Missed Apartment Applications Can Lead to Cash Settlement in Reconstruction Projects

Association members who miss the application period for an apartment allocation in a reconstruction or redevelopment project can lose their membership status and become subject to cash settlement, according to an explanation by lawyer Kim Ye-rim carried by KB Real Estate TV.

Demand for reconstruction and redevelopment projects is growing as prices for newly built apartments rise. But complex legal procedures and competing interests at each stage can leave people exposed to setbacks if they proceed without adequate information.

Kim Ye-rim explained that some legal questions surrounding these projects remain unsettled, creating considerable scope for disputes. Different stages bring different lawsuits, including administrative challenges to permits and approvals and disputes over members’ eligibility for apartment allocations.

Missed notices can cost members their apartment allocation

Because these projects can take many years, members sometimes unintentionally lose their eligibility after overlooking meeting notices and newsletters and missing a critical step.

The video identified two essential procedures for securing an apartment allocation as an association member. The first is consenting to the association’s establishment: in reconstruction projects, that consent is required to receive a member’s allocation. The second is submitting an apartment allocation application within the designated period. Missing that window can result in the loss of membership status and classification for cash settlement.

According to the video, many members miss the application period because they fail to update their address and do not receive notices, or because they overlook the application amid the numerous matters circulated during a lengthy project. Members seeking an apartment allocation therefore need to examine each notice carefully when it arrives.

Approval defects can force projects to start over

Defects in the approval process are another major risk. An association’s establishment approval can be invalidated even just before construction begins, forcing the entire project to restart.

In one project area in Jangwi-dong, Seoul, the association’s establishment was revoked because of problems including the splitting of ownership shares during the collection of consent forms at the establishment stage.

Later in a project, negotiations involving shops, churches and other facilities used by multiple people can become obstacles. Unresolved disputes over shop tenants vacating premises during relocation can prevent demolition and construction from proceeding.

Unlike redevelopment projects, reconstruction projects often do not carry a legal guarantee of compensation for business losses. Conflicts between tenants seeking key money and associations can consequently delay projects.

The video explained that some recent, highly profitable reconstruction projects in Gangnam have secured cooperation by guaranteeing apartment allocation rights to commercial property owners who are association members. Commercial tenants, however, may remain unwilling to relocate because of key money issues.

Every occupant must leave before demolition and construction can begin. Associations generally file eviction lawsuits against all occupants together, then withdraw the claims against those who move out.

Although some occupants previously viewed delaying relocation as a way to gain an advantage, the video explained that forced eviction is now possible through legal procedures. Holdouts may also face claims for the return of unjust enrichment or criminal penalties, making it very difficult to secure an advantage by refusing to leave.

Higher construction costs increase contribution burdens

Additional contributions from association members have become a major concern at project sites. Among projects selecting contractors and signing construction contracts, costs of 10 million won or more have become frequent, a sharp increase from earlier cases negotiated at around 7 million to 8 million won.

This can create a substantial gap between the contribution estimated when a redevelopment plan is prepared and the amount members ultimately must pay. The video explained that costs continue to rise while sale prices do not increase as much, making it likely that members will bear the higher costs through additional contributions.

The video also explained that a resolution at a general meeting is treated as approval of the additional contributions, requiring members to pay.

Members should closely examine projected construction costs and additional contributions when the redevelopment plan is drawn up. If the expected contribution is too burdensome, they can choose not to submit an apartment allocation application and instead become subject to cash settlement.

Source: original video (YouTube)