LH slapped with fine for squeezing new town investors

LH headquarters in Jinju, South Gyeongsang. [YONHAP]

The state-owned Land and Housing Corp. (LH) was fined 565 million won ($483,300) by the antitrust agency for unfair penalties on investors in a new town development in Gimpo.

According to the Fair Trade Commission (FTC) on Monday, LH misused its monopolistic position in the real estate market.

LH collected a total of 948 million won in bogus late payments and property taxes.

LH was in charge of the development of the Gimpo Han Gang New Town in 2006 and in 2008, and sold land and apartments before construction began, a common practice.

The development was supposed to be completed by the end of 2012. That was delayed to April 2014, at least partly because of unexpected unearthing of cultural heritage sites.

While the private investors weren’t responsible for the delays, LH charged the investors late payments to cover losses it incurred as a result of the 16 month delay.

There was no legal foundation for LH to ask for such payments.

Additionally, it charged the investors property taxes, although legally they would only be rightful owners of the property -- and liable for taxes -- when development was complete. Until then, LH was liable for the taxes.

The FTC said LH had been unfair to investors by denying requests that late payments be suspended. LH did not properly inform the investors that there could be a delay in construction.

The FTC said that LH was focused on trying to improve its financial position.

LH holds the dominant position in public real estate development. It accounted for 67 percent of non-private real estate projects as of 2019. Joint projects with local governments accounted for 3.4 percent while those done solely by local governments accounted for 29.3 percent.

LH made headlines earlier this year after a civic group revealed that some of its employees were trying to profit by using inside information on a major real estate development.

This controversy led the Democratic Party to lose mayoral by-elections in Seoul and Busan in April.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]