In a case where the council of lessees’ representatives comprised of lessees of an apartment constructed and leased by Company A filed a lawsuit seeking invalidation or revocation of the disposition on the grounds that the amended Rental Housing Act does not apply to a rental business operator for whom the period of lease obligation has elapsed prior to the enforcement of the amended Rental Housing Act as a right recognized pursuant to Article 21(5) of the amended Rental Housing Act, the case holding that Party A’s claim is groundless on the grounds that the lessee has a right to apply for approval for conversion for conversion for sale in lots, in a case where the council of lessees’ representatives comprised of lessees of an apartment constructed and leased by Company A filed a lawsuit seeking invalidation or revocation of the disposition on the grounds that the amended Rental Housing Act does not apply to a rental business operator who had the right to apply for approval for

In a case where the council of lessees’ representatives composed of lessees of an apartment constructed and leased by Company A filed a lawsuit seeking invalidation or cancellation of the disposition of conversion to parcelling-out on the ground that the tenant’s right to request conversion to parcelling-out under Article 21(5) of the former Rental Housing Act (wholly amended by Act No. 13499, Aug. 28, 2015), the case holding that, in light of the purport or content of Article 21(5) of the amended Rental Housing Act and the Rental Housing Act, the tenant’s right to request conversion to parcelling-out in lots cannot be deemed to have been applied to the lessee for the purpose that the tenant’s right to request conversion to parcelling-out in lots has not been applied to the Rental Housing Act before the enforcement of the amended Rental Housing Act (wholly amended by Act No. 8966, Mar. 21, 2008) and the tenant’s right to request conversion to parcelling-out in lots has not been applied to the lessee for the lapse of the enforcement period of the amended Rental Housing Act.

Article 21 of the former Rental Housing Act (wholly amended by Act No. 13499, Aug. 28, 2015) (see current Article 50-3 of the Special Act on Public Housing) (see current Article 50-3 of the Special Act on Public Housing), Article 3 of the Addenda ( March 21, 2008)

Non-permanent Housing Co., Ltd. (Law Firm, Seoul et al., Counsel for the defendant-appellant)

Seoul High Court Decision 201Na1448 decided May 1, 201

Defendant 1 and six others (Law Firm Hoh, Attorneys Park Byung-hee et al., Counsel for the defendant-appellant)

March 8, 2018

1. The plaintiff's primary and conjunctive claims are all dismissed.

2. The costs of lawsuit are assessed against the Plaintiff, including the part resulting from the supplementary participation.

The primary purport of the claim is to confirm that the defendant's disposition of approval for conversion of rental housing to sale in lots on December 2, 2016 to the council of lessees' representatives of Namwon-si ( Address omitted) ○○○ apartment apartment is invalid.

Preliminary purport of claim: On December 2, 2016, the defendant revoked the approval of conversion of rental housing into sale in lots made to the council of lessees' representatives of the Namwon-si ( Address omitted) ○○○ apartment.

1. Details of the disposition;

A. The Plaintiff is a rental business operator with the purpose of civil engineering, construction, lease of real estate, and sale, and has been running a housing rental business since its registration as a rental business operator on December 12, 1994.

B. The Plaintiff constructed 686 households (the exclusive use area of 48.9060 square meters and the exclusive use area of 59.2962 square meters and the exclusive use area of 308 square meters) on the ground of the Nam-gu Seoul Special Metropolitan City ( Address omitted) (hereinafter “instant apartment”). On March 30, 2001, the Plaintiff received a report on the terms and conditions of lease as follows under civil petition No. 2217 against the Defendant on March 30, 2001, and the Defendant issued a report completion certificate to the Plaintiff on March 31, 201.

The actual rental period: From March 31, 2001 to March 30, 2002

The actual results of sale: 2006

The calculation standards of actual sale prices

The arithmetic mean value of construction costs and appraisal values pursuant to Article 3-3 of the Enforcement Rules of the Rental Housing Act shall be the arithmetic mean value: Provided, That even in this case, the pre-sale conversion price shall not exceed the amount calculated by deducting depreciation costs during the lease period from the price of the relevant house calculated at the time of conversion

The actual terms and conditions of lease shall be changed every one year, based on the date of the last change, within the scope of increase under Article 7 of the Housing Lease Protection Act.

