The end of the grace period for changing the use of living accommodations (residences) to officetels, which are lodging facilities but have been used for residential purposes, is one month away. Approximately 100,000 households who use residential accommodation facilities for residential purposes without changing their use have been forced into a situation where they have to pay tens of millions of won in enforcement fees every year.
According to the industry on the 12th, starting from the 15th of next month, the government plans to impose compliance fines on living accommodation facilities that have not changed their use and are not registered as lodging facilities. According to the Korea Real Estate Development Association, the number of living accommodation facilities is 103,820 households in 592 complexes nationwide. Of these, only 1,173 households, or 1.1%, have been repurposed into officetels.
Living accommodation facilities with cooking facilities are not included in the number of houses and there are no regulations such as restrictions on resale, so more than 10,000 households have been supplied every year since the late 2010s. As it was pointed out that it was an ‘expedient investment’, the government revised the Enforcement Decree of the Building Act in 2021 and set a two-year guidance period to change the use to officetels, etc. If you want to change an already completed living accommodation facility into an officetel, it is difficult to do so without rebuilding it, as it requires increasing the number of parking lots or widening the width of the hallway for firefighting purposes.
The enforcement fee is estimated to amount to tens of millions of won, depending on the price of living accommodations. According to the Enforcement Decree of the Building Act, enforcement fines are imposed within 10% of the standard taxable value of the building as of the date the first correction order is issued. The standard market value of an 83㎡ residential lodging facility built in Namyangju, Gyeonggi Province is 170.07 million won, and 10%, or 17 million won, must be paid as a performance penalty. The enforcement fee for the exclusive 83㎡ living accommodation facility under construction in Incheon is estimated at 21.8 million to 25.43 million won.
In the industry, it is pointed out that regulations that are difficult to adhere to are producing a large number of criminals. A resident of a living accommodation facility in the metropolitan area expressed concern, “When a performance penalty is imposed, financial companies may decide that it is an illegal building and begin to repay the loan.”
Government: “Residence is illegal in the first place” vs. Residence owner: “Are you asking me to move out of the house I live in?”
Housing is not included, heavy taxes are excluded… More than 10,000 houses are completed every year, making it popular.The reason that the owners of more than 100,000 households of living accommodation facilities across the country are forced to pay tens of millions of won in enforcement fees is because living accommodation facilities have been in the blind spot of regulations between government ministries. The government took steps to regulate accommodations belatedly in 2021 in response to criticism that, unlike housing, they are not subject to legal regulations. However, as the Ministry of Health and Welfare, Ministry of Land, Infrastructure and Transport, Ministry of Public Administration and Security, and local governments manage them separately, there is growing criticism that regulations are inconsistent and that the government will apply standards that are difficult to adhere to, creating a mass of criminals.
○Lack of consistent management system
There is an analysis that the ‘living accommodation crisis’ is due to the lack of a consistent management system within government ministries. The Ministry of Land, Infrastructure and Transport regulates firefighting facilities, parking areas, etc. in accordance with the Building Act. The Ministry of Health and Welfare manages the operation of lodging facilities in accordance with the Public Health Management Act. In this structure, local governments accepted move-in reports from people living in living accommodation facilities, causing owners to misunderstand that their residences were legal.
Living accommodation facilities, commonly known as ‘serviced residences’, were first introduced during the 1988 Seoul Olympics, and demand grew ahead of the 2002 Korea-Japan World Cup. As apartment prices soared during the Moon Jae-in administration and tax regulations based on the number of homes owned were strengthened, it became popular as an alternative product. Since it is not legally included in the number of houses, it is excluded from heavy acquisition tax and transfer tax. Also, since it was possible to report moving in, the buyer thought it was a house he could live in and bought it. From 2018 to 2021, more than 10,000 households were completed each year.
Living accommodation facilities are accommodation facilities under the Building Act and the Public Sanitation Management Act, so in principle, owners cannot reside there directly. However, no ministry or local government separately managed living accommodation facilities. Developers and sales companies used the term ‘accommodation facilities’ in contracts and sales advertisements and advertised that housing was actually possible. During the 2020 National Assembly audit, when ‘illegal housing’ was pointed out, the Ministry of Land, Infrastructure and Transport began preparing regulatory measures. If they wanted to continue to use the already-sold residential lodging facilities as if they were their homes, they were given a two-year grace period to change their use to officetels.
○ “The government must properly open the exit route”Owners and residents of living accommodation facilities claim that the government has postponed the regulation, but they protest that it is a regulation that is difficult to adhere to. In order to change the use of a living accommodation facility to an officetel, the consent of all buyers must be obtained and standards such as parking lot and hallway먹튀검증 width must be met. This is why some say it is impossible unless a new building is built. Of the total 103,820 living accommodation facilities, only 1.1% (1,173 households) were converted to officetels.
The Ministry of Land, Infrastructure and Transport, which is in charge of building law, maintains the position that living accommodation facilities are originally lodging facilities and that using them as residential facilities was illegal from the beginning. The explanation is that if it is recognized as a residential facility, it will cause problems with parking problems and overcrowded classes in nearby areas, causing losses to those who follow the law. In addition, the position is that it is difficult to relax the regulations on corridor width and firefighting standards because they are related to safety.
It is also difficult to register it as an accommodation facility as required by the Ministry of Land, Infrastructure and Transport. This is because at least 30 households must be gathered together and entrusted to a consignment company. Even if it is registered as an accommodation facility, it is unclear whether it is possible to live in a living accommodation facility like at home. This is because the Ministry of Health and Welfare manages whether it is actually operated as an accommodation facility, and the actual inspection is done by the local government.
According to the industry, compliance fines can range from 10 million to 40 million won depending on the price of living accommodations. As the imposition of enforcement fees approaches, the prices of living accommodations are falling. The asking price for the 84㎡ exclusive area of Lotte Castle Le West in Gangseo-gu, Seoul was 1.56 billion won, 50 million won lower than the sale price (1.61 billion won).