The government will raise the level of punishment for corruption in condominium management fees. If ledgers are falsified, criminal penalties will be significantly toughened from the current level to up to two years in prison or fines of up to 20 million won.
The Ministry of Land, Infrastructure and Transport on the 21st announced a plan to improve the condominium management fee system as one of the agenda items of the task force (TF) on special management of cost-of-living prices.
There have been claims that management fees for condominiums such as apartments, row houses, and multi-family homes have risen due to corruption by residents' representative councils or management entities.
As a result of the government's inspection of the execution of management fees at 19 condominium complexes in 16 cities and provinces from Mar. 25 to Apr. 9, 38 on-site guidance and corrective actions and 19 cases including prior notices of the imposition of fines were uncovered.
Based on the findings, the government will improve the condominium management system. It will raise the level of criminal penalties for violations related to management fees. If ledgers are not prepared or are prepared falsely, the criminal penalty will be strengthened from up to one year in prison or fines of up to 10 million won to up to two years in prison or fines of up to 20 million won.
In addition, if the inspection or issuance of ledgers is refused, the penalty will be raised from fines of up to 5 million won to up to one year in prison or fines of up to 10 million won, and if the obligation to provide management fee details is violated, the penalty will be raised from fines of up to 5 million won to fines of up to 10 million won.
To prevent misconduct by residents' representative councils and management entities, the government will delete the regulation that allowed them to forgo audits if approved by residents. The aim is to heighten awareness of corruption in management fees among residents' representative councils and management entities.
Previously, even for condominiums under mandatory management that are required to undergo annual audits, the audit for that year could be skipped with written consent from a majority of residents (300 households or fewer) or two-thirds or more (over 300 households).
Sanctions against corrupt condominium managers will also be toughened from "license suspension" to "license revocation." If a condominium manager, in connection with condominium management, causes property damage through willful intent or gross negligence or gains unfair benefits such as by receiving money or valuables, the highest level of administrative disposition will be imposed to permanently expel the person from the market, minimizing the possibility of management entities becoming entangled in corruption.
The government will also improve the bidding system for condominium construction and services. The measure is intended to prevent arbitrary application or abuse of private contracts. Going forward, private contracts in condominiums will be limited to urgent cases such as natural disasters and safety accidents or where specific technology is required. Items such as insurance and consumer goods will be removed from eligibility for private contracts. For previously contracted cleaning and security services, private contracts will be allowed on a limited basis, taking into account performance records.
Requirements for restricted competitive bidding will also be strengthened. This is because excessive restrictions in restricted competitive bidding have undermined the principle of competitive bidding and contributed to rising management fees in many cases. In particular, for restricted competitive bidding on technical capability, which has many instances of abuse, the requirements will be tightened to require prior consent from residents for patents or new technologies necessary for the construction or services.
Kim Ei-tak, Vice Minister of the Ministry of Land, Infrastructure and Transport (MOLIT), said, "Because even slight fluctuations in management fees for condominiums, where more than 70% of the public live, immediately burden household budgets, more meticulous management is needed," adding, "If we prevent corruption by residents' representative councils and management entities on the ground in advance and make operator selection for construction and services within condominiums more substantive, we can fully achieve real reductions in management fees." Kim added, "We will do our best to ensure that the public can be confident that 'not even 1 won of the management fees I pay is wasted.'"