C. On November 1, 2016, the council of lessees’ representatives of the instant apartment complex comprised of lessees of the instant apartment complex applied for approval for conversion of rental housing for sale in lots (hereinafter “instant application”) pursuant to Article 21(5) of the former Rental Housing Act (wholly amended by Act No. 13499, Aug. 28, 2015; hereinafter “former Rental Housing Act”). On December 2, 2016, the Defendant approved conversion of rental housing for sale in lots (hereinafter “instant disposition”).

[Reasons for Recognition] Unsatisfy, Gap evidence 1, 9, 16 (including branch numbers, hereinafter the same shall apply), Eul evidence 1 to 5, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is null and void because of the existence of a serious and apparent defect as follows, and even if there is no apparent defect, it should be revoked as it is unlawful.

1) A lessee’s no right to apply for approval for conversion for sale in lots

Article 21(5) of the former Rental Housing Act (amended by Act No. 9541, Mar. 25, 2009; hereinafter “Revised Rental Housing Act”) provides that “The amended provisions of Article 21 of the amended Rental Housing Act (amended by Act No. 8966) shall not apply to a rental business operator who has submitted a plan for conversion for sale in lots or has applied for permission for conversion in lots pursuant to the previous provisions at the time this Act enters into force.” In the instant apartment, Article 21 of the former Rental Housing Act is not applicable after the period of mandatory lease expires before the amended Rental Housing Act enters into force, and therefore, Article 21 of the former Rental Housing Act does not apply to the lessee of the instant apartment house.

2) Extinctive prescription of the lessee’s right to apply for approval for conversion for sale in lots

Since the basic nature of rental housing for sale in lots is a sales contract between private parties, tenant's right to expect the approval of conversion for sale in lots or right to apply for approval of conversion for sale in lots is a civil claim, and five years have passed since tenant can apply for approval of conversion for sale in lots, tenant's right to apply for approval of conversion

3) Violation of the principle of good faith

An application for approval for conversion for sale in lots at the expiration of 11 years from the expiration of the mandatory rental period is not permissible as it goes against the principle of good faith.

(4) Defect in calculating pre-sale conversion price

Article 21(1) and (10) of the former Rental Housing Act; Article 23(8) of the former Enforcement Decree of the Rental Housing Act (wholly amended by Presidential Decree No. 26763, Dec. 28, 2015; hereinafter “former Enforcement Decree of the Rental Housing Act”); Articles 14 and 9(1) [Attachment Table 1] [Attachment Table 1] of the former Enforcement Rule of the Rental Housing Act (wholly amended by Ordinance of the Ministry of Land, Infrastructure and Transport, No. 270, Dec. 29, 2015; hereinafter “former Enforcement Rule of the Rental Housing Act”); and Article 23(8) of the former Enforcement Decree of the Rental Housing Act (wholly amended by Presidential Decree No. 26763, Dec. 28, 2015; hereinafter “former Enforcement Rule of the Rental Housing Act”). However, the mandatory rental period at the time of the instant apartment rental business should be calculated as “the arithmetic average of the construction cost and appraisal price.”

5) Failure to meet the consent requirement of at least 2/3 of the total number of lessees

A) Only a lessee entitled to preferential conversion under Article 21(1) of the former Rental Housing Act may file an application for approval of conversion for sale in lots pursuant to Article 21(5). Therefore, excluding a lessee who is not entitled to preferential conversion for sale in lots, the requirement of consent by at least 2/3 of the total number of lessees was not satisfied.

B) It is difficult to determine whether the consent form submitted by the council of lessees' representatives is based on its own will because the lessee's lease agreement or certificate of personal seal is not attached, and the lessee who did not actually reside or did not move-in is included in a number of lessees, and thus did not meet the requirements for consent by more than 2

B. Relevant statutes

[Attachment 1] The entry is as specified in the relevant statutes.

