“The aging downtown of Seoul will lower the barriers to entry for redevelopment and reconstruction and promote the increase of floor area ratio and the alleviation of charges.” (Apr. 24, Lee Jae-myung, then-candidate of the Democratic Party of Korea, on Facebook)
With the inauguration of the Lee Jae-myung government, the real estate industry anticipates that regulations on reconstruction and redevelopment will be eased. This expectation arises from Lee Jae-myung's pledge during his presidential campaign to promote the 'increase of floor area ratio and alleviation of charges for redevelopment and reconstruction.'
Lee & Ko (led by attorney Kim Sang-gon) recently launched a one-stop team for urban regeneration projects to respond to the legal advisory needs of reconstruction unions. The team includes experts from the Lee & Ko construction real estate group, Park Sun-ho, a former first deputy minister of the Ministry of Land, Infrastructure and Transport, and attorney Kang Dong-hyuk, who served on the specialized administrative court for urban regeneration in Seoul.
Park Sun-ho noted, “Regeneration projects involve complex procedures and regulations, and with various stakeholders involved, projects are often delayed and conflicts escalate into disputes.” He added, “We launched the one-stop team to provide comprehensive services from the early stages of the project through to its completion, rather than just offering advisory services related to permits or representing specific unions.”
In the late 1990s, Lee & Ko established a specialized team for construction and real estate. Attorney Jang Chan-ik (23rd Judicial Research and Training Institute) has been recognized as an expert in reconstruction and redevelopment. Currently, the team includes over 50 members, making it one of the largest in South Korea. Along with Jang, attorneys Yoo Dong-kyu (31st), Jung Chae-hyang (38th), Choo Gang-cheol (38th), and Na San-ha (40th) are actively involved.
Legal disputes related to regeneration projects occur repeatedly every year. The Seoul Central District Court has 10 specialized divisions for construction and real estate, and it is reported that many of the cases handled by these divisions stem from disputes arising during reconstruction and redevelopment processes. The nature of lawsuits is also diversifying, with unions sometimes engaging in litigation against contractors or conflicts arising between business union members and apartment union members.
One of the most talked-about disputes in the real estate industry recently involves a lawsuit filed by the members of the commercial union of the Garak Shiyoung reconstruction (Helios City) against the union to cancel the management disposal plan. In this case, the Lee & Ko construction real estate group represented the union that had lost in the first and second trials, leading to a Supreme Court ruling in 2018 that overturned the union's losses.
This Supreme Court ruling is evaluated as providing a standard for resolving disputes surrounding the 'independent accounting system for commercial spaces.' The independent accounting system allows for the separation of the development profits and expenses pertaining to commercial spaces and dwellings. Commercial union members can create development plans separately from residential ones. However, since the independent accounting system is not a legally defined system, legal disputes frequently arise regarding the validity of agreements.
In this case, the commercial union members entered into a memorandum of understanding with the union to adopt the independent accounting system for commercial spaces. Accordingly, the commercial union members created a management disposal plan and shared it with the union. However, the union did not reflect this plan and instead adopted a comprehensive management disposal plan for both the apartment and commercial spaces at a general meeting, which was approved by the district office. The commercial union members filed a lawsuit stating that the union's management disposal plan conflicted with the independent accounting system for commercial spaces. The first and second trials ruled in favor of the commercial union members.
However, the Supreme Court ruled in favor of the union, stating that it could not view the decisions made at the general meeting, the union's highest decision-making body, as illegal. In this ruling, the Supreme Court stated, “If the reconstruction union's general meeting was held according to the procedures and voting quotas stipulated by law and the union's bylaws, it may withdraw or amend the terms of the independent accounting system agreement.”
Recently, the Lee & Ko construction real estate group provided legal advice regarding disputes related to the reconstruction of the Gaepo Jugong Complex 4, the construction cost dispute of the Dunchon Jugong reconstruction, and the selection of a contractor in the Hannam 3 Regeneration Promotion Zone. Attorney Na San-ha stated, “Since regeneration projects must obtain permits at various stages, if the permit for the third stage is retroactively invalidated when the project has reached the tenth stage, the project itself could be halted, so obtaining legal consulting from the beginning is essential.”
The Lee & Ko construction real estate group predicted that the Lee Jae-myung government would focus on promoting regeneration project policies emphasizing 'deregulation' and 'strengthening public good.' Park Sun-ho stated, “The easing of the floor area ratio and building coverage ratio is understood as an intention to reduce the burden charges for members.” Additionally, he mentioned, “There could be a unified permitting process introduced to progress the projects quickly by consolidating overlapping procedures.” Attorney Na San-ha added, “Instead of controlling ultra-high-priced apartment prices, there can be a focus on housing supply policies for the middle class and low-income households.”