Disputes over sales prices are recurring at privately rented apartments facing conversion to sale. Tenants say the sales prices proposed by the operator are higher than nearby market levels and that the basis for calculation has not been sufficiently disclosed. The operator, however, maintains it set prices reasonably after appraisal and market analysis. Unlike public rentals, general private rentals do not have tightly defined legal standards for setting the conversion-to-sale price, so clashes between operators and tenants are repeated whenever the mandatory rental period ends.
According to the dwellings industry on the 29th, a privately rented apartment complex of 800 households in Pyeonghwa-dong, Jeonju, North Jeolla, completed its eight-year mandatory rental period and began conversion-to-sale procedures this month. In the process, the operator and tenants are at odds over how to calculate the sales price.
Residents are demanding disclosure of the basis for the sales price calculation and materials related to the appraisal. The operator was said to have explained that it set the sales price based on the final appraisal by a qualified appraisal firm and analysis of nearby market prices.
A resident of the complex said, "Based on an exclusive area of 84 square meters, the sales price was set in the 300 million won range, which is expensive compared with the average market price in the area," adding, "The operator said price changes or adjustments would be difficult for any reason or objection, so resident backlash is strong."
Conflicts over conversion-to-sale prices at privately rented apartments are continuing in other regions as well. Last year, at the privately rented apartment complex "Daesung Verthill 1·2" with 1,507 households in Dongnam District, Cheongju, North Chungcheong, conflict erupted over the sales price proposed by the operator. Residents said they were told at move-in that they could buy at a price lower than nearby market levels, but the actual proposed sales price was higher than expected. At the time, local political circles and related agencies stepped in to help resolve the dispute.
"Pangyo Valley Jeil Punggyeongchae" in Godeung-dong, Seongnam, Gyeonggi, also saw its dispute over the conversion-to-sale price escalate into a legal battle. Residents protested that the conversion-to-sale price was far higher than what they had expected at move-in, while the operator's side was said to have maintained that it calculated the price in line with the contract and appraisal procedures.
A structural feature of private rentals lies behind the repeated conflicts. In public rentals, the method of calculating conversion-to-sale prices is set relatively specifically by laws and guidelines. For five-year public rentals, prices are calculated by reflecting construction costs and the appraised value, and for 10-year public rentals, conversion-to-sale prices are set based on the appraised value.
By contrast, in general private rentals, whether to convert to sale and at what price is often decided after the mandatory rental period based on the contract and the appraisal results. From the tenant's standpoint, they must buy to keep living in a home they have occupied for a long time, but if the sales price is higher than expected, the financial burden grows. Operators say that after the rental period ends, they have no choice but to reflect current market prices and appraisal results in the asset sale process.
A construction industry official said, "Projects with public support, such as public-support private rentals, have certain guidelines and management systems, but general private rentals have different conversion-to-sale conditions depending on the contract," adding, "If a gap arises between the price expected at move-in and the actual conversion price, conflict is bound to grow."
Experts note that to reduce conflicts over conversion to sale in private rentals, conditions should be explained more clearly at the move-in stage. Yoo Sun-jong, a professor in the Department of Real Estate at Konkuk University, said, "Operators try to reflect market prices at the time of sale, while tenants, having lived there a long time, want to buy at a lower price, which creates clashes," adding, "However, because this is the realm of private contracts, it is not easy for the public sector to directly set prices."
Seo Jin-hyung, a professor in the Department of Real Estate Law and Administration at Kwangwoon University, said, "In principle, the conversion-to-sale procedure should proceed according to the contract signed at move-in," while adding, "Given that some tenants struggle to raise sales funds due to changes in market conditions, it is necessary to consider supplementary measures such as tailored financial support."