The Supreme Court ruled that a contract by a winning bidder of a public rental apartment to transfer ownership of the dwelling during the rental period to another person is void.
The Supreme Court's first division, presided over by Justice Shin Suk-hee, stated on the 1st that it overturned a lower court's ruling in a lawsuit brought by a public rental apartment winner, surnamed Jeong, against a person surnamed Song for the return of the building and sent the case back to the Suwon District Court.
Jeong entered into a lease agreement with the Korea Land & Housing Corporation (LH) in 2008 and lived there for 10 years before deciding to purchase the dwelling.
However, the actual resident of the dwelling was Jeong's acquaintance, Song. Song lived there, paying not only the deposit and rent but also maintenance fees. In 2012, Song entered into a contract to purchase the dwelling from Jeong.
Jeong received the apartment in 2021. Jeong asked Song to vacate the apartment, but Song insisted, saying, 'Didn't you agree to sell the house to me?' As a result, Jeong filed a lawsuit for the return of the building against Song, while Song filed a lawsuit for transfer of ownership against Jeong.
The first and second trials determined that Jeong must transfer the house to Song. Although the Housing Construction Promotion Act prohibits the resale of public rental housing, it does not invalidate transactions between individuals.
However, the Supreme Court stated that it cannot recognize the validity of the contract between the two and instructed a retrial, noting that it is likely that the contract between Jeong and Song could be deemed a 'legal act against public order' that can be invalidated under civil law.
The Supreme Court said that Jeong's transfer of tenancy rights to Song itself violated the Rental Housing Act. The law stipulates that tenants of public rental housing can only transfer their tenancy rights to members of 'homeless' households. At the time of the contract with Jeong, Song had a home.
The Supreme Court viewed that a sales contract based on this illegal agreement essentially undermined the legislative purpose of laws related to public rental housing. It stated, '(Recognizing such contracts) would deprive low-income non-homeowners of the opportunity to receive public rental housing and first priority for conversion to sale according to established criteria and procedures.'