[Real Estate Investment] 'Reconstruction Diagnosis' Introduction Imminent... Project Acceleration Amid Ongoing Dispute Risks

How Will the First Step of Reconstruction Change?
Safety Inspection Name and Implementation Timing Revised
If Passed in Plenary Session This Year, Implementation in Early Next Year
Maintenance Plans Can Be Drafted Without Basic Plans
Resident Consent Period Also Shortened
Project Delays Inevitable if Reconstruction Inspection Fails
Reconstruction Inspection Evaluation Criteria Also to Be Revised

A follow-up bill to the January 10 measures aimed at accelerating the pace of reconstruction projects is about to pass the National Assembly after 10 months. The key points include changing the first step of reconstruction projects, the ‘Safety Inspection,’ to a ‘Reconstruction Inspection,’ and postponing the implementation timing from before the formation of the promotion committee to before the approval of the project plan. Experts predict that the speed of maintenance projects will increase once the amendment passes. However, they also analyze that there remains potential for disputes since the safety inspection itself is not being eliminated.

According to the Ministry of Land, Infrastructure and Transport (MOLIT) and others on the 13th, a partial amendment to the Urban and Residential Environment Maintenance Act, which includes these contents, passed the National Assembly’s Legislation and Judiciary Committee review on the 8th. If the amendment passes the plenary session of the National Assembly within this year, it is likely to be implemented around the first half of next year.

‘Reconstruction Inspection’ Significantly Reduces Project Duration

The amendment includes changing the name of the reconstruction safety inspection to reconstruction inspection and stipulates that mayors and county governors must conduct the reconstruction inspection before the approval of the project implementation plan. It also allows the promotion committee for establishing the association or the project implementer to request the reconstruction inspection. The amendment also deletes the provision requiring a re-inspection if the project implementation approval is not obtained 10 years after the designation and announcement of the maintenance zone. Previously, the safety inspection had to be completed before drafting the project plan, and procedures had to proceed in the order of forming the promotion committee and then establishing the association.

The amendment also allows areas that have not established a basic plan to request the drafting of a maintenance plan, and the promotion committee for establishing the association can also request or propose the drafting. Additionally, a special provision has been introduced that recognizes consent to one of the items?requesting the drafting of a maintenance plan, proposing the drafting, or forming the promotion committee?as consent to the other items. A MOLIT official said, "Once it passes the Legislation and Judiciary Committee, the risks related to the law’s passage will be greatly reduced, and it is expected to pass the plenary session in most cases."

The government expects the amendment to shorten the project duration of reconstruction projects by more than three years. Once the law is amended, the project can proceed if either the consent form for drafting the maintenance zone or the formation of the promotion committee is fulfilled. This will reduce the time needed to secure consent. Currently, when applying for a safety inspection, consent from 10% of landowners is required. The consent rate for drafting the maintenance zone is 50%, and the consent rate for establishing the association is 75%.

Changes Also Planned for ‘Reconstruction Inspection’ Evaluation Criteria

However, even if the amendment is implemented, the procedure of the safety inspection itself will not disappear. Although the formation of the project promotion entity before the safety inspection is possible, subsequent procedures such as project plan approval can only proceed after passing the reconstruction inspection. Therefore, projects that have completed the formation of the promotion committee and association and designation of the maintenance zone but fail to meet the reconstruction inspection criteria may inevitably face project delays. Operating costs are incurred during the preparation process such as establishing the basic plan or designating the maintenance zone, and these various costs could become a source of conflict within the association.

The industry expects the government to resolve such uncertainties through detailed guidelines. Yoon Ji-hae, Senior Researcher at Real Estate R114, said, "Improving procedures such as the safety inspection will certainly shorten the initial phase by about one to two years," but added, "If the association separately staffs a team responsible for the safety inspection, labor costs may increase, and if the project stagnates after incurring costs during the zone designation process, how to handle the cost burden later could become a blind spot."

On the 15th, Seongsan Sijeong Apartment in Seongsan-dong, Mapo-gu, Seoul. Seongsan Sijeong Apartment is a complex with 33 buildings, 3,710 households, and up to 14 floors, completed in 1986. Photo by Jin-Hyung Kang aymsdream@

The government plans to establish evaluation criteria for the reconstruction inspection once the amendment is passed. A MOLIT official said, "We plan to review the evaluation criteria for the reconstruction inspection in line with the amendment. Previously, if the safety inspection was not passed, the data could not be reused, but with this improvement, the data can be reused without retesting." Earlier this year, MOLIT announced improvements to the safety inspection system, stating, "While conducting safety inspections focusing on living inconveniences and aging, we will ensure that safety inspections do not become obstacles in places where residents’ consent requirements are met." In January last year, the safety inspection criteria were relaxed once. The weight of structural safety was reduced from 50% to 30%, while the weight of residential environment and facility aging was increased to 30%. The conditional reconstruction range was relaxed from 30?55 points to 45?55 points, and scores below 45 points were allowed immediate reconstruction.

Experts expect the amendment to accelerate the initial speed of maintenance projects. However, they point out that not abolishing the safety inspection itself remains a variable in the project. Kim Je-gyeong, Director of Toomi Real Estate Consulting, said, "The limitation that projects without profitability are difficult to proceed still remains. It is necessary to consider options such as allowing local government heads to omit the safety inspection within a certain period," adding, "Since the safety inspection is not abolished but postponed, if it is not resolved later, it could cause confusion."