In cases where approval for conversion for sale in lots has been granted upon application of a rental business operator, requirements for a rental business operator to sell rental apartments to a third party pursuant to Article 21(7) of the former Rental Housing Act / Whether the lessee’s right to preferential conversion is extinguished even if the period of application for conversion for sale in lots was less than six months, even if the period of application for conversion for sale in lots notified by the rental business operator is less than six months, even if the period of application for conversion for sale in lots was less than six months

Article 21(1), (4), and (7) of the former Rental Housing Act (Amended by Act No. 11690, Mar. 23, 2013)

Plaintiff 1 and 13 others (Law Firm Subdivision, Attorneys Han Jae-chul et al., Counsel for the plaintiff-appellant)

Plaintiff 14

Seocho-do Co., Ltd. (Law Firm Rate, Attorneys Kim Ho-jin et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2013Na6577, 6584, 6591 decided December 13, 2013

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Whether the plaintiffs' preferential right to convert to lots has ceased to exist

A. Article 21(1) of the former Rental Housing Act (amended by Act No. 11690, Mar. 23, 2013; hereinafter “Rental Housing Act”) provides that “Where a rental business operator constructs a rental house with a subsidy from the National Housing Fund pursuant to Article 60 of the Housing Act or sells it for sale in lots on a housing site developed by a public project after the expiration of the mandatory rental period, among the housing constructed by the rental business operator after obtaining approval for a project plan pursuant to Article 16 of the Housing Act, the rental business operator shall make a conversion in lots on a preferential basis to any of the following lessees (excluding subparagraph omitted), and Article 21(4) of the same Act provides that “The head of a Si/Gun/Gu shall grant approval within 30 days from receipt of an application for approval for conversion in lots.” Article 21(7) provides that “Where a lessee fails to comply with the conversion in lots after obtaining approval for conversion in lots under paragraph (4), the rental business operator may sell the relevant rental house to a third party as prescribed by Ordinance of the Ministry of Land,

In light of the purport of the provisions of the Rental Housing Act to ensure a lessee’s preferential right to conversion into parcelling-out, so that lessee can purchase a rental house in a stable manner by guaranteeing a lessee’s preferential right to conversion into parcelling-out, and the Rental Housing Act provides procedures for a lessee’s application for conversion into parcelling-out and provides for a lessee’s approval for conversion into parcelling-out and does not provide for separate procedures to notify the lessee of such approval, and thus, lessee could not be aware of approval for conversion into parcelling-out, and Article 21(7) of the Rental Housing Act provides that a lessee may not sell a rental house to a third party for the first time after the date of approval for conversion into parcelling-out, and that a lessee’s right to conversion into parcelling-out is presumed to be premised upon a lessee’s application for conversion into parcelling-out, if the lessee fails to comply with a lessee’s right to request conversion into parcelling-out within six months after the date of approval for conversion into parcelling-out from the date of legitimate guidance or notification by the rental business operator.

B. According to the reasoning of the lower judgment and evidence duly admitted by the lower court, (1) the Defendant applied for approval for conversion of the above 1,392 apartment units; (2) on October 12, 2010, 1,155 units including the Plaintiffs among 1,392 units of the instant apartment units; and (3) on October 22, 2010, the Defendant may first file an application for conversion of the parcelling-out within 30 days from November 1, 2010 to November 6, 2010; and (4) on October 25, 2010, the Defendant may first file an application for conversion of the parcelling-out to 1, 203 units of the instant apartment units with the 10th anniversary of the fact that the Plaintiff did not first file an application for conversion of the parcelling-out period; and (5) on December 10, 2010 to December 21, 2011.

Examining the above facts in light of the legal principles as seen earlier, although the Defendant’s first-sale contract period, which was announced or notified to the Plaintiffs through each public notice of this case, was less than six months, the Defendant, from October 22, 2010 to June 2012, can be deemed as guaranteeing the Plaintiffs the opportunity to apply for conversion to conversion to sale in lots during the period exceeding six months as prescribed in Article 21(7) of the Rental Housing Act, and the Plaintiffs were entitled to apply for conversion to sale in lots for the above period, even though they did not file an application for conversion to sale in lots, and they did not file an application for conversion to sale in lots for six months or more under Article 21(7) of the Rental Housing Act, there is considerable room to view that the Plaintiffs were extinguished the right to preferential conversion to the rental housing of this case as they did not comply with the conversion to sale in lots for six months or more

C. Nevertheless, the lower court determined that each of the instant notices by the Defendant constitutes an offer for a sales contract with the Plaintiffs, and the Defendant’s offer is effective only within the period of concluding the first sale contract specified in the public notice, and does not reach six months even if the period of concluding the contract is added up. Thus, even if the Plaintiffs did not accept the above offer, it cannot be deemed that the Plaintiff’s preferential right of sale is extinguished since it does not constitute “where the lessee does not accept the rental business operator’s offer for more than six months” under Article 21(7) of the Rental Housing Act. In so determining, the lower court erred by misapprehending the legal doctrine on the interpretation of Article 21(7) of the Rental Housing Act and the extinction of the lessee’s preferential right of sale, thereby adversely affecting the conclusion of the judgment. The ground of appeal

2. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

[Attachment] List of Appointeds: Omitted

Justices Lee In-bok (Presiding Justice)