Conflict Over Maintenance Plan at Gongjak Apartment
Concerns Over Deteriorating Living Conditions as Number of Units Rises 2.4 Times
Homeowners Express Dissatisfaction With Trust Companies' Lack of Consultation
Reconstruction Complexes Move Toward Association Method
Conflicts between trust companies and homeowners are spreading among apartment complexes in Yeouido that are pursuing reconstruction projects using the trust method. Homeowners say they entrusted the project to trust companies based on their expertise, but are now protesting that their opinions have not been properly reflected and that design plans have been changed without adequate consultation. Experts analyze that the conflict is deepening because there are no institutional mechanisms to check the powers granted to trust companies.
According to the maintenance industry on July 16, following Gongjak Apartment, which is pursuing the trust method in the Yeouido area, homeowners at Plaza Apartment have also risen up over proposed changes to the maintenance plan.
Increase in Small Units and Surge in Number of Households... Friction Between Plaza and Gongjak Apartments and Trust Companies
Korea Asset Trust, which is in charge of the project, recently submitted a revised maintenance plan to reconstruct Plaza Apartment (28 Beonji) into five buildings with up to 56 floors and 1,391 units. Homeowners are protesting, claiming that Korea Asset Trust proceeded unilaterally with the drafting process for the maintenance plan without collecting opinions from homeowners.
Homeowners point out that the number of units will increase excessively after the project. According to the maintenance plan, the number of units will rise from the current 576 to 1,391, a 2.4-fold increase. Homeowner A from Plaza Apartment said, "If the number of units increases as planned, the daily active population will become two to three times higher than that of a typical residential complex," adding, "The increase in residents is also expected to result in a 2.8-fold increase in vehicle traffic, raising concerns about severe traffic congestion within the complex."
There is also controversy over the excessive allocation of small-sized units as the number of units increases. According to the revised plan, units of the national housing size (exclusive area of 84 square meters or less) account for 67.8% of the total. Some homeowners who expected a high-end reconstruction are voicing complaints that Plaza Apartment may become a "beehive apartment" dominated by small units. Homeowners also believe that an explanation is needed for the significant drop in the exclusive ratio, which has fallen from the previous 92% to 67%, meaning the proportion of living space relative to the supplied area has sharply decreased.
Korea Asset Trust explained, "The exclusive ratio inevitably dropped as we met strengthened fire safety standards and secured necessary common facilities," adding, "We conducted two rounds of surveys on resident unit preferences and collected opinions through the maintenance project committee." The company also stated, "There is still room for design adjustments during the integrated review process."
Some argue that the trust company did not properly collect residents' opinions. The maintenance plan submitted by the trust company to Yeongdeungpo District Office included the results of a 'homeowner preferred unit size survey.' However, homeowners point out that the survey only had responses from 52% of all households, making it difficult to say that overall resident opinions were reflected.
The Gongjak Apartment Reconstruction Normalization Promotion Group held a protest against KB Real Estate Trust in front of the KB Financial Group headquarters in Yeouido on the 8th. Photo by an independent contributor
Gongjak Apartment, located nearby, also held a protest against the trust company after pursuing the project using the trust method. Some homeowners at Gongjak Apartment formed the Gongjak Apartment Normalization Promotion Committee (Gongjeongchu), which acts as an emergency response committee, and held a protest in front of the KB Financial Group headquarters for three days starting July 7, raising their voices against KB Real Estate Trust.
Gongjeongchu protested that KB Real Estate Trust expanded the number of small units and changed the design to place 59-square-meter units in a single line on every floor of one building without the consent of all homeowners. The original design proposal by Daewoo E&C, the initial contractor, called for 63 units of 59 square meters (25 pyeong) and 191 units of large-sized units of 41 pyeong or more. However, KB Real Estate Trust increased the number of 59-square-meter units to 141 and reduced the number of large units to 124.
In response to protests from some residents, a third design proposal was presented, reducing the number of 59-square-meter units to 124. Currently, some homeowners at Gongjak Apartment have submitted a motion to dismiss the maintenance project management committee. A general meeting is scheduled for July 26 to discuss the integrated review agenda.
No Mechanism to Check Trust Companies... High Barriers to Contract Termination
As internal conflicts surrounding trust companies spread, the maintenance industry is seeing a movement to return to the association method. The trust method has the advantage of enabling initial funding and rapid project progress. However, as seen in the above cases, there is a structural limitation in that it is difficult to reflect homeowners' intentions in the event of opinion conflicts.
Yeouido Daegyo Apartment selected KB Real Estate Trust as the preliminary developer in 2017. However, as the trust company failed to meet the requirements for designation as a developer, the project shifted to the association method in 2023. The Mokdong New Town Complex 7 Reconstruction Preparation Committee also signed a memorandum of understanding (MOU) with Koramco Asset Trust in 2023, but switched to the association method through a vote in February this year.
Disputes over fees are also a reason for reluctance toward the trust method. Typically, trust companies take a fee of 2-4% of the total sales from a maintenance project. Some sites set an upper limit on the trust fee amount. However, ambiguous fee regulations lead to conflicts. In the case of Plaza Apartment, Korea Asset Trust is to be paid a fee equivalent to 2% of total sales, with a cap set at 24 billion won. However, an addendum to the contract includes a clause stating that the fee can be changed or paid separately through negotiation in cases of "drastic economic changes" or "significant effort." Homeowners in this complex see this as a structure that allows the trust company to secure additional profits.
Experts point out that while trust companies have excessive authority, there are insufficient mechanisms to check them. Maintenance projects that choose the trust method can form a management committee to reflect homeowners' opinions, but this is not a legal body stipulated in the "Urban and Residential Environment Improvement Act," so it has no real binding power. Once a contract with a trust company is signed, it is not easy to terminate. To withdraw from the contract, more than 70% of homeowners must agree.
Kim Jaekyung, head of Tumi Real Estate Consulting, said, "The trust method has the advantages of speed and expertise, but conversely, the homeowners' decision-making power is easily restricted," adding, "Since there is always a possibility that the trust company may push the project unilaterally, there needs to be a system in place to check this."
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