[비즈한국] Members of the Noryangjin Bon-dong Regional Housing Cooperative, who joined forces to build their own homes, have been pleading for redress for 13 years following the collapse of their project. The project was derailed after internal corruption led the contractor, Daewoo E&C047040, to refuse to guarantee loans. The site was subsequently converted into a private housing development project, and the cooperative members are now calling for relief, stating that they have received neither their homes nor a refund of their contributions.
"Joining Forces" to Save Money, Only for it to Vanish in 2012
"The purpose of this project is to construct and supply apartment housing for members to achieve stability and improvement in residential life, which is the long-cherished desire of the members, and to handle the financing, operation, and other necessary tasks for such purpose." (Content of the Noryangjin Bon-dong Regional Housing Cooperative member sales contract)
The Noryangjin Bon-dong Regional Housing Cooperative was formed in November 2008 by individuals who did not own a home or owned only one home with a dedicated area of 60㎡ or less, in hopes of purchasing their own property. They pooled their funds to purchase land around 441 Bon-dong, Dongjak-gu, Seoul, and build new apartments. By March 2012, the number of members dreaming of owning their own home had reached approximately 500. The money they contributed (member contribution) to cover land acquisition and construction costs averaged 200 to 300 million won per person.
The cooperative selected Daewoo E&C as the contractor in July 2007 to proceed with the housing construction project. They took out a total of eight loans from financial institutions to gradually purchase the land, as the members' contributions were far from sufficient to cover the costs. Daewoo E&C, as the contractor, provided joint guarantees for the cooperative's loans, which had poor credit ratings. Koramco Asset Trust signed a real estate collateral trust agreement with the cooperative, taking over the purchase of the site and ownership management. In this trust agreement, the financial institutions and Daewoo E&C became the priority beneficiaries of the project.
"If the loan contract reaches its maturity on March 26, 2012, Daewoo E&C, as a joint guarantor, may repay the cooperative's debt at the discretion of the lender, Company A, and exercise its right of indemnity." (From an official document sent by Daewoo E&C to the cooperative in March 2012)
However, the Noryangjin Bon-dong Regional Housing Cooperative met a catastrophic end when the contractor, Daewoo E&C, refused to extend the loan guarantee. In March 2012, Daewoo E&C refused to extend the guarantee for the cooperative's eighth loan, citing internal corruption within the cooperative. At the time, internal corruption, including the embezzlement of contributions by the cooperative head, had already been confirmed. The cooperative failed to find a new guarantor, and eventually, Daewoo E&C代位 (subrogated) repaid the 270.1 billion won in cooperative loans. Daewoo E&C, having acquired the rights of indemnity and priority beneficiary status, transferred 180 billion won of the claims to a real estate development firm called Locus.
The Noryangjin Bon-dong regional housing project failed to get back on track and was terminated. Daewoo E&C, while transferring the claims to Locus, requested that the trust company managing the ownership liquidate the property. Consequently, in April 2012, Koramco Asset Trust sold the site to Locus, as designated by the priority beneficiary Daewoo E&C. The sale price was 210 billion won. According to the preceding trust agreement, the disposition of the trust property can be determined through consultation between the trust company and the priority beneficiary, and if the priority beneficiary requests, it can be sold directly to a party designated by the priority beneficiary.
A private housing development project was pursued in the area instead of the regional housing cooperative project. Having acquired the site, Locus signed a management-type land trust agreement with Daewoo E&C and Hana Asset Trust in April 2012 to push forward with the private housing project. Under the agreement, Locus and Daewoo E&C assumed all responsibilities and obligations, while Hana Asset Trust merely held the name of the project implementer. Locus transferred ownership of the site to Hana Asset Trust, and they selected Daewoo E&C as the contractor. They drafted a plan to build 6 apartment buildings (823 units) and auxiliary facilities, which was approved by the Dongjak-gu Office in April 2017.
13 Years of Stagnation: The Unfulfilled Dreams of Cooperative Members
Former members are still pleading for compensation. Most of those who paid contributions to the Noryangjin Bon-dong Regional Housing Cooperative have received neither an apartment purchase right nor a refund of their contributions. According to the Dongjak-gu Office, Locus established a plan to address (settle) the complaints of existing members when receiving approval for the private housing development project. In approving the plan, the Dongjak-gu Office stated, "We hope you faithfully implement the measures presented for the complaints of the regional housing cooperative members." While some who paid contributions were compensated according to this plan, others claim they are still awaiting relief.
A person who identified themselves as a member, A, said, "I became a member of the Noryangjin Bon-dong Regional Housing Cooperative in 2008 and paid my entire life savings of 220 million won. Seventeen years later, I haven't received a house or even my contribution back. After the project collapsed, my husband suffered a heart attack and has been bedridden; I became the breadwinner and make a living by picking up recycled paper. The government, which created the system for home ownership, does not care about the damages suffered by innocent ordinary people," they said, shedding tears.
B also said, "I became a member in 2008 and paid 295 million won. But I received neither the house the cooperative promised nor my money back. I was diagnosed with cancer in 2020 after the project fell through. The amount I contributed would have been more than enough to buy one of the apartments I see in front of that site today. I wonder if it was such a big greed to just want to own one home," they lamented.
Some members have even been branded as "holdouts" hindering the private housing project. From around 2012, when the cooperative's default became a reality, some members signed contracts to buy shares in two multi-family housing buildings (two units) on the project site in an attempt to secure land necessary to normalize the housing cooperative project. While some have completed the transfer of ownership, many are still in a state of preliminary registration. Some of these individuals are currently occupying the site to demand compensation, and Locus has sued them for obstruction of business and organization of a criminal group, claiming they are systematically hindering the project.
122 people, including Noryangjin Bon-dong cooperative members, are currently in a lawsuit against Locus, demanding the return of the housing cooperative project site. The premise is that there were issues with the general meeting resolution regarding the eighth loan that led the cooperative to disaster. It is reported that they are arguing that the resolution was illegal due to issues such as the cooperative head's eligibility to call a meeting and a lack of quorum, and therefore the transfer of ownership based on it is void. The first trial ruled in favor of Locus last July, and the plaintiffs immediately appealed, with the second trial currently underway.
An official from Locus, the project implementer, stated, "Locus wants to reach a settlement. We told the existing members that we would compensate them, but some are refusing to settle and have not canceled their preliminary registrations." Bizhankook asked Locus about the estimated number of people to be settled, the number of people settled so far, and future settlement plans, but did not receive a response.
Daewoo E&C, the project contractor, only stated, "The compensation process for existing members is being handled by the site implementer (Locus)," and added, "We hope that a fair and amicable settlement will be reached so that the compensation issue is well resolved." As of the end of last year, Daewoo E&C provided a guarantee for the 320 billion won real estate PF (bridge loan) taken out by Locus. This loan is set to mature this coming June.