Hello, this is attorney Park Jong-han of Cheongchul Law Firm.

This time, we look at the Supreme Court precedent, the interpretation of the Ministry of Government Legislation, and the provisions of the current Act on the Improvement of Urban Areas and Residential Environments (도시정비법) on two questions that arise when a project implementation plan is amended: as of which date the value of the prior assets that form the basis of the management and disposition plan should be appraised, and whether the unit allocation application procedure must be conducted again.

[Question]

When a project implementation plan is substantially amended, must the prior assets be re-appraised, and must the unit allocation application procedure be repeated?

[Answer]

A. Base Date for Prior Asset Valuation: The Date of Public Notice of Approval of the Initial Project Implementation Plan

Under the Act on the Improvement of Urban Areas and Residential Environments (hereinafter the "Urban Improvement Act"), a management and disposition plan must include, for each person eligible for unit allocation, a list of the previous land or buildings and their value as of the date on which the public notice of approval of the project implementation plan was given (Urban Improvement Act Article 74(1)5 (도시정비법 제74조 제1항 제5호)). Where the project implementation plan has been amended, the question arises whether the notice date referred to here is the date of notice of the initial approval or the date of notice of the approval of the amendment.

Supreme Court Decision 2014Du15528, decided November 26, 2015, held: "Even in light of the characteristics of an improvement project, which proceeds over a relatively long period, the 'date of public notice of project implementation approval' prescribed in Article 48(1)4 of the former Urban Improvement Act (구 도시정비법 제48조 제1항 제4호) means, literally, the 'date of public notice of approval of the initial project implementation plan'. Therefore, even if approval of an amendment to the project implementation plan substantially changing the main parts of the initial project implementation plan was granted, absent special circumstances, a management and disposition plan established on the basis of prior asset values appraised as of the date of public notice of approval of the initial project implementation plan cannot be regarded as violating Article 48(2)1 of the former Urban Improvement Act (구 도시정비법 제48조 제2항 제1호), which requires that land or buildings be allocated to applicants in a balanced manner after comprehensively considering the area, use, environment and other aspects of the prior assets."

The Court based this on the points that the appraisal of prior asset values serves to determine the relative contribution ratios among the members, that the valuation date needs to be fixed uniformly to prevent disputes, and that even if the initial project implementation plan loses effect as a result of the amendment, it does so only prospectively (current Urban Improvement Act Article 74(1)5 and Article 76(1)1 (현 도시정비법 제74조 제1항 제5호·제76조 제1항 제1호)).

B. Whether a New Unit Allocation Application Procedure Is Required When the Project Implementation Plan Is Amended

Unlike the re-appraisal of prior assets, where the amendment of the project implementation plan reaches a degree that affects members' decisions on whether to apply for unit allocation, the position of the Ministry of Government Legislation's interpretation and of the lower courts is that the public notice of allocation and the unit allocation application procedure must be conducted again.

In its statutory interpretation of March 13, 2014 (Case No. 13-0652, inquiry by Gangbuk-gu, Seoul), the Ministry of Government Legislation replied: "Where a housing redevelopment association, as the project implementer of a housing redevelopment project, obtained approval of an amendment to the project implementation plan under Article 28(1) of the Act on the Improvement of Urban Areas and Residential Environments (「도시 및 주거환경정비법」 제28조제1항) changing the total number of households and the housing supply area, with members who had previously applied for a housing unit being allocated a unit of the supply area closest to it after the change, and the content of that amendment approval was publicly notified under paragraph (4) of the same Article, if there are members who do not wish to be allocated a unit of the changed supply area, the housing redevelopment association should conduct the public notice of allocation and the unit allocation application procedure again under Article 46 of the same Act (같은 법 제46조) and amend the management and disposition plan."

Seoul Administrative Court Decision 2013Guhap19400, decided September 19, 2014, likewise held: "With respect to matters that have a material effect on the interests of the members, such as the 'association's cost burden,' if the change reaches a degree that substantially alters the content of the original project implementation plan, the project implementer must conduct a new public notice of allocation and unit allocation application procedure for the owners of land, etc., whereas in the case of a partial amendment of the project implementation plan that does not reach such a degree, a new public notice of allocation and application procedure need not be conducted." In a case where the project cost had increased by 89.39% compared to the original and the number of households and the composition of exclusive-use areas had changed, the court revoked a management and disposition plan adopted after only a unit-size change application procedure. The court viewed that "the unit-size change procedure is a procedure, premised on the existing allocation application, for applying to change the apartment size one wishes to receive, and is therefore different from the allocation application procedure in which one decides whether to apply for allocation at all."

C. Re-Application Provisions of the Current Urban Improvement Act

The current Urban Improvement Act, wholly amended on February 8, 2017, codified the re-application procedure: where, after the end of the application period, an amendment to the approval of the project implementation plan (excluding changes to minor matters) results in a change in the number of households or the housing size, the project implementer may conduct the public notice of allocation and related procedures again (Urban Improvement Act Article 72(4) (도시정비법 제72조 제4항)), and where the articles of association or similar rules so provide or a resolution of the general meeting has been passed, it may also allow those who did not apply for allocation or who withdrew their application to apply again (Urban Improvement Act Article 72(5) and Article 73(1)1 and 2 (도시정비법 제72조 제5항, 제73조 제1항 제1호·제2호)).

However, since the above provision takes the form of a discretionary rule stating that the procedure "may be conducted again," where the amendment of the project implementation plan constitutes a substantial change that materially affects the interests of the members, it appears that the re-application procedure should be conducted in line with the precedent and interpretation discussed above. Conversely, where the degree of change is minor, the management and disposition plan may be established on the basis of the previous allocation applications.

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