“If 95% of the Project Site Is Secured and Three Months of Consultation Are Satisfied, the Sale Contract Is Formed”... A Judgment Recognizing a Market Price Inclusive of Development Gains

The key issues in this case were as follows.

• Whether the requirements for exercising the right to claim sale (securing 95% of the project site plus three months of consultation) were satisfied
• The standard for assessing the ‘substance’ of the consultation rather than its ‘form’
• The time at which the sale contract is formed by the manifestation of intent to claim sale
• The meaning of ‘market price’ as the standard for calculating the sale price
• Whether development gains are included

In practice, the following points are central.

“When is a claim for sale completed as a contract?” and “To what extent must the market price reflect value?”

The court first assessed whether the requirements for a claim for sale under the Housing Act were satisfied.

• Completion of project plan approval
• Securing title to at least 95% of the project site
• Conducting consultation for at least three months

With respect to the consultation requirement in particular, the court set out an important standard.

The consultation must not be limited to a formal notice but must be a concrete and substantive consultation.

Accordingly, it took the following factors into comprehensive consideration.

• Whether an appraisal-based price was presented
• The number and manner of consultation requests
• The other party's responsiveness
• As a rule, the burden of proving that the consultation requirement was satisfied rests on the association as the project proponent

In the end, the court found that the plaintiff association had satisfied the substantive consultation requirement, on the grounds that it had presented an appraised amount, sent certified mail, and continuously attempted consultation, while the other party had not responded to the consultation.

The court made clear the legal effect of the claim for sale.

At the moment the manifestation of intent to claim sale reaches the other party, a sale contract at the market price is formed.

In other words, even without a separate conclusion of a contract or agreement, the claim for sale itself has the character of a formative right that brings the contract into existence.

In this case, the sale contract was recognized as having been formed on March 13, 2024, the date on which the document containing the manifestation of intent to claim sale was served on the defendants.

However, where a notice demanding a reply on whether to participate in the reconstruction is attached to the complaint, the day following the expiration of the reply period becomes the date the sale contract is formed.

The court also reaffirmed an important legal principle regarding the standard for calculating the sale price.

The ‘market price’ in a claim for sale means not a mere current price but an objective transaction price that includes the development gains expected to arise from the implementation of the project.

This is a highly important point.

That is, it includes a value reflecting the development gains that gradually take concrete shape as the project progresses.

This does not mean, however, that the value after the project's completion must be reflected in full at the present time; rather, it means that the development gains that had become concrete at the time, in accordance with the degree of the project's progress, must be reflected.

The court also determined the following with respect to the appraisal result.

Where the appraisal method is reasonable, does not contravene the rules of empirical experience, and contains no manifest error, the appraisal result must be adopted as it stands.

Accordingly, the court fixed the sale price on the basis of the appraised value.

Although the defendants took issue with the absence of an association general meeting resolution, the court rejected this argument, holding as follows.

The right to claim sale is a right recognized by law, and because there is no provision in Article 48 of the Act on Ownership and Management of Aggregate Buildings, as applied mutatis mutandis by Article 22, Paragraph 3 of the Housing Act, requiring a separate general meeting resolution, it may be exercised without a separate general meeting resolution.

Managing the Consultation Procedure

• Present an appraisal-based price
• Secure a record of consultation, such as certified mail
• Accumulate evidence of consultation attempts

Strategy for Securing Title

• Achieve the 95% securing threshold in advance
• Organize the ownership-interest structure

Responding to Market Price Calculation

• Use multiple appraisals
• Prepare the rationale for reflecting development gains

Litigation Response

• Manage the timing of the claim for sale
• Prove arrival of the manifestation of intent

Analysis of the Risk Structure