Gwangmyeong City in Gyeonggi Province has been accused of selling land in a municipal urban development project to a specific construction company through a private contract under favorable conditions. The allegation is that Gwangmyeong City provided important development information only to one construction company and supplied limited information to other companies, helping that company win the land at a low price.
According to the real estate development industry on the 12th, Gwangmyeong City on June 20 selected Useung Construction as the successful bidder in the public sale of the A2 block collective land readjustment site in the Gwangmyeong Gurumsan district.
The Gwangmyeong Gurumsan district urban development project is a roughly 772,855㎡ project to improve the residential environment of Gari-dae and Seolwol-ri in Soha-dong, Gwangmyeong, and the 40-dong village, and to create a total of 5,050 households. Among them, the A2 block is the largest of the six parcels in the Gurumsan district at about 89,000㎡ and can accommodate an apartment complex of about 1,400 households, making it a key site. For this reason, many construction companies were interested.
The winning bid price for the land that Useung Construction bought through a private contract was 498 billion won, about 22 million won per 3.3㎡. The sale price for the A2 block had started at 25 million won per 3.3㎡ at the first bid in April this year, but after four consecutive failures to sell it fell to 22 million won. After four failed auctions, a private contract was possible for about two months, during which Useung Construction won the land.
Some landowners of the Gwangmyeong Gurumsan district A2 block claim they were forced to sell their land at low prices compared with surrounding market prices because of Gwangmyeong City's improper administration.
According to the real estate industry, after four failed auctions Gwangmyeong City planned to cash-settle and take ownership of the land of 23% of landowners who did not consent to the sale. If securing land ownership in a development project is delayed, costs increase accordingly, and construction companies or project operators tend to avoid such sites. Construction companies did not participate in bidding for the land that was rejected four times because they feared this problem.
The problem is that this information was not provided equally to construction companies. Reviewing the reply Gwangmyeong City sent to Useung Construction titled "Reply regarding the collective land readjustment sale for A2 block of the Gwangmyeong Gurumsan district urban development project," it included language such as "for remaining land that did not consent to collective readjustment sale, only land for which a purchase and sale contract has not been concluded with a buyer will proceed to sale after completion of the readjustment plan change procedure" and "shortfalls arising from the purchase of collective readjustment land will be paid by the project operator as settlement money."
However, the reply to an inquiry from SEOHEE CONSTRUCTION, which had shown interest in the site, contained only the phrase "for remaining land that did not consent to collective readjustment sale, only land for which a purchase and sale contract has not been concluded with a buyer will proceed to sale after completion of the readjustment plan change procedure," and the cash-settlement part was omitted. There was no response at all to inquiries from another competitor, BS Industry.
Generally, local governments, for landowners who do not agree to the sale, have methods other than cash settlement, such as returning developed land or housing rights to owners after development. If it is not cash settlement, it takes at least one to two more years to proceed with the project because the location, area and value of the previous land must be assessed and redistributed as new land.
Landowner A said, "Gwangmyeong City did not re-auction and provided an official document during the private contract period to Useung Construction outlining a cash-settlement plan for the most important nonconsenting land in the development project, which is tantamount to giving special favors," and added, "as a result, landowners sold their land at rock-bottom prices and suffered a loss of 300,000 won per 3.3㎡ compared with the initial bid price, totalling 80 billion won."
Seo Ga-hee, a lawyer at Jehyeon Law Firm, said, "Changes to the readjustment plan and cash-settlement plans are important information for carrying out an urban development project, and the fact that a Gwangmyeong City official provided such information only to a specific construction company and that the city ultimately signed a private contract with that company could violate the Fair Trade Act and administrative law."
Moon Ju-hye, a lawyer at DaeRyukAju Law Firm, said, "The information provided to Useung Construction appears not to be one of many possibilities reviewed by Gwangmyeong City but information with a high likelihood of realization that would materially affect bid pricing and business decisions." She added, "If this information was conveyed only to Useung Construction, Useung Construction would have been able to participate in the bid under more favorable conditions and prices than its competitors, and competitors could claim the bidding violated fairness and transparency and file lawsuits to cancel the bid or confirm its invalidity."
In response, a Gwangmyeong City official said, "We conducted a public auction for the sale of the A2 block site, but it continued to fail, and Useung Construction ultimately entered into a private contract through a trust company and the sale was completed, and Gwangmyeong City did not provide any special favors," and added, "we answered the construction companies' inquiries with the same content."
A Useung Construction official said, "We purchased the A2 block, which had repeatedly failed to sell, during the roughly two-month period when a private contract was possible."