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If you canceled a presale contract but the developer lacks the financial ability to repay the money, can you claim against the contractor or the trustee? The conclusion depends on "who the contracting party is" and "the trust structure and special terms".

[Table of Contents]

1. Principle - The developer/seller bears primary responsibility

2. Possibility of claiming against the contractor - generally difficult

3. Possibility of claiming against the trustee - direct liability in a management-type land trust

4. Special clause limiting liability to trust assets - invalid if the duty to explain under the Act on the Regulation of Terms and Conditions is violated

5. Review of the contract and project structure required - help from Chungchul Law Firm

Principle - The developer/seller bears primary responsibility

When a presale contract is terminated, the obligation to return the payment as restitution is borne by the contracting party, namely the developer/seller. However, if the construction project is not proceeding smoothly, it is often the case that the developer has already lost its financial ability, making actual recovery difficult in practice.

At this point, the issue is whether the contractor or trustee can also be held liable.

Possibility of claiming against the contractor - generally difficult

The contractor is usually not a party to the presale contract. Therefore, it is difficult to view the contractor as directly responsible for returning the payment upon termination of the contract.

In actual litigation, arguments such as "the contractor was the de facto developer" or "the debt was assumed" are often raised, but most are rejected unless proven.

However, the contractor bears separate responsibility for defects. This is a different type of liability from termination of the contract.

Possibility of claiming against the trustee - direct liability in a management-type land trust

In large-scale construction projects, the developer often proceeds with the project together with a trustee. In particular, under a management-type land trust structure, the trustee succeeds to the position of the developer/seller.

In that case, because the trustee is the contracting party, it directly bears the obligation to return the payment and pay liquidated damages upon termination of the contract.

Special clause limiting liability to trust assets - invalid if the duty to explain under the Act on the Regulation of Terms and Conditions is violated

Trustees often include a special clause in presale contracts stating that they will "be liable only within the scope of the trust assets". This clause has the effect of limiting the trustee's liability to the extent of the trust assets, which is unfavorable to buyers.

Recently, the Supreme Court held that this special clause is subject to the duty to explain under the Act on the Regulation of Terms and Conditions, and ruled that if there was no sufficient explanation, the trustee cannot limit liability based on this clause.

Therefore, if you were not given an explanation of the liability-limiting provision by the trustee, the buyer may argue that the clause is invalid due to a violation of the Act on the Regulation of Terms and Conditions and may claim the full amount from the trustee.

Review of the contract and project structure required - help from Chungchul Law Firm

A claim for return of presale payments is not simply a matter of "whom to claim against." To determine the target of the claim and the scope of liability, you must comprehensively review several factors, including the contract, trust structure, special clauses, and whether the duty to explain was fulfilled.

Based on extensive advisory and litigation experience in real estate presale disputes, Chungchul Law Firm provides integrated support ranging from contract review to proving the trustee's liability and asserting invalidity under the Act on the Regulation of Terms and Conditions. If you are struggling with a presale payment refund issue, please consult Chungchul Law Firm.

This post is intended to provide legal information, and different results may arise depending on the specific facts. Please consult a professional for accurate legal advice.