A study on the defect liability period for housing units subject to conversion for sale: Necessity of expanding public law regulation on defect liability

The statutory defect liability period for housing units subject to conversion for sale constitutes a fundamental element in determining the persistence of the obligor’s liability. Nevertheless, its commencement point has been inconsistently defined under the Act on Ownership and Management of Condominium Buildings and the Multi-Family Housing Management Act, which adopt the tenant’s delivery date, the transferee’s delivery date, or the date of use inspection for sections for exclusive possession and common use, respectively. Such inconsistencies have produced inequitable treatment among unit owners and considerable uncertainty in practice, particularly due to the substantial temporal gap between the transfer of ownership and the use inspection dates. Doctrinal controversy has also arisen regarding whether the defect liability period should be construed as a preclusive period or a period of defect occurrence. It would be more persuasive to construe this as a preclusive statutory period under the Multi-Family Housing Management Act. However, the civil law-based legislative approach, which designates the delivery date as the point of commencement for both sections for exclusive possession and common use, imposes a disproportionate burden on developers. The underlying cause of such problems lies in regulating the commencement of liability through private law concepts, namely, ownership or delivery. Accordingly, it is necessary to unify the commencement point based on a public law criterion, specifically, the inspection date. Further difficulties have emerged in cases where lease agreements and sales contracts overlapped before and after the enforcement of the amended Act on Ownership and Management of Condominium Buildings (June 19, 2013). Article 3 of its Addenda, which stipulates that liability for buildings “sold” prior to the amendment shall follow the former provisions, has given rise to interpretive disputes over the meaning of “sale,” thereby resulting in unequal application of the law among different units. Ultimately, as these problems originate from the civil law framework of the Act on Ownership and Management of Condominium Buildings, strengthening and expanding public law regulations over defect liability are necessary. Legislative reform should designate the Council of Occupants’ Representatives as the primary holder of the right to claim defect liability and introduce both the principle of priority in defect remediation and the establishment of a mandatory defect repair reserve fund.