Construction company transferred ownership without repaying Housing and Urban Fund loans during rental-to-pre-sale conversion

Songbo Apartments in Suncheon, completed in 2015. [Provided by residents]
Songbo Apartments in Suncheon, completed in 2015. [Provided by residents]

Two people, including the head of a construction company, have been arrested on charges of shifting billions of won in corporate debt onto residents during the conversion of a rental apartment complex to pre-sale units.

The South Jeolla Province Police Agency said Wednesday it had detained the construction company representative and one other person in connection with the Songbo rental apartment complex in Suncheon. The two are accused of transferring ownership of pre-sale units to residents without first repaying loans from the Housing and Urban Fund, effectively passing the company's debt on to buyers.

Between 2020 and 2021, the suspects converted a rental apartment complex in Suncheon to pre-sale units five years after residents moved in. They transferred ownership without repaying Housing and Urban Fund loans received through the Korea Housing and Urban Guarantee Corporation (HUG), leaving more than 100 households unable to freely exercise their property rights.

The complex consists of 757 units across 10 buildings, each with an exclusive use area of 84 square meters. More than 100 of those households — after living in the units as renters for five years — paid a deposit of about 180 million won ($127,000) to convert to ownership on a rolling basis.

The pre-sale price was set at 226.5 million won per unit. Residents paid an additional 40 million won on top of their existing rental deposit to receive title to their homes.

The case drew community outrage after it emerged that the construction company had failed to repay the government-backed Housing and Urban Fund loans used to build the complex, meaning the mortgage liens had not been cleared when ownership was transferred to residents.

Residents found themselves saddled with roughly 8 billion won in debt that the construction company should have borne, leaving them unable to exercise their property rights. In December 2024, they filed a fraud complaint with police against the suspect identified only as A and others.

The case was initially handled by the Suncheon Police Station before being transferred to the South Jeolla Province Police Agency last May. After more than a year of investigation, police applied for arrest warrants, which a court issued Tuesday.

Earlier Tuesday, a group of affected residents calling themselves "Songbo Fineville Victims" held a press conference in front of the Suncheon branch of the Gwangju District Prosecutors' Office, urging authorities to pursue detention. "Residents faithfully paid the full pre-sale price, but because the developer failed to repay the Housing and Urban Fund loans, ownership was transferred to us with roughly 29 million won in debt per household and the mortgage liens still in place — leaving innocent residents to suffer the consequences," the group said.

The South Jeolla Province Police Agency's Anti-Corruption and Economic Crime Investigation Unit 2 is continuing to investigate the exact circumstances surrounding detained suspect A.


parkds@heraldcorp.com