Long-Term Non-Registration Delayed by a Dispute... How to Avoid an Unjust Penalty Surcharge

If, after purchasing real estate, one does not complete the registration of transfer of ownership for a long time, one may be classified as a long-term non-registrant under the Real Name Real Estate Act and have a penalty surcharge imposed. However, advice has emerged that if the transfer of registration was realistically impossible due to a rights dispute with the seller, an exception may be recognized, so legal review is necessary.

The current Act on the Registration of Real Estate under Actual Titleholder's Name stipulates that, in order to secure the transparency of real estate transactions and prevent speculation and tax evasion, a penalty surcharge for long-term non-registration is imposed when the registration of transfer of ownership is not made within a certain period from the date the payment of the purchase price is completed. However, in actual transaction settings, there are not a few cases in which the registration procedure is delayed due to a dispute over whether the purchase price was paid or the seller's refusal to cooperate.

In judging the legality of imposing such a penalty surcharge, the key issue is whether, under the Real Name Real Estate Act, "the performance of the counter-consideration was substantially completed." This does not simply mean that time has passed, but whether the buyer paid the full agreed price and reached an objective state in which he could claim the registration of transfer of ownership at any time.

For example, if, despite the buyer having paid the full purchase price, the seller demands an additional amount or denies having received the payment itself and refuses to hand over the documents necessary for registration, a situation may arise in which the buyer finds it difficult to transfer the registration on his own. Such circumstances can be an important factor in judging the legality of imposing a long-term non-registration penalty surcharge.

In fact, the court recently, in a related case in which the seller denied the fact of payment and refused the transfer of registration for a long time, judged that until the buyer's rights were confirmed through a civil lawsuit, the buyer was in a state where he could not substantially apply for registration on his own. In particular, it ruled that the mere fact that the extinctive prescription of the purchase-price claim had been completed could not immediately be regarded as a state of "substantial completion of the counter-consideration" under the Real Name Real Estate Act, and it canceled the penalty surcharge disposition.

The court took the view that, since the cause of the buyer's failure to register lay not in a mere delay but in a legal and factual obstacle, it was difficult to evaluate this as a violation of the long-term registration obligation. This is interpreted to mean that, since the legislative purpose of the Real Name Real Estate Act lies in regulating title trusts and speculative transactions, actual rights-relationship disputes should not be uniformly subject to sanctions.

Attorney Shin Hyo-sang of the law firm Daeryun explained, "The long-term non-registration penalty surcharge is not uniformly applied to all registration delays; the cause of the registration delay and the actual rights relationship must be comprehensively examined," adding, "If it is objectively proven that registration was impossible due to the seller's refusal to cooperate or a rights dispute, the penalty surcharge disposition may be canceled."

He continