Hello, this is Attorney Kim Kwang-sik from Cheongchul Law Firm.

To join a regional housing association, you must meet certain eligibility requirements under housing law. Is a contract entered into without member qualification always considered invalid? Recently, the Supreme Court ruled that just violating the relevant eligibility requirement provisions under housing law does not automatically lead to invalidity. We will look into the reasons behind the Supreme Court's judgement, and what circumstances could lead to a contract being considered invalid below.

[Question]

Is a contract for joining a regional housing association entered into without member qualification invalid?

[Answer]

1. Case Overview: Dispute Arising from Failure to Meet Member Qualification Requirements

The defendant in this case applied for approval of the establishment of the regional housing association on June 16, 2016 and received approval around that time. The plaintiff entered into a membership contract with the defendant on May 6, 2022, intending to receive one unit of an apartment that the defendant was constructing. However, at the time of the contract, the plaintiff and their spouse each owned one unit, totaling two units. Article 11, Section 7, of the Housing Act and Article 21, Section 1 of the Enforcement Decree of the same law state that membership is only recognized if not all household members own housing or if one household member, including the head of the household, owns one housing unit with a residential area of 85㎡ or less. Therefore, the plaintiff did not meet the eligibility requirements at the time the contract was signed. Consequently, the plaintiff claimed that the contract was invalid due to original impossibility and sought the return of the deposit already paid as unjust enrichment.

2. Lower Court's Judgment: Failure to Meet Qualification Requirements as Original Impossibility of the Contract

The lower court ruled that the matters concerning member qualification under Article 11 of the Housing Act and Article 21, Section 1 of the Enforcement Decree are not provisions that can be arbitrarily excluded by the parties, and therefore, a contract made while failing to meet these requirements is considered invalid as it is originally impossible to achieve the objective. The lower court also found that since the defendant had already received approval for the establishment of the association at the time of the contract, the defect in the contract could not be remedied. Consequently, the court ruled that the defendant must return the deposit received from the plaintiff as unjust enrichment. This ruling reflects a strict application of the provisions of the Housing Act, limiting the validity of the contract.

3. Supreme Court's Judgment: Simply Not Meeting Qualification Does Not Render the Contract Invalid

However, the Supreme Court reversed the lower court's judgment and recognized the validity of the contract for the following reasons.

The Supreme Court considered that the eligibility requirement provisions in Article 11, Section 7, and Article 21, Section 1 of the Enforcement Decree of the Housing Act are regulatory provisions aimed at ensuring the sound operation of the association and the fairness of housing supply (Supreme Court ruling 98Da17954, July 10, 1998; Supreme Court ruling 2011Da5547, December 8, 2011), and established the principle that if parties collude to violate such regulatory provisions, it is only then that it corresponds to a legal act that violates good morals and the order of society (Supreme Court ruling 93Da2926, July 27, 1993; Supreme Court ruling 2012Da44839, September 10, 2015).

Based on this principle, the Supreme Court ruled that merely failing to meet the eligibility requirements does not automatically render the contract invalid. To declare it invalid, there must be evidence that the plaintiff and the defendant conspired or colluded with the intent to violate the relevant provisions, and since there was no such evidence, the contract itself could not be ruled invalid.

4. Implications of This Ruling: Precautions in the Legal Relationship Between Members and the Association

This Supreme Court ruling has provided an important criterion regarding the legal validity of contracts for joining regional housing associations. Although the eligibility requirements for membership are legally significant, merely failing to meet these requirements is not enough to negate the validity of the contract. It must be proven that there was intent or collusion to violate the regulations at the time of the contract. Therefore, both associations and members must thoroughly check whether legal requirements are met when entering into contracts, and obtaining relevant proof materials has become even more important in the event of a dispute.

Attorney Kim Kwang-sik, based on the expertise and experience gained at Kim & Jang Law Firm, has successfully resolved numerous real estate-related cases and has handled complex legal disputes such as property disputes, registration issues, and possession issues, providing clients with the most suitable customized legal solutions.

Legal issues related to real estate require prompt and accurate judgments. With Cheongchul, we will precisely understand the essence of the case and focus on achieving the optimal outcome. If you trust us, we will be a reliable ally.