Granting a Private Developer to Claim Transfer of Land from Private Owner Case

[158 KCCG 2169, 2008Hun-Ba133, November 26, 2009]

In this case, the Constitutional Court held that the first sentence of Article 18-2 Section 1 of the former Housing Act (revised by Act No. 8239 on January 11, 2007 but before revised by Act No. 8657 on October 17, 2007) cannot be regarded as infringing on the essential aspects of petitioners' property right or violating the rule against excessive restriction, and therefore does not violate the Constitution.

Background of the Case

Petitioners are the co-owners of a lot and a house built thereon located in ○○-Dong, △△-Gu, Daegu Metropolitan City, which was acquired around December 2005. On January 22, 2007, a development company obtained approval for its construction project plan on 337 lots including the aforementioned lot from the Mayor of Daegu Metropolitan City, pursuant to Article 16 of the Housing Act. The company, which had asked the petitioners to sell the lot but failed to reach an agreement, filed a claim against the petitioners seeking to transfer the lot, pursuant to Article 18-2 of the Housing Act. While the litigation was pending, the petitioners filed a motion to request for the constitutional review of Article 18-2 of the Housing Act, arguing that the provision was unconstitutional as it infringed on the essential aspects of petitioners' property right and ran afoul of the principle of just compensation (2008KaKi1735), but the motion was denied. At this, the petitioners subsequently filed this constitutional complaint with the Court on November 5, 2008. The provision at issue is as follows:

Provision at Issue

Former Housing Act (revised by Act No. 8239 on January 11, 2007 but before revised by Act No. 8657 on October 17, 2007)

Article 18-2 (Claim for Sale, etc.)

(1) Any project undertaker who obtains approval for his project plan pursuant to the provisions of Article 16 (2) 1 may file a claim against an owner of a site (including buildings thereon; hereafter the same shall apply in this Article and Article 18-3) that the former has not secured the ground of use (excluding anyone who has continued to hold the ownership of the site for 10 years prior to the date on which the district-based planning area is determined and published. In this event, in calculating the period of holding the site, if the owner of the site has acquired the ownership by inheritance from the lineal descendant or ascendant or the spouse, the period of holding the site by the inheritee shall be added up) among the sites for the relevant housing construction for selling the site at the market price. In this case, such project undertaker shall negotiate with the owner of the site subject to the claim for its sale for the period of not less than three months.

Summary of the Decision

In an opinion of 8 to 1, the Constitutional Court held constitutional the first sentence of Article 18-2 Section 1 of the former Housing Act which authorizes a private developer to claim transfer of the land (amended by Act No. 8239 on January 11, 2007 but before amended by Act No. 8657 on October 17, 2007). The summary of decision is as follows:

1. Court Opinion

By granting a private developer to claim transfer of the land necessary for its housing construction project, the first sentence of Article 18-2 Section 1 of the former Housing Act (revised by Act No. 8239 on January 11, 2007 but before revised by Act No. 8657 on October 17, 2007, hereinafter the "Instant Provision") forces the landowner to sell its land and involuntarily transfer of the land, which in fact amounts to land expropriation. Therefore, the issues in this case are 1) whether there is any public necessity to authorize a developer to transfer land; 2) whether the landowner is justly

compensated; and 3) whether the Instant Provision excessively restricts or infringes on the essential aspects of the freedom of contract and the property right.

In this case, as the Instant Provision's allowing a private developer to buy land necessary for its housing construction project is to achieve the public interest of facilitating completion of the construction project approved pursuant to the district unit planning, the legislative purpose is considered legitimate and the element of public necessity for lawful expropriation deems to be satisfied. Further, granting the private developer to the right to file a claim transfer of land against the owner at market price is an appropriate means to achieve the aforementioned purpose, given the fact that in order to acquire some parcels of adjacent land necessary for construction of more than 20 houses, it is necessary to provide a certain measure to acquire such land within the district unit planning zone. The Instant Provision is a system of expropriation of private property less severe than a general taking as it strictly regulates the requirement for the right claim transfer of land from owners. Moreover, in relation to the exercise of this right, the Instant Provision sufficiently guarantees the interests of the related landowners and minimizes the possibility of infringing on their basic right. Therefore, the Instant Provision does not violate the principle of least restrictive means. Also, it cannot be said that the Instant Provision infringes on the essential aspects of the landowner's property right regarding the land against which the claim is filed, because under the Instant Provision, the developer who can claim transfer of land should provide adequate compensation for the landowner based on the fair market price of the property, which guarantees just compensation. Moreover, the Instant Provision strikes an appropriate balance between legal interests because the public interest to facilitate a construction project pursuant to the district unit planning surpasses the private interest expected to be restricted by the Instant Provision, considering the facts that the right to land, different from other property rights, is far more strongly related to the public interest concerns; that the development project constructing more than 20 dwelling units assumes strong public nature even conducted by a private developer; and that parcels of adjacent land are indispensible to such a development project.

For the forgoing reasons, the Instant Provision neither infringes on the essential aspects of the petitioners' property right nor violates the principle against excessive restriction.

2. Dissenting Opinion of One Justice

Given the Instant Provision forcibly deprives a landowner of the property right against his/her will, the right to claim transfer of land provided in the Instant Provision essentially belongs to the type of expropriation stipulated in Article 23 Section 3 of the Constitution. Different from a governmental taking in which the State is the main party that takes private property and spreads the benefits to the public as a whole, however, when a private company becomes the main party expropriating private property, there should be more intensive legislative measures by which the public necessity of such expropriation is secured and the benefits from it can be reverted to the public, in order to justify such expropriation. For example, some institutional arrangements, such as measures to guarantee continuous restitution of the development benefits caused by such expropriation or public use the business profit derived from such expropriation, should be added, thereby sharing the fruits of expropriation with all members of the community including the ones taking and being taken. As long as the exercise of the right to claim transfer of land by a private developer takes the characteristics of expropriation by a private party, legal and institutional complementary measures should be accompanied in order to make such expropriation comply with the constitutional value of guaranteeing property right.

Furthermore, even in a situation where the right to claim transfer of land, i.e., the power of eminent domain, is inevitably granted to a private party, such a right should be exercised as minimized as possible, only to achieve the legislative purposes of the Instant Provision and prevent damage of activities, so called albaggi in Korean (meaning "planting of golden egg"), pursuing unjustifiable profit taking advantage of the needy condition of the developer, stubbornly refusing to sell land at a reasonable price hoping for a higher level of compensation later on. This requirement is normative demand originated from the principle of least restrictive means of rule

against excessive restriction. The Instant Provision, before being revised, prevented an exercise of the right to claim purchase of land against those who had continued to hold the title of the site for three years prior to the date on which the district-based planning area was determined and published. However, after the revision to the Instant Provision, the three year period was extended to ten years. This extension of period, however, seems likely to unnecessarily expand the scope of exercising the right to claim transfer of land against those who have nothing to do with the activities (what is called albaggi in Korean) pursuing unjustifiable profit. In this regard, the Instant Provision cannot be acknowledged as complying with the spirit of the rule against excessive restriction.

As such, the Instant Provision, which fails to provide the aforementioned legal and institutional complementary measures while easily granting a private party the power of eminent domain, infringes on the constitutionally guaranteed property right and therefore, violates the Constitution.