It has emerged that even if people are caught after fraudulently applying for and winning new apartments in key areas such as Gangnam and Mapo in Seoul, their status as successful applicants is still recognized. In other words, although the homes were obtained through improper means, there is no problem continuing to live in them. Critics say only those whose chances to apply were taken away by fraudulent applicants suffer harm.
The current Urban and Residential Environment Improvement Act (Dojung Act), which sets rules for reconstructed apartments, has no penalty provisions for fraudulent applications. As a result, authorities cannot strip fraudulent applicants of their status. The opposition has proposed an amendment to include penalty provisions for fraudulent applications in the Dojung Act to close this blind spot.
◇ Status maintained even when fraudulent applications are caught due to gaps in the law
According to the redevelopment industry and the Ministry of Land, Infrastructure and Transport (MOLIT) on the 22nd, representative complexes where fraudulent applications were uncovered but the status of successful applicants remained intact include THE H Bangbae, for which applications opened in Aug. 2024 after the reconstruction of Bangbae 5 District in Bangbae-dong, Seocho-gu, Seoul, and Mapo Xi Hillstate La Chelles, for which applications opened in Jul. 2024 after the reconstruction of Gongdeok 1 District in Gongdeok-dong, Mapo-gu.
In these complexes, some people boosted their scores by faking cohabitation with parents living in other regions through documents such as national health insurance treatment statements, then won the lottery, and were later caught by an investigation by the Ministry of Land, Infrastructure and Transport (MOLIT). MOLIT referred the cases to police, and police forwarded them to prosecutors, but the winners' status was recognized. That is because the Dojung Act lacks provisions to punish "acts disrupting the supply order," such as false address registration, so prosecutors did not indict them.
An industry official said, "They were investigated for more than six months, but I understand they ultimately kept their status," adding, "Not only at these two sites but also at major complexes such as Raemian One Pentas, Raemian One Bailey, and Jamsil Raemian I'Park, some cases flagged by the Ministry of Land, Infrastructure and Transport (MOLIT) had statuses canceled, while others were maintained."
The current Housing Act has a provision (Article 65) that penalizes "acts disrupting the supply order." For this reason, those who win through fraudulent applications in public housing sites sold by the Korea Land & Housing Corporation (LH) and others face stern sanctions such as criminal punishment and loss of winner status. However, the Dojung Act, which governs redevelopment and reconstruction projects, had no such penalty provisions, and fraudulent applications exploiting this blind spot quietly took place.
An attorney said, "Even if fraudulent application by Minister of Planning and Budget nominee Lee Hye-hoon, who faces suspicion of false address registration, is confirmed, there is no penalty provision, so punishment would not be possible." The nominee is suspected of boosting points by falsely registering a married son's address and winning an application at Raemian One Pentas in Banpo-dong, Seocho-gu. This apartment is a reconstruction of Shinbanpo 15th.
◇ In 2024 the Supreme Court gave a "free pass" to fraudulent applications
The Ministry of Land, Infrastructure and Transport (MOLIT) investigates sales complexes every half-year (six months) and refers suspected cases of acts disrupting the supply order for investigation. In many half-year periods, the cases number in the hundreds. The ministry also strips winner status ex officio. In Dec. last year, it inspected 40 complexes that opened in the first half of the same year and referred 252 suspected fraudulent applications for investigation.
Some people who lose their winner status after being caught for fraudulent applications accept wrongdoing and the penalty as is. But in cases like THE H Bangbae, some take legal action and keep their status. There are also many cases where, even without legal moves by suspects, police do not forward cases to prosecutors, or prosecutors decline to indict. One major reason such cases have spread is a Supreme Court ruling recognizing that the Dojung Act has no penalty provisions.
On May 30, 2024, the Supreme Court's Second Division (Presiding Justice Lee Dong-won) upheld a lower court ruling in favor of the defendant in a case where prosecutors sought to cancel and punish fraudulent application by a person identified as A. A, who lived in Goseong-gun, South Gyeongsang Province, confirmed in Mar. 2021 that priority in general supply for a reconstructed apartment in Changwon, South Gyeongsang Province, would go to Changwon residents, then falsely registered at an apartment in Changwon to apply and won in Apr. the same year. After signing a supply contract, A sold the pre-sale right and gained a profit of 14,870,000 won.
After the fraudulent application was uncovered, prosecutors argued A should be punished based on the Housing Act's provision mandating penalties for fraudulent applications. However, the Changwon District Court ruled not guilty, citing that the reconstructed apartment was built and supplied under the Dojung Act, which has no penalty provisions for fraudulent applications by general-sale winners, and the Supreme Court affirmed. An industry official said, "I understand that after the Supreme Court ruling, police and prosecutors in many cases stopped investigating reconstructed-apartment fraudulent application cases."
To resolve this problem, lawmaker Cho Eun-hee of the People Power Party proposed an amendment to the Dojung Act adding penalties for fraudulent applications, allowing sentences of up to three years in prison upon detection. A staffer in Cho's office said, "We proposed the bill to close this blind spot because cases exploiting the lack of penalties for fraudulent applications in the Dojung Act are increasing."