[Designing Victory] Bae, Kim & Lee Wins Final Ruling in 'Songdo Rental Housing Dispute'... Overturns Case by Highlighting Rarity and Legislative History

Incheon Urban Development Corporation's Open Sale: Stance Changed Citing 'Audit'
Bulk Sale's Unique Nature Confirmed, Legal History Traced
Errors in Public Law Application... No Harm Should Come to Companies
Bae, Kim & Lee LLC Secures Final Victory

"When a public institution enters into a contract through an open sale and later changes its stance to claim 'invalidity' based on audit results, it creates a structure where the private party, who trusted the process, bears the damage."

Park Cheolgyu, an attorney at the Construction and Real Estate Group of Bae, Kim & Lee LLC (Judicial Research and Training Institute, 31st class), explained the significance of his final victory in a lawsuit filed by Incheon Urban Development Corporation against IOS Co., Ltd. The case involved a request to cancel the registration of ownership transfer for the 'Songdo Foreigners-Only Rental Housing.' Bae, Kim & Lee LLC successfully defended against the corporation's claim that the sales contract was invalid due to a violation of the Special Act on Public Housing, ultimately securing a Supreme Court ruling in favor of IOS after a remand, with the corporation's claim being definitively dismissed last year.

Jungil Moon (right) and Cheolgyu Park, lawyers at the law firm Bae, Kim & Lee LLC, are posing after finishing an interview with The Asia Business Daily. Photo by Dongju Yoon

◆Highlighting the Rarity of 'Bulk Sales'

The case began in June 2017, when Incheon Urban Development Corporation announced the sale of 120 units of foreigners-only rental housing in Block A-3 of the Songdo Knowledge Information Industrial Complex. After four failed auctions, IOS was the sole bidder in the fifth round and won the bid. The contract was signed that same month under the condition of "comprehensive succession of the landlord's rights and obligations."

Moon Jungil, a former judge at the Seoul High Court (Judicial Research and Training Institute, 25th class), stated, "Our research found almost no cases of such bulk sales," adding, "It is quite rare to see a bulk sale occur in the middle of the mandatory rental period." Bae, Kim & Lee LLC focused on this uniqueness, framing the issue not as a simple 'failure to register' but as a question of "whether a transaction established through a public process can be overturned after the fact."

◆'Legislative History' Overturns Lower Court Trend

After the mandatory rental period ended, the corporation argued that the contract was invalid because IOS had failed to complete its registration as a rental business operator. The first trial sided with the corporation, but the appellate court dismissed the claim, stating that the corporation's argument for invalidity violated the principle of good faith. Bae, Kim & Lee LLC organized the timeline of amendments to rental housing laws, highlighting the distinction between public and private systems and the structure of supplementary provisions. This led the Supreme Court to rule that "if the Minister of Land, Infrastructure and Transport has not designated the entity as a public housing operator, the old Rental Housing Act, not the Special Act on Public Housing, applies."

Attorney Moon said, "When we first started the lawsuit, lower courts often applied the Special Act on Public Housing, but this ruling clarified which laws apply to the sale of existing rental housing, which is very rewarding."

◆The Issue of 'Invalidity Due to Lack of Registration'

After the remand, the dispute narrowed to whether a contract could be considered invalid solely because registration had not been completed. The Supreme Court ultimately sided with IOS, emphasizing that unless it is 'definitively impossible' to register, a contract cannot be easily declared invalid.

This ruling is seen as significant for establishing standards on 'applicable laws' and curbing reversals by public institutions. Attorney Park commented, "Even if a sales contract conducted by a public institution violates mandatory legal provisions, in certain cases, the public institution cannot claim invalidity based on the principle of good faith, which is highly unusual." He added, "Even if there is an error in the public institution's application of the law, private companies that have relied on such actions should not suffer damage."