C. Determination

1) Whether a lessee’s right to apply for approval for conversion for sale in lots is recognized (whether the amended Rental Housing Act applies)

Article 3 of the Addenda of the instant case provides, “The amended provisions of Article 21 shall not apply to a rental business operator who has submitted a plan for conversion for sale in lots or has applied for permission for conversion for sale in lots in accordance with the previous provisions at the time this Act enters into force.” The meaning of the Addenda provision of the instant case is that Article 21 of the amended Rental Housing Act does not apply to a rental business operator who has submitted a plan for conversion in lots after the lapse of the mandatory rental period, and that Article 3 applies to a rental business operator who will begin procedures for conversion in lots after the lapse of the mandatory rental period (see, e.g., Constitutional Court en banc Order 2008Hun-Ma581, 582 (Consolidation) Decided July 29, 201

In light of the purport of the decision of the Constitutional Court of this case, the Plaintiff asserts that the amended Rental Housing Act does not apply to “rental business operators whose mandatory rental period has expired”. However, the decision of the Constitutional Court of this case also ruled that “The former Act shall apply depending on whether or not the amended Rental Housing Act submitted a plan for conversion for sale in lots at the time of the enforcement of the amended Rental Housing Act,” and that Article 3 of the Addenda of this case stipulates whether the amended Rental Housing Act shall apply as the basis for submission of a plan for conversion for sale in lots or permission for conversion for sale in lots, not the expiration of the mandatory rental period, and ③ the Plaintiff may not be subject to the amended Rental Housing Act by submitting a plan for conversion in lots before the enforcement of the amended Rental Housing Act pursuant to Article 3 of the Addenda of this case, it is reasonable to deem that Article 21 of the amended Rental Housing Act is applied to the lessee. Therefore, unless the Plaintiff submitted a plan for conversion in lots at the time of the enforcement of the amended Rental Housing Act, or applied for permission for conversion in lots, the Plaintiff’s assertion that the amended Rental Housing Act has no reason.

2) Determination on the completion of extinctive prescription of the right to apply for approval for conversion for sale

In order to facilitate the construction of rental housing, Rental Housing Act, which has the purpose of supplying houses to homeless people with lower market prices, provides a construction rental business operator with various benefits, such as lending the National Housing Fund at a long-term and low interest rate, providing preferential supply of housing sites, etc. In addition, the Rental Housing Act has several regulations to protect lessee by limiting the sale of rental housing during the mandatory rental period and allowing the rental business operator to subscribe to guarantee on rental deposit, prohibiting rental business operator from establishing a mortgage, lease right, etc. on rental housing until before transfer of sale in lots, and setting separate standards for lease conditions, such as the lessee’s qualifications, selection methods, lease deposit, rent, etc., including the rental obligation period from the announcement stage of tenant recruitment, the rental business operator shall be included in the standard rental contract, using the standard rental contract, etc. (see, e.g., Constitutional Court en banc Decision 2008Hun-Ma581, 582 (Consolidated Decision, Jul. 29, 2010).

In full view of the contents of the aforementioned relevant provisions and the legislative purpose of the former Rental Housing Act, in principle, whether to apply for approval for conversion of rental housing to parcelling-out after the expiration of the mandatory rental period is left to the leased business operator’s choice. However, if a rental business operator does not apply for approval for conversion to parcelling-out within the specified period after the expiration of the mandatory rental period, the lessee may apply for approval for conversion to parcelling-out with the consent of at least 2/3 of the total number of lessees. If a lessee does not have such application, the rental business operator may continue to engage in the rental business under the previous condition without the limit of the mandatory rental period. However, even in this case, if there is any change in the existing intent or position of the rental business operator or lessee, it shall be deemed that the rental business operator or lessee has the right to apply for approval for conversion to parcelling-out at any time, which shall not be the other party to the lease contract under Article 21 of the former Rental Housing Act, and it shall be deemed that the lease business operator or lessee has the legal nature of the right to conversion to parcelling-out.

