[1] The meaning of an urban development project by collective land substitution method

[2] The nature of the disposition of designating reserved land for replotting in an urban development project by collective replotting

[3] In a case where an urban development project and an aggregate building construction project are combined by a collective land substitution method, whether a construction project proprietor shall obtain approval for the use of individual land from the land owner in relation to the housing construction project to be implemented in a collective land substitution site (negative in principle)

[1] An urban development project by collective replotting means an urban development project by replotting method based on Article 27(9) of the Enforcement Rule of the Urban Development Act and a construction project of aggregate buildings (in particular multi-family housing). A separate project operator selected by an implementer of an urban development project can immediately implement an aggregate building construction project on a group of land created by the implementation of an urban development project. On the other hand, a land owner of the previous land shall allocate a group of co-ownership shares on the land and sell such shares to the construction entity of an aggregate building or acquire a newly-built house by selling it

[2] According to Articles 35(1), 36(1), 42(1), and 42(6) of the Urban Development Act, the extinction of rights to the previous land and the alteration of rights to substitute land under the Act on the Acquisition of Land, Etc. arising from a disposition of replotting. The designation of land to be reserved for replotting is made for landowners to temporarily use and benefit from the previous land until a disposition of replotting is publicly announced, while the designation of land to be reserved for replotting is merely a disposition prohibiting the use of and benefit from the previous land.

As such, it is permissible for a landowner to temporarily use and profit from the land scheduled for substitution to the extent that does not hinder the implementation of an urban development project, and in the case of a collective replotting method, the landowner is designated as a land scheduled for substitution, not as an individual parcel, but as a site for an aggregate building construction project. Therefore, in the collective replotting method, the designation of land scheduled for substitution is merely merely to inform the landowner, who is the object of collective replotting, that he/she is in the temporary position to acquire the share of the land scheduled for collective substitution if the disposition of replotting is publicly announced in the future, and it does not give the landowner the status that he/she can actually use and profit from the share

[3] Considering the business characteristics of the collective replotting method and the temporary and provisional nature of the temporary and provisional nature of the disposition of the designation of the land scheduled for substitution, where an urban development project and an aggregate building construction project are combined by a collective replotting method, land owners who are entitled to share of the collective replotting shall, in principle, be deemed to have exercised the right to collective replotting by the implementer of an urban development project rather than individually selling, investing or allowing the construction entity of the aggregate building to use the share of the collective replotting. Under such premise, land owners may be deemed to have consented to the progress of the project by applying for collective replotting, barring any special circumstance. Even if the land owner is subject to the disposition of the designation of land scheduled for substitution, it does not require the construction entity to express his/her consent to individual land use that grants the right to use the share of the collective replotting

[1] Article 27(9) of the Enforcement Rule of the Urban Development Act / [2] Articles 35(1), 36(1), and 42(1) and (6) of the Urban Development Act / [3] Articles 35(1), 36(1), and 42(1) and (6) of the Urban Development Act, Article 16(1) (see current Article 15(1) and (4)2 (see current Article 21(1)2) of the former Housing Act (wholly amended by Act No. 13805, Jan. 19, 2016)

[2] Supreme Court Decision 99Du6873 delivered on October 8, 1999 (Gong1999Ha, 2342)

Plaintiff 1 and four others (Law Firm Squa, Attorneys Kim Tae-tae et al., Counsel for the plaintiff-appellant)

Cheongju Market (Liwon Law Firm, Attorneys Kim Jong-sik et al., Counsel for the plaintiff-appellant)

Jin Construction Co., Ltd. and one other (Attorneys Lee Jae-de et al., Counsel for the plaintiff-appellant)

Daejeon High Court (Cheongju) Decision 2017Nu2913 decided November 1, 2017

All appeals are dismissed. The costs of appeal, including the part resulting from supplementary participation, are assessed against the plaintiffs.

The grounds of appeal are examined.

1. A. Article 28(1) and (5) of the Urban Development Act provides that, where an implementer intends to implement all or part of an urban development project by replotting, he/she shall prepare a replotting plan including the replotting plan, the details of replotting by lots, the liquidation land by lots and rights, the details of land to be liquidated, the details of land reserved for recompense of development outlay or reserved land, etc., and necessary matters concerning the standards for replotting plan following the preparation of a replotting plan, the standards for setting land reserved for development outlay and public facilities, etc. may be prescribed by Ordinance of the Ministry of Land, Infrastructure and Transport (Article 28(1) and (5). According to delegation, the Enforcement Rule of the Urban Development Act stipulates that all land in a replotting plan zone shall be liquidated in cash if replotting is designated or excluded from land subject to replotting (Article 27(5)); and the implementer may designate replotting by sharing at least two landowners’ request for the land planned to construct buildings falling under the Act on Ownership and Management

An urban development project by collective land substitution means an urban development project by replotting method based on Article 27 (9) of the Enforcement Rule of the Urban Development Act and a construction project of aggregate buildings (in particular multi-family housing), and a separate project operator selected by the implementer of an urban development project can immediately implement an aggregate building construction project on a group of land created by the implementation of an urban development project. On the other hand, a land owner of the previous land shall allocate a group of co-ownership shares on the land to the construction project owner of an aggregate building and sell such share to the construction project owner of an aggregate building

B. (1) On the other hand, the summary of the Urban Development Act provisions relating to the application of land substitution method is as follows.

