excess amount when the profit gained through reconstruction exceeds 80 million KRW per member. This system was first introduced in 2006 and has undergone several suspensions and regulatory relaxations since then.

Apartment complexes are clustered in downtown Seoul. Photo by Yonhap News

In particular, the law was amended on March 27, easing the reconstruction excess profit threshold from 30 million KRW to 80 million KRW. The tax rate also increased with every 20 million KRW increase in excess profit, but this increment bracket was changed to 50 million KRW. Additionally, the timing for calculating the charge was postponed from the stage of the establishment promotion committee to the stage of the establishment approval of the association.

However, as the government and ruling party are pushing for the repeal of the Jaechohwan Act, no complexes have paid the charge yet. Members of the complexes subject to the charge were supposed to pay by August 27. According to the amended Jaechohwan Act, if the completion approval date of the reconstruction project is before the law's enforcement date, payment must be made within five months from the enforcement date.

The Democratic Party holds the position that it is premature to repeal the law without having applied the amended law. The Land Committee also delayed the review of the repeal bill at the bill review subcommittee meeting held on the 6th.

Meanwhile, as the legal payment deadline has passed, some local governments are proceeding with the charge calculation process. Seocho-gu in Seoul is a representative example. The Banpo Hyundai (Banpo Centerville Asterium) reconstruction association in Banpo-dong, Seocho-gu, Seoul, submitted documents such as construction costs and changes in association project expenses to the district office last month. This complex was occupied in August 2021. A Seocho-gu office official said, "Based on the documents submitted by the association, the charge determination process must be followed, so it will take at least 2 to 3 more months before the actual charge is imposed."

However, even if the charge is imposed, it may take longer to collect the actual charge as the association may file administrative lawsuits. One complex in Gangnam-gu was required to pay 716 million KRW but has filed a cancellation lawsuit against the imposition, which is currently pending in the third trial. The total amount imposed on five complexes with reconstruction charges is 2.549 billion KRW, but the amount collected by July was 1.635 billion KRW.