Residential Property Ownership CeilingCase

[11-1 KCCR 289, 94Hun-Ba37, etc.,(consolidated), April 29, 1999)

A.Background of the Case

In this case, the Court invalidated, as a whole, the Ceilings onthe Ownership of Housing Sites Act as a whole for limiting indivi-duals' housing sites ownership and prohibiting such ownership entirelyfor corporations.

Traditionally, the people of our country have lived in a family-centered agrarian society and had strong preference for land owner-ship. The shortage in usable land, relative to the national popula-tion, caused an imbalance in supply and demand. Rapid industrial-ization and urbanization, and the resulting increase in urban popula- tion, caused constant increase in urban land prices. Businesses andindividuals developed a tendency to own more land than needed fortheir production or residence and use the surplus land to increase wealth. Under these circumstances, the constant increase in landprices, the vicious cycle around land speculation, and the resultingdistortion in wealth distribution prompted a discussion of a remedy.In 1989, the so-called concept of 'all land as public property' was actively discussed and legislated into the Land Excess-Profits TaxAct and the Restitution of Development Gains Act. Also, on Decem- ber 30, 1989, the Ceilings on the Ownership of Housing Sites Act waspassed, allowing people a

landownership only up to the amount neededfor their own use. However, due to the recent changes in social andeconomic circumstances, the Act was repealed in less than ten years on September 19, 1998.

The contents of the statutory provisions reviewed were as fol-lows:

An individual cannot own any residential property above the limitestablished for each type of household (660 m2for Seoul). A corpo-ration cannot own any residential property. Those individuals or cor-porations acquiring land in excess or violation of these rules, wheth-er before or after the enactment of the Act, must dispose of, use, ordevelop the excess property within a certain period, or pay a fee.This case is consolidated from sixty seven cases in which the excessresidential property owners sought cancellation of the assessment ofexcess residential property ownership fees and requested constitu-tional review of the Act. When denied by the presiding court, they filed a constitutional complaint with the Court.

B.Summary of the Decision

The Constitutional Court, in a majority decision of eight justices,struck down Article 7 (1) that set the ownership limit, Supplemen-tary Rule 2 that imposed the same obligations on those who acquired the excess land before the enactment of the Act as on those who ac- quired after, and Article 24 (1) that set the excess residential proper-ty ownership fee, individually. The Court, then recognizing that in-validation of the above provisions would bring about the same resultas invalidation of the entire Act, invalidated the entire Act. Thesummary of the decision follows:

The right to property protects material and economic conditionsfor one to shape his or her life according to his or her values andcapacities. It is a material foundation for realization of freedom.Residential property is a shelter for an individual with human dignityand worth, a place where he realizes his right to pursuit of happi-ness and right to pleasant housing. Therefore, setting the ceiling onownership too low is equivalent to excessive limitation on the scopeof one's exercise of freedom. The statute does not distinguish own-ership by the speculative or residential nature of its purposes andindiscriminately imposes the uniform ceiling of 660 square meterwithout any exception. It is a limitation excessive of the extent nec-essary for the legislative purpose of maintaining a sufficient supplyof residential property. It is an unconstitutional violation of theconstitutional right to property.

Also, extending the same uniform ceiling even to those who ac-quired the excess land before the enactment of the Act may be anunavoidable measure for the legislative purpose of suppressing landspeculation and land prices and channeling land to those with actual

demand. However, residential property is the place for one's pursuitof happiness and realization of his or her dignity. It should not beevaluated merely as the object of speculation. It should be pro- tected more robustly by the right to property, which also should operate to protect people's confidence in law. In other words, aresidential property varies in its social meaning according to the pur-pose of or the reasons for the acquisition. The uniform ceiling im-posed on all instances of residential property ownership, regardless ofthe purpose of or the reasons for the acquisition, exceeds the extentnecessary for the legislative purpose, violating the principle of equal-ity and the principle of protection of confidence in law.

The statute also imposes the same 'use or sell' period on thosewho, before its enactment, acquired the excess land in reliance on thestatus of the law at the time of the acquisition and those who, afterits enactment, acquired the excess in full knowledge of the new stat-ute with intent to use or sell in the requisite period. The length of the period, determined in consideration of those who knowingly ac-quired it after the enactment of the statute, is too short when appliedequally to those who had acquired the excess land before the enact-ment unknowingly. Such indiscrimination violates the principle of pro-portionality. The length of the period is also uniformly applied to theproperty acquired for residential purposes and the property acquiredfor speculative purposes, in violation of the principle of equality.

The statute also assesses a high rate of fee. It is appropriateand necessary to impose the fee to enforce the ceiling. However, im-posed for ten years, the fees can accumulate to 100% of the totalvalue of the levied land. Setting the rate of the fees as high as4-11% of the land value for unlimited periods is equivalent to allow- ing confiscation of the land in a short period of time. Such rule vio-lates the inherent limit on social intervention into right to property.

Justice Lee Young-mo dissented, after finding the 660㎡ limit rea-sonable and necessary, finding no reason to exclude those using theexcess property for one's own residential purposes, and also findingthe two year grace period and the rate of the fee adequate underthe principle of equality and the right to property.