(1) An urban development zone shall be designated with the consent of at least 2/3 of the area of land in an area to which the designating authority of an urban development zone applies and with the consent of at least 1/2 of the total number of landowners in such area and shall formulate an urban development plan (Article 4 (1) and

(2) In order to implement an urban development project by replotting, a cooperative is established with the consent of at least 2/3 of the area of land in an urban development zone with the consent of at least 1/2 of the total number of landowners in such zone, and an association is authorized to be established by the authority designating an urban development zone, and landowners in the relevant urban development zone shall become its members (Articles 11 (1) 6, 13 (3), and 14 (1)).

(3) Upon application by a landowner or consent, replotting for all or part of the relevant land need not be determined (Article 30 (1)).

(4) Where replotting is determined or excluded from the land entitled thereto, the excess or excess portion shall be liquidated in cash in comprehensive consideration of the location, classification, area, soil, water quality, repair, utilization status, environment, and other matters of the previous land and replotting (Article 41 (1)).

(2) Comprehensively taking account of the above provisions, when an urban development plan is established to implement an urban development project by replotting and a project implementer is established by the urban development project association, the land owner in the urban development zone becomes a whole member of the urban development project regardless of the replotting method or the consent to establish an association, and as a matter of principle, the land owner in the urban development zone is invested in the urban development project, and as a result, the individual land created by the urban development project is allocated as replotting. However,

C. Furthermore, according to Articles 35(1), 36(1), 42(1), and 42(6) of the Urban Development Act, the extinction of rights to previous land and the alteration of rights to substitute land under the Act on the Acquisition of Land, Etc. arising from a disposition of replotting. The designation of land to be reserved for replotting is made for landowners to temporarily use and benefit from land determined by a land substitution plan until a disposition of replotting is publicly announced, while it is merely a disposition prohibiting the use of and benefit from the previous land (see Supreme Court Decision 99Du6873, Oct. 8, 199, etc.).

As such, it is permissible for a landowner to temporarily use and profit from the land scheduled for substitution to the extent that does not hinder the implementation of an urban development project, and in the case of a collective replotting method, the landowner is designated as a land scheduled for substitution, not as an individual parcel, but as a site for an aggregate building construction project. Therefore, in the collective replotting method, the designation of land scheduled for substitution is merely merely to inform the landowner, who is the object of collective replotting, that he/she is in the temporary position to acquire the share of the land scheduled for collective substitution if the disposition of replotting is publicly announced in the future, and it does not give the landowner the status that he/she can actually use and profit from the share

D. The former Housing Act (wholly amended by Act No. 13805, Jan. 19, 2016; hereinafter the same) provides that a project proprietor who intends to obtain approval of a housing construction project plan shall, in principle, secure ownership of the relevant housing construction site, but may obtain approval of a project plan if he/she secures title to use the relevant housing site even if he/she fails to secure ownership (main sentence and proviso No. 16(4)2).

Considering the business characteristics of the collective replotting method as seen earlier and the temporary and provisional nature of the temporary and provisional disposition of the designation of the land scheduled for substitution, in cases where an urban development project and an aggregate building construction project are combined by the collective replotting method, land owners who are entitled to share of the collective land substitution shall, in principle, be deemed to have exercised the right to the overall land substitution by the implementer of an urban development project rather than individually selling, investing or allowing the construction entity of the aggregate building to use the share of the collective land. According to such premise, barring any special circumstance, land owners may be deemed to have consented to the progress of the project by applying for collective land substitution. Even if the land owner is subject to the disposition of designation of land scheduled for substitution, it is not necessary that the land owner should express his/her intent to grant the right to use the collective land to the construction entity

2. The reasoning of the lower judgment reveals the following circumstances.

A. On May 4, 2007, the Do governor of Chungcheongbuk-do designated an urban development zone with the content that an urban development project by replotting shall be implemented with approximately KRW 460,000 square meters of the total amount of KRW 232,00,000,00,000, and developed and publicly announced a development plan.

B. In order to promote the instant urban development project by means of collective land substitution, the Seog Urban Development Project Association Promotion Committee received a request for collective land substitution from landowners within the instant urban development project zone.

C. The deceased Nonparty (hereinafter “the deceased”) died on August 8, 2016 while the first instance trial in the instant case, and the Plaintiffs, co-inheritors of the deceased, taken over the instant litigation procedures) owned ten parcels listed in the [Attachment List of the lower judgment (hereinafter “instant land”) within the instant urban development project zone, and submitted a collective land substitution application to the Committee for Promotion of the Seoseo Urban Development Project Association on June 7, 2007.

