[비즈한국] HDC Hyundai Development Company294870 (HDC) has recently been confirmed to have placed a provisional seizure on the construction site of the Banghwa District 6 reconstruction project in Gangseo-gu, Seoul, after being stripped of its role as the contractor. Previously, the Banghwa District 6 reconstruction union notified HDC of the termination of its construction contract in October following disputes over construction cost increases. In retaliation, HDC filed a lawsuit seeking to invalidate the contract termination and confirm its status as the contractor, while also freezing the union's assets.
According to the urban development industry, HDC placed a provisional seizure on a portion of the Banghwa District 6 reconstruction site on the 20th. This action is intended to recover 20 billion won in subrogation claims that arose during its time as the project contractor. The seized property includes 14 plots of land (totaling 3,776㎡), such as roads and building sites owned by the union. The Seoul Southern District Court accepted the application for provisional seizure on the same day after receiving 1 billion won in cash and a deposit guarantee insurance policy from HDC.
The Banghwa District 6 union and HDC parted ways two months ago after clashing over construction cost increases. Both parties originally signed a construction contract in June 2020 at a rate of 4.71 million won per 3.3㎡. As inflation and other factors were later reflected, the cost per 3.3㎡ rose to 7.27 million won by October last year. When HDC repeatedly demanded an increase to 7.97 million won per 3.3㎡—a total increase of approximately 21 billion won—around July, just before construction was set to begin, the union held a general meeting and notified HDC of the contract termination in October.
HDC is exerting all-around pressure on the Banghwa District 6 union following their breakup. After filing an injunction in November to suspend the effect of the general meeting that resolved to terminate the contract, the company filed a series of lawsuits seeking to invalidate that resolution. It is reported that during the same month, HDC also filed a lawsuit to confirm its status as the contractor for Banghwa District 6 and an injunction to block the bidding process for a new contractor. In addition, immediately after receiving notice of the contract termination, HDC exercised a lien on the project site and has continued to freeze union assets, including placing a provisional seizure on the union's bank accounts.
The head of the Banghwa District 6 reconstruction union expressed frustration, saying, “Since the contract termination, pressure to repay project loans has increased, and now that HDC has provisionally seized the union's accounts, we are even having difficulty paying interest. Seizing the project site on top of the accounts is an act of unfairly harassing the union.” An official from HDC Hyundai Development Company merely confirmed, “We have proceeded with a provisional seizure on a portion of the project site.”
The Banghwa District 6 reconstruction project is an urban development project aimed at demolishing old houses in the area of 608-97 Banghwa-dong, Gangseo-gu, Seoul, to build 10 apartment buildings (557 households) ranging from 3 floors underground to 16 floors above ground. The union received project implementation plan approval in November 2018 and selected HDC as the contractor the following July to push forward with the project. Although the relocation of union members and demolition were completed in April last year, construction could not begin due to the dispute over construction cost increases. Currently, the union is in the process of selecting a new contractor following the termination of the contract with HDC.
This is not the first time this year that HDC has engaged in disputes with urban development project sites from which it was dismissed. Previously, the Namyeong District 2 redevelopment union in Yongsan-gu, Seoul, stripped HDC of its bidding eligibility and confiscated its 10 billion won bid deposit in July, alleging that HDC violated promotional guidelines by individually contacting union members during the bidding process for a new contractor. In retaliation, HDC filed a lawsuit in August for the return of the deposit and damages. On the 17th, it placed a 2.2 billion won provisional seizure on the union's account, citing its claim for damages as the basis.
HDC recorded 1.3332 trillion won in orders for urban development projects this year. The four projects secured this year include: Gayang District 1 redevelopment in Dong-gu, Daejeon (257.3 billion won); Jangan Hyundai Apartment reconstruction in Dongdaemun-gu, Seoul (274.2 billion won); redevelopment in the area near the Military Manpower Administration in Jeonju, Jeonbuk (410.5 billion won); and Yongdu District 3 redevelopment in Jung-gu, Daejeon (391.2 billion won). Compared to last year, when it only secured one project—the Samsung Apartment reconstruction in Singil-dong, Yeongdeungpo-gu, Seoul (179.2 billion won)—the company's performance in urban development projects appears to be returning to its typical annual level of around 1 trillion won.