The reconstruction union of 'Raemian One Pentas' in Banpo-dong, Seocho-gu, Seoul has decided to pay the construction company an additional 10 billion won in construction costs. This apartment complex was reconstructed from the Sinbanpo 15th apartment and was completed last June. The reconstruction work was completed last year, and the area has since been occupied and sold, but the union noted, "The construction was done at a price much cheaper than other reconstruction complexes in Gangnam, resulting in losses for the construction company," and decided through an extraordinary general meeting to pay more money, even though there is no legal obligation. The union also stated that they needed to pay more because "the construction company did well, contributing to the increase in property value."
In the process of reconstruction, it is not uncommon to pay the construction company additional funds due to disputes over construction costs. However, it is rare to find cases where an already occupied complex pays the construction company more, citing that the construction was done at "too low a price." For this reason, some union members have expressed opposition, claiming procedural issues.
This union has also been the subject of a damage compensation lawsuit from Daewoo E&C, the former construction company, for about 20 billion won due to the illegal termination of the construction contract.
According to the maintenance industry on the 1st, 39 union members, including Kang, filed a request for a provisional injunction to suspend the effect of the extraordinary general meeting resolution at the Seoul Central District Court earlier this month. Previously, in February, the union held an extraordinary general meeting and passed a motion to pay Samsung C&T, the construction company, an additional 9.9 billion won for construction costs. They requested a suspension of the effect, citing procedural issues. The proposal was approved by 105 out of 168 attending members at the extraordinary general meeting (with 61 opposed and 2 abstaining). However, the union members who filed the injunction claim that since it is a change in a contract with significant alterations to construction costs, more than two-thirds of all union members must agree according to relevant laws.
One reason for the controversy is the justification provided by the union when presenting the agenda. The union stated, "There is no contractual obligation to pay additional construction costs," explicitly indicating that there is no legal duty for the payment of construction costs. They also mentioned that "Samsung C&T has repeatedly complained about significant losses (amounting to 30 billion won) due to a sharp rise in construction costs at our business sites" and added, "The current per-pyeong construction cost (about 6.14 million won) of our apartment is lower compared to similar-sized reconstruction projects in Gangnam."
They emphasized, "The union actively helped to achieve a higher general sales price, provided urgent lending to quickly resolve the provisional seizure by Daewoo E&C, and successfully completed the general sale, which greatly contributed to the increase in property value for the union members, culminating in the construction of an apartment praised as the best in South Korea."
When Daewoo E&C, which had previously terminated the construction contract, filed a lawsuit claiming the termination was unjustified, Samsung C&T paid 2.07 billion won to the court to lift the provisional seizure, citing that it had sold units at an unprecedented price exceeding 67 million won per 3.3 square meters, following the implementation of the sale price ceiling system.
However, although there is no obligation to pay additional amounts under the construction contract, some union members are opposing the decision to pay around 10 billion won more. One official stated, "It is completely unreasonable to suggest giving more money just because the construction company is struggling without any contractual obligation." In this regard, a union official noted, "As this is a matter under legal litigation, we plan to resolve it based on the court's ruling."
Raemian One Pentas is an apartment complex located in a prime area of Banpo-dong, but it has faced ongoing conflicts during the reconstruction process. It was developed with a total of 641 units across 4 basement floors and 35 above-ground floors in the area of 12 Banpo-dong. It is adjacent to the Sinbanpo Station on Seoul Subway Line 9 and recorded the highest sale price after the implementation of the sale price ceiling system, with a price set at 6.737 million won per 3.3 square meters during the general sale last July.
Daewoo E&C was selected as the construction company in 2017, but after experiencing conflicts over construction costs, the construction contract was terminated in 2019. Subsequently, in 2020, a contract was signed with Samsung C&T, which returned to the maintenance project after five years.
However, Daewoo E&C filed a lawsuit claiming that the construction contract was unjustly terminated and ultimately won in the Supreme Court in January 2022. The court ruled that the termination of the construction contract was unjust and deemed that the business rights and construction company status belonged to Daewoo E&C. Considering that Samsung C&T had already made significant progress in the construction, the court instructed Daewoo E&C to seek compensation through a damage lawsuit. Accordingly, Daewoo E&C filed a damage claim against the union for about 20 billion won last September.
Lawyer Jo Sung-hwan from the law firm Dairok Aju stated, "Since the court confirmed that the termination of the construction contract was unjust and recognized the business rights and construction company status, I believe that the verdict will serve as favorable evidence for Daewoo E&C in future damage lawsuits."