D. On October 26, 2007, the Nowon-gu Urban Development Project Cooperatives obtained authorization for the establishment of the instant urban development project implementer from the Chungcheongnam-do Governor, and on November 15, 2007, the association establishment assembly held on November 15, 2007 explained that “the instant urban development project is completed by constructing and selling apartment on the site of multi-family housing at a series of stages for apartment construction projects,” and resolved the association’s articles of incorporation and replotting execution rules.

E. Around November 2012, the Seodaemun Urban Development Project Cooperatives obtained authorization of the implementation plan of the instant urban development project from the Defendant, and, preparing a replotting plan thereafter, planned the part corresponding to three blocks (29-1 block 1 sheet) in the instant urban development project zone (hereinafter “instant project site”) as a group of land substitution to proceed in the way of constructing multi-family housing. Around March 20, 2013, it was notified the members of the instant project site for collective land substitution application and submitted a written intent for sale from the desired members. On June 20, 2013, the Deceased also submitted a written intent for collective land substitution sale to the Seoseo Urban Development Project Association, stating that “The intent to sell the instant land as a group land substitution is to sell”.

F. On December 14, 2013, the Seog urban development project cooperative partially revised a replotting plan by reflecting such details, and obtained authorization for a replotting plan from the Defendant on April 25, 2014. On June 19, 2015, a collective replotting plan for the instant land, etc. was designated as a planned land substitution including the content of a 30,642 square meters of the instant project site.

G. Meanwhile, the Defendant’s supplementary intervenor-affiliated District Housing Association is a housing association authorized pursuant to Article 32 of the former Housing Act. The Defendant’s supplementary intervenor-subsidiary construction corporation was registered pursuant to Article 9(1) of the former Housing Act, and the two parties agreed to jointly implement the housing construction project that purchases the instant project site and constructs apartment buildings with a scale of 600 households on the ground thereof (hereinafter “instant housing construction project”).

H. The Defendant’s supplementary intervenor’s housing association purchased approximately 76.2% shares (25,942,942,898 won of the land secured by the landowner) of the project site of this case, which is the land scheduled for replotting, based on the amount of right from landowners, i,11,00 won = approximately 23,350.9 square meters of the right area, and the rate calculated by dividing it by 30,642 square meters of the project site area of this case, and filed an application for approval of the housing construction project plan with the Defendant with the consent to the land use of the project site of this case, on March 30, 2016.

(i) On April 5, 2016, the Defendant: (a) issued a disposition to approve the housing construction project plan with the content that the Intervenor joining the Defendant as a joint project implementer and the housing construction site consisting of 30,642 square meters of the instant housing construction site (hereinafter “instant disposition”); and (b) publicly announced the instant disposition pursuant to Article 2016-97 of the Cheongju-si Public Notice on April 8, 2016.

3. Examining the above facts in light of the legal principles as seen earlier, it is reasonable to view that the deceased submitted a collective land substitution application by consenting to the implementation of an urban development project by collective land substitution method, and that the land of this case, which is the previous land, was designated as a co-owned share and sold to the construction project proprietor of the housing, was prepared and approved by the housing construction project association. Since the housing urban development project association formed a land substitution plan based on the land substitution plan and obtained authorization, the housing construction association can provide the entire land of this case, which is a collective land substitution site, as a site for the housing construction project, as a collective land substitution plan authorized. The housing construction association can provide the whole land of this case, which is a collective land substitution site, as a site for the housing construction project owner. Furthermore, it is reasonable to view that the plan for collective land substitution application and the plan for sale of collective land prepared and submitted by the deceased, including an expression of comprehensive consent from the housing development project association on March 30, 2016. Furthermore, the Defendant’s Intervenor satisfied the requirements for approval for the project plan under Article 16(4) proviso.

Meanwhile, although the instant project site was designated as a collective land substitution site for the deceased’s instant land, it cannot be deemed that the designation disposition of land substitution is effective to create a right to exercise the right, such as the consent to use the land individually with respect to the co-ownership of the instant project site, which is a collective land substitution site. The deceased shall sell or invest the co-ownership share of the instant project site to the Defendant’s auxiliary participant in the event that a disposition of land substitution is publicly announced in the future, and only have the share pecuniary value transferred by such method.

4. In the same purport, the court below determined that, in light of the legal principles as seen earlier, the tide urban development project association is deemed to have been granted the comprehensive right to use the project site of this case, which is a collective land substitution site, by the deceased, and that the Defendant’s supplementary participant is sufficient to obtain approval for the housing construction project plan under Article 16(1) of the former Housing Act, and that it does not need to obtain individual approval for the use of the project site of this case from the land owners, such as the deceased, etc.

5. Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party, including the part resulting from the participation in the appeal. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Shin (Presiding Justice)