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

Where a project implementation plan contains a defect rendering it void as a matter of law, so that a new project implementation plan must be established, this article examines whether owners of land, etc. who previously lost their association membership by not filing, or by withdrawing, an allotment application also have a legal interest in seeking confirmation of invalidity or revocation of the project implementation plan or the management and disposition plan.

[Question]

Whether owners of land, etc. who lost their association membership by not filing an allotment application within the application period, or by withdrawing it, also have a legal interest in seeking confirmation of invalidity or revocation of the project implementation plan or the management and disposition plan where the project implementation plan contains a defect rendering it void as a matter of law

[Answer]

A. How Cash-Settled Members Arise and the Issue Presented

Article 72 of the Act on the Improvement of Urban Areas and Residential Environments (도시정비법; the "Urban Improvement Act") requires the project implementer to set an allotment application period within 90 days after public notice of the approval of the project implementation plan and to have owners of land, etc. file allotment applications, while Article 73 requires the project implementer to consult on compensation for losses relating to land, buildings, etc. with those who did not file an allotment application or who withdrew their application before the end of the allotment application period.

Under these provisions and the association's articles of incorporation, owners of land, etc. who did not file, or who withdrew, an allotment application lose their membership and become so-called "cash-settled members" (청산조합원). However, where the project implementation plan itself contains a defect rendering it void as a matter of law, so that the entire prior allotment application procedure consequently becomes invalid, the practical question arises whether owners of land, etc. who have already lost their membership have a legal interest in bringing an action to challenge the project implementation plan or the management and disposition plan.

B. How Cash-Settled Members Regain Their Status When the Project Implementation Plan Is Void

The Supreme Court has established the position that, where a project implementation plan contains a defect rendering it void as a matter of law, the project implementer must establish a new project implementation plan, obtain approval for it, and then receive allotment applications again in order to establish a management and disposition plan; accordingly, former cash-settled members may also have an opportunity to be allotted buildings, etc. by filing an allotment application again in the new allotment application procedure, and therefore have a legal interest in seeking confirmation of invalidity or revocation of the management and disposition plan.

Supreme Court Decision 2008Du18342, decided December 8, 2011 (대법원 2011. 12. 8. 선고 2008두18342 판결) held: "Where a project implementation plan for an urban environment improvement project contains a defect rendering it void as a matter of law, the urban environment improvement project association must establish a new project implementation plan, obtain approval from the competent authority, and then receive allotment applications again in order to establish a management and disposition plan. Accordingly, owners of land, etc. who lost their membership under Article 47 of the Act on the Improvement of Urban Areas and Residential Environments (도시 및 주거환경정비법 제47조) and the association's articles of incorporation by not filing an allotment application within the application period or by withdrawing their application may also be allotted buildings, etc. by filing an allotment application at that time, and therefore have a legal interest in seeking confirmation of invalidity or revocation of the management and disposition plan."

C. The Same Principle Applies Where the Management and Disposition Plan Itself Is Void

Furthermore, the Supreme Court applies the same principle and recognizes the cash-settled members' interest in bringing suit not only where the project implementation plan, but also where the management and disposition plan itself, contains a ground rendering it void as a matter of law.

Supreme Court Decision 2012Du5572, decided August 20, 2014 (대법원 2014. 8. 20. 선고 2012두5572 판결) held: "Where a management and disposition plan contains a defect rendering it void as a matter of law, the urban environment improvement project association must establish a new management and disposition plan and obtain approval from the competent authority; owners of land, etc. who lost their membership under Article 47 of the Act on the Improvement of Urban Areas and Residential Environments (도시 및 주거환경정비법 제47조) and the association's articles of incorporation by not filing an allotment application within the application period or by withdrawing their application may also be allotted buildings, etc. by filing an allotment application at that time, and therefore have a legal interest in seeking confirmation of invalidity or revocation of the management and disposition plan."

Because Article 47 of the former Urban Improvement Act (구 도시정비법 제47조) cited in the above precedents corresponds to Article 72 (Public Notice of Allotment and Application for Allotment) and Article 73 (Measures for Persons Who Did Not Apply for Allotment, etc.) of the current Urban Improvement Act (도시정비법), the current article numbers must always be checked together when handling practical matters involving cash-settled members.

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