Gov’t solves row, decides units’ value
The two parties have been fighting over what they say is the actual value of luxury apartments at Hannam The Hill, on the north end of Hannam Bridge heading toward Itaewon. The current tenants claim that by their own assessment, the value of a unit in the complex is 2.4 billion won ($2.35 million), but Hans Jaram, the company that manages the apartments, claims the value is nearly double, at 5.2 billion won.
As the two sides have failed to find a solution, the government stepped in. In its own evaluation, the Ministry of Land, Infrastructure and Transport concluded that a private land evaluation company used by the tenants lowered the value of the apartment excessively, while the management company’s assessment put the price too high.
The conflict between the two parties surfaced when the units in the building, which were initially constructed to be leased only, were put up for sale. The Land Ministry said the differing evaluation is the result of both parties trying to manipulate the value of the apartments to their advantage.
The Hill, which is located on the former Seoul campus of Dankook University, has attracted a lot of public attention since the development plan to lease it exclusively to wealthy tenants was unveiled. In February 2009, when Hans Jaram was looking for tenants, the company was asking for a 2.5 billion won deposit and monthly rent of 4.3 million won for a 332-square-meter (3,573-square-feet) apartment.
In the apartment complex, there is a space for tenants to hold parities, a business conference room, an indoor golf range, a swimming pool and a yoga and aerobics studio.
In 2011, tenants began to move in. But as of July, Hans Jaram decided to sell the apartments, sparking the conflict.
The construction company made the first move when it announced that it will decide the selling price of each unit based on the assessed value of 3.3 square meters for 61.1 million won in a 284-square-meter apartment.
The tenants argued that the value was unreasonably expensive and hired their own evaluator. For the same apartment, the tenant’s evaluator said a 3.3-square-meter area was worth 28.5 million won.
The tenants claim that a 3.3-square-meter area of that unit is worth 29 million won, but the management company assessed the value at nearly three times more, at 79.4 million won.
As the conflict seemed to have reached a deadlock, the government began a five-month investigation in January via the Korea Appraisal Board to assess the value.
It concluded that the values suggested by both parties were wrong.
“The normal way to assess the value of real estate is to incorporate the value of similar residential properties, the estimated construction cost and the current rent fees among other things,” said Kim Sang-gwon of the Korea Appraisal Board. “But the evaluations of both parties missed out on some of the factors.”
The Land Ministry is looking into a heavy fine or business suspension for the evaluation companies that were involved. The maximum possible fine is 500 million won.
The heavy penalties would be given to the evaluators for making assessments that favored their clients.
“We plan to harshly penalize them for damaging the credibility of the appraisal,” said Yoo Byeong-gwon at the Land Ministry.
BY choi seon-wook [email@example.com]