Songpa District Office Issues Administrative Guidance to Withdraw Reserved Unit Proposal
Arbitrary Disposal May Violate the Law
Performance Bonus Proposal Also Rejected
The attempt by the Jamsil Raemian I-Park (Jamsil Jinju Apartment) association to grant priority allocation of reserved units to specific companies has been halted. The proposal to pay a performance bonus totaling 1.4 billion KRW to the association's executive committee was also rejected, bringing the controversy to a temporary close.
According to the maintenance industry on August 6, the Songpa District Office issued administrative guidance the previous day, instructing the Jamsil Raemian I-Park association to withdraw the proposal for arbitrary disposal of reserved units. An official from the Songpa District Office stated, "Arbitrarily disposing of reserved units is against the law, so the association cannot act on its own in this matter," and added, "We received an urgent civil complaint, verified the facts, and then conveyed our intention to the association to withdraw the proposal."
In addition, the Songpa District Office requested that the association coordinate differing views regarding the proposal to pay a performance bonus of 1.45 billion KRW to the executive committee. The official said, "We also conveyed the intention that the incentive payment proposal should be controlled."
On the same day, the association held an emergency board meeting and rejected both the proposal for arbitrary disposal of reserved units and the performance bonus payment. These two proposals had been scheduled for presentation at the general meeting of representatives on August 8, but appear to have been withdrawn following the district office's mediation and growing opposition from association members.
Withdrawal of Performance Bonus and Reserved Unit Proposals... Arbitrary Disposal of Reserved Units May Violate the Urban and Residential Environment Improvement Act
The controversy arose when the association proposed granting priority allocation of two 84-square-meter reserved units to Law Firm A and Maintenance Business Specialist Company B at the highest general sale price (1.9037 billion KRW), specifying even the building and unit numbers. The association cited the two companies' contributions in securing exemption from the reconstruction excess profit recovery system as the reason for the reward.
However, the Prospective Residents' Association (Ipyehyeop) objected, arguing that the association's arbitrary disposal of reserved units instead of an open bid infringed on property rights. They also pointed out that even if the highest general sale price was applied, it would only be about half the market price, allowing for significant windfall profits. Last month, a high-floor 84-square-meter unit in this apartment complex was traded for 3.5547 billion KRW. Compared to the highest general sale price (1.9037 billion KRW), a minimum market profit of 1.6 billion KRW is expected.
It appears that the proposal was blocked due to its potential illegality. Under current law, selling reserved units to third parties without an open bid may violate regulations. According to the Urban and Residential Environment Improvement Act (Urban Improvement Act), its enforcement decree, and the Housing Act, reserved units allocated to non-members must be supplied in accordance with the timing, conditions, and procedures for housing supply contracts as stipulated by the Ministry of Land, Infrastructure and Transport.
The proposal to pay a performance bonus to the association executive committee, which had also sparked opposition among members, was likewise rejected. The association had planned to present a proposal to pay a total of 1.45 billion KRW in performance bonuses at the general meeting of representatives on August 8. However, members have been in conflict with the construction consortium (Samsung C&T and HDC Hyundai Development Company) over increased construction costs due to upgraded finishing materials, and have argued that placing such a large bonus on the agenda was excessive.
An association representative stated, "We have withdrawn both the performance bonus payment and reserved unit proposals," adding, "We will also revise the expenditure plan included in the amended management and disposal plan to reflect the removal of these two items before submitting it."
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