Compensation criteria for land grabs changed

Citizens seeking compensation for state-expropriated land will not be able to factor in pronounced hikes in land prices caused by fired-up demand from government projects in the vicinity, according to new criteria announced by the Ministry of Land, Transport and Maritime Affairs yesterday.

The ministry said this and other changes to the compensation criteria will serve to establish “a fair and reasonable standard” replacing the past practice of private appraisers determining the extent of remuneration. The new rules are due to be enacted around July.

As a rule, when the government expropriates land for state projects, the landowner’s compensation is determined by the price of the land at the time of the contract being signed.

But that is all about to change for any land that has “seen its property value change by at least 3 percent” since the announcement of a government project nearby that occupies more than 200,000 square meters, the ministry said in a statement.

In such cases where land prices outpace the average level of growth in the same district by more than 30 percent, the difference will not be factored in.

Under Korean law, profits gained from property values that have skyrocketed due to their proximity to public projects are excluded from government compensation as the profit did not stem from the landowner’s own efforts.

However, until the rule change, a private trade group of property appraisers was responsible for determining the details of the compensation criteria. Even though the results were not legally binding, critics said this fueled excessive government compensation and overheated speculation.

Last August, the Board of Audit and Inspection reviewed records from the ministry, regional governments and Korea Land & Housing (LH) to see if they had paid excessive amounts of compensation for expropriated land.

It found that 16,700 cases, or 45 percent of all those probed, had misapplied the criteria concerning dramatic hikes in property value due to government projects from 2003 to November 2010. LH paid an excess of 180 billion won ($158 million), it found.

The land ministry also prepared new rules for farmers who must hand over their land for government projects. They can receive compensation up to 1.5 times the size of the average profit per square meter of the land for two years after they report their earnings.

By Lee Jung-yoon [joyce@joongang.co.kr]