3) Determination on the assertion that it violates the principle of good faith

The principle of trust and good faith refers to an abstract norm that a party to a legal relationship should not exercise his right or perform his duty in a way that goes against the principle of trust and good faith, taking into account the other party’s interest, and thus, in order to deny the exercise of such right on the ground that it violates the principle of trust and good faith, the other party has good faith or that the other party has such faith objectively, and the other party’s exercise of right against the other party’s good faith should reach an extent that is not acceptable in light of the concept of justice (see Supreme Court Decision 2002Du11233, Jul. 22, 2004).

In light of the above legal principles, inasmuch as multiple lessees did not express their intent not to file an application for approval for conversion for sale in lots actively and definitely, the mere fact that many lessees did not wish to conversion for sale in lots in the previous survey of conversion for sale in lots or passed for more than 10 years after the expiration of the mandatory rental period is insufficient to deem that the lessee’s application for approval for conversion for sale in lots has reached the status that is not acceptable in light of the concept of justice. Therefore, this part of the Plaintiff’s

4) Determination on illegality in calculating pre-sale conversion conversion price

In full view of the following circumstances, it is difficult to view that the Defendant calculated the pre-sale conversion price under subparagraph 1(b) of the attached Table 16 as the “value obtained by calculating the arithmetic mean of the construction cost and the appraisal value” pursuant to subparagraph 1(b) of the attached Table of this case.

① Article 9 Subparag. 3 of the former Enforcement Decree of the Rental Housing Act (amended by Presidential Decree No. 19051 of Sept. 16, 2005) newly established a provision on rental housing with a mandatory rental period of ten years. Accordingly, the former Enforcement Rule of the Rental Housing Act (amended by Presidential Decree No. 471 of Sept. 22, 2005) newly established a provision that a lease compulsory rental period of ten years shall not exceed the appraised amount if a lease compulsory rental period of ten years is ten years. The purpose of adding a publicly constructed rental house with a mandatory rental period of ten years under the above Enforcement Decree of the Rental Housing Act is to solve the problem where a housing price increase each time when a housing price increase for the people’s stable residing therein. Considering the purpose of Article 9 subparag. 3 of the former Enforcement Decree of the Rental Housing Act (amended by Presidential Decree No. 19051 of Sep. 16, 2005), setting a rental business operator favorable to a lease business operator when the mandatory rental period of five years is five years, the mandatory rental period may be deemed to have been introduced.

② After the expiration of the lease period, a rental business operator has the right to decide on whether to apply for approval for conversion for sale in lots, and accordingly, it is possible to choose whether to continue lease business for sale in lots. Therefore, even if the lease business operator, the lease period of which was set for five years, starts the lease business without applying for approval for conversion for sale in lots, and ten years have passed since it was based on his/her own choice, it cannot be deemed that the lease period was set at ten years from the beginning.

③ It is recognized that the Plaintiff was unable to choose a mandatory rental period of 10 years since the Plaintiff’s mandatory rental period was set at five years at the time of commencing the instant apartment rental business. However, the sale price standard for the report on the terms and conditions of lease submitted by the Plaintiff to the Defendant on March 30, 201 stipulated that “the construction cost and the appraised value shall be the arithmetic average of the appraised value pursuant to Article 3-3 of the Enforcement Rule of the Rental Housing Act: Provided, That even in this case, the pre-sale conversion price shall not exceed the amount calculated at the time of conversion into a housing unit based on the construction cost and housing site cost of the relevant apartment unit.” The Plaintiff was aware that the sale price should be calculated as above at the time of the report on the terms and conditions of lease. As such, it is difficult to deem that the mandatory rental period of the instant apartment unit was newly established

5) Whether consent was obtained from two-thirds or more of the total number of lessees

A) Whether the lessee is qualified to preferentially sell to the lessee

According to Article 21(1) of the former Rental Housing Act, where a rental business operator sells public rental housing constructed with approval of a project plan pursuant to Article 16 of the Housing Act after the expiration of the mandatory period of lease, he/she shall do so preferentially to the lessee falling under any subparagraph of paragraph (1) (Article 16). A rental business operator who intends to convert the above constructed rental housing into parcelling-out shall apply for approval for parcelling-out to the head of a Si/Gun/Gu (hereinafter referred to as the "head of a Si, etc.") along with the documents prescribed by Ordinance of the Ministry of Land, Infrastructure and Transport (Article 21(1) (Article 3), and the head of a Si, etc. shall, upon receipt of such application, grant approval within 30 days, and may sell the relevant rental housing to a third party (Article 4); and where a lessee who has obtained approval for parcelling-out after obtaining approval for parcelling-out, a rental business operator may sell the relevant rental housing to the third party. Article 13(1) of the Enforcement Rule attached to [Attachment 13] application form, provides that a lessee’s desire not to supply the above list.

In addition to the forms and contents of the regulations on the approval for conversion of sale in lots and preferential sale of rental housing, ① the former Rental Housing Act does not stipulate that the lessee should be given priority to the sale of rental housing and the rental housing that can be sold to a third party when the mayor, etc. approves the conversion of sale in lots of rental housing, and does not stipulate that the form of the application for approval for conversion in lots should include only the number of rental housing supplied to the lessee and the general number of rental housing supplied to the lessee due to the sale in lots. ② The documents required to attach the application for approval for conversion in lots under Article 13(1) of the former Enforcement Rule of the Rental Housing Act are not sufficient to examine the existence of the right to preferential sale in lots of the lessee. ③ According to Article 21(7) of the former Rental Housing Act, the lessee holding the right to conversion in lots can be deemed to have the right to select the sale in lots within six months after the approval for conversion in lots, and it can be said that the lessee did not have the right to request sale in lots before the application for sale in lots.

B) As to the number of lessees who consented to the application for approval for conversion in lots of this case

A lessee eligible to apply for approval of conversion for sale in lots pursuant to Article 21(5) of the former Rental Housing Act refers to a lessee who has entered into a lease contract with a rental business operator at the time of applying for approval of conversion for sale in lots, unless any definition is provided for in Article 21(5) of the former Rental Housing Act. As seen earlier, the Defendant asserted that only a lessee who actually resides is a lessee entitled to apply for approval of conversion for sale in lots. However, approval of conversion for sale in lots pursuant to Article 21 of the former Rental Housing Act is merely limited to examining and approving whether a lessee who has preferential right to conversion for sale in lots of the relevant rental housing satisfies the requirements for conversion for sale in lots, and does not approve whether a lessee who has preferential right to conversion for sale in lots has to preferentially convert the relevant rental housing to a lessee. Article 13(1) of the former Enforcement Rule of the Rental Housing Act requires a lessee’s representatives’ representatives’ meeting to “a lessee who does not wish to purchase in lots, such as a certificate of waiver of the sale in lots,” and “documents of resident registration documents.”

The application for approval for conversion for sale in lots in this case requires the consent of at least 458 households (the total number of lessees 686 households x 2/3, and less than one household). In full view of the overall purport of the evidence Nos. 23, evidence Nos. 1, 1, 2, 4, and 5, among the 686 households, the total number of 575 households of the apartment in this case signed and sealed the written consent for conversion for sale in lots. The fact that the 556 households of this case submitted a certificate of personal seal impression to the effect that the 556 households of this court consented to conversion for sale in lots on their own will, and that the 511 households of this court, signed and sealed the written consent for conversion for sale in lots among the lessees at the time of applying for approval for conversion in lots on November 1, 2016, and the 511 households of this case who submitted the certificate of personal seal impression to this court. According to the above facts, it is reasonable to deem that at least the 5111 households consented to the Plaintiff

3. Conclusion

If so, the plaintiff's primary and conjunctive claims are without merit, all of them are dismissed, and the costs of lawsuit are assessed against the losing party including the costs incurred by the supplementary participation. It is so decided as per Disposition.

[Attachment 1] Relevant Statutes: omitted

Judges Lee Hyun-woo (Presiding Judge)