[Exclusive] LH New Construction Purchases Face 29.65 Billion Won in Contract Lawsuits Over Three Years... 2.4 Times Higher Than Existing Home Purchases

Office of Assemblyman Mo Kyungjong of the Democratic Party of Korea
"Contract Standards and Project Developer Verification Procedures Must Be Reviewed"

The New Construction and Purchase Program by Korea Land & Housing Corporation (LH), introduced as a rapid housing supply measure in urban areas, has seen lawsuit claims totaling over 29.65 billion won over the past three years, primarily due to insufficient pre-verification and related issues.

According to data titled "Annual Status of Lawsuits Related to LH New Construction and Purchase Agreements," submitted by the office of Mo Kyungjong, member of the Democratic Party of Korea and a member of the National Assembly’s Land, Infrastructure and Transport Committee, there have been a total of 33 lawsuits related to this program since the first case in 2023. The total amount claimed amounts to 29.65 billion won over the three-and-a-half-year period. Of these 33 cases, 13 are still ongoing.

This is approximately 2.4 times greater than the total amount involved in lawsuits for existing home purchase cases during the same period, which recorded 29 lawsuits with claims totaling about 12.4 billion won. The new construction and purchase agreement, implemented in 2019, is a system in which LH agrees to purchase homes built by private developers after project completion. However, if preliminary checks on a project developer’s execution ability are inadequate, or if LH’s response to disputes is insufficient, contract cancellations and payment disputes can lead to substantial legal expenses and interest burdens for LH.

The most significant LH loss involved the 2021 "Social Housing Supply Project through Non-Residential Use Change and Remodeling," publicly invited by LH. Despite acquiring a building in Mapo District, Seoul, for 14.6 billion won, LH withheld the remaining payment of 2.8968 billion won by depositing it in court due to consortium disputes among the sellers. Consequently, LH had to cover an additional 400 million won in late interest, litigation costs of 59.7 million won, and attorney fees and court fees totaling 29.17 million won.

Assemblyman Mo Kyungjong commented, "The breakdown in screening at the contract conclusion stage is a result of prioritizing quantity expansion above all else," adding, "LH must comprehensively review its agreement standards and project developer verification process and establish a system to proactively manage legal risks."

Mo Kyungjong, Democratic Party of Korea. Photo by Yonhap News Agency

This content was produced with the assistance of AI translation services.