A resident in their 30s, identified as A, living in a newly constructed apartment in Yangcheon-gu, Seoul, expressed their frustration about the defects in the apartment. A said, "If it were just a problem in my home, I would rather pay to fix it myself," adding, "All the homes on that line are suffering from leaks, so fixing one won't solve the issue."
The dream of home ownership is short-lived, as more people are facing defects after moving into newly constructed apartments like A. At the Olympic Park Foreon in Gangdong-gu, Seoul, where residents have been living for less than a year, wall cracks have been discovered, prompting a detailed safety inspection. In the underground parking lot of the D.H. First Tier I Park, which welcomed residents in November 2023, residents experienced inconveniences due to water leaks.
As defects arise in newly constructed apartments, tensions between construction companies and residents are escalating. Factors such as excessive orders by contractors, a shortage of skilled workers, and a lack of management and oversight are all contributing to the emergence of defects in newly built apartments. However, unless it is a serious defect, immediate repairs are difficult to accomplish. Due to the nature of apartments, exchanges and refunds are also challenging, unlike other products such as cars or electronics. As a result, the inconveniences caused by defects are directly felt by the residents.
◇Increasing defect disputes every year… 8 out of 10 newly constructed apartments involved in 'lawsuits'
The number of defect dispute cases received by the defect review and dispute mediation committee operated by the Ministry of Land, Infrastructure and Transport is rising each year. The number of disputes increased from 4,370 cases in 2022 to 4,559 cases in 2023, and is expected to reach 4,663 cases in 2024.
The total number of defect review applications over the past five years is 10,989. Of these, the ratio of cases finally determined as defects is 67% (7,411 cases). Last year, out of the total 1,774 defect review cases, 1,399 were judged as defects. The defect ruling rate is 78.9%.
The main types of defects recognized are poor functionality (15.2%), bubbling and detachment (13.8%), cracks (10.3%), condensation (10.1%), leaks (7.1%), and contamination and discoloration (6.6%).
It is also common to engage in legal disputes against construction companies. According to reports, 8 out of 10 apartments completed in the past 10 years have filed defect lawsuits within 2 to 3 years after construction. This translates to 2.8 million out of 3.5 million households filing disputes against construction companies.
Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, noted, "Given the recent increase in unskilled workers and the lack of assurance regarding appropriate construction costs and periods, it is natural that defects are on the rise," adding, "For construction companies, the expense of repairing defects ultimately impacts their profitability. When disagreements arise about defect repairs, the issue inevitably leads to lawsuits."
Another real estate expert pointed out that "recently, there has been a rise in unnecessary lawsuits with more law firms taking on defect lawsuits for newly constructed apartments," while also noting, "Nevertheless, the increase in lawsuits indicates that the number of apartment defects is also on the rise."
◇There are measures for addressing defects, but… practical solutions are difficult
Various systems have been established to prepare for defects in apartments. However, resolving issues related to apartment defects is not straightforward.
Under the Joint Housing Management Act enforcement decree, construction companies must repair defects related to structures, facilities, and finishes free of charge for a certain period. However, some construction companies may delay repairs until the expiration of this period. Even if residents file defects with the government-operated defect review and dispute mediation committee, if construction companies resist, residents must endure the inconveniences caused by defects for an extended period.
B, in their 40s, who rented out their unit without directly moving in, applied for a defect review with the committee regarding a leak and received a judgment of construction defects. However, the construction company delayed the repairs, stating, "We are searching for the materials used during the move-in," causing B to express frustration, saying, "I intend to report the construction company to the local government, but I'm not sure if the company will properly handle the repairs after receiving fines."
A warranty bond system is also in place, but complaints arise that "it is actually hard to utilize." Construction contractors deposit 3% of the amount remaining after deducting site and indirect construction costs from project expenses as a warranty bond for repairs. However, it is difficult to cover repair expenses with the bond in large apartment complexes. Obtaining a judgment of objective defects is necessary to claim the bond, meaning it can take at least several months before the bond is paid, making it hard to address defect issues immediately. Additionally, during bond claims, warranty institutions may delay payments citing unclear liability of the construction company.
Even if lawsuits are filed, resolving the issues takes a long time. According to the study "Research on Resident Satisfaction Following the Results of Defect Lawsuits for Joint Dwellings," only 35% of residents at an apartment in Seoul, where recent defect lawsuits were completed, responded that the judgment amount was "sufficient."
Won Jun-yeon, manager of CS at TAEYOUNG E&C, stated in this paper, "Apartment owners tend to hope for large judgment amounts, but civil lawsuits can take a long time before reaching a conclusion, and satisfaction with the judgment amounts tends to hover around 35%." He added that "during the lawsuit process, the construction company does not provide defect repairs, resulting in nearly 80% of residents reporting inconveniences."
◇Defects in cars are 'social issues'… defects in apartments are 'resident problems'
One reason it is difficult to repair apartment defects is that the defects in multi-family housing are categorized as 'only residents' problems.' Typically, when there are design or manufacturing defects, or component failures in cars or electronics, the issues escalate to 'social issues.' These lead to large-scale consumer lawsuits or widespread repairs or exchanges done by government recall orders. Corporations also proactively address defects to prevent damage to their reputations.
However, apartment defects are confined to the issues of the individuals living in those apartments. Even if constructed by the same company, the condition of each apartment can vary, making collective responses difficult. In particular, publicly raising defect issues can lead to a decline in housing prices, causing residents concerned about their asset value to refrain from actively addressing the defects.
The government also finds it difficult to intervene forcefully in defect issues unless there is a request from residents, except for special inspections. Consequently, construction companies tend to wait until after decisions from the defect review and dispute mediation committee or lawsuit rulings before addressing problems. Ultimately, residents are left to endure inconveniences until a conclusion on defect liability is reached.
Professor Lee Yong-man from the Department of Real Estate at Hanseong University stated, "Due to the issue of defect judgments, there are parts where legal recourse is sought, leading to lawsuits or defect review and dispute mechanisms, but amidst the information asymmetry regarding defects between construction companies and residents, the government needs to resolve this and take enforceable measures to ensure prompt defect determinations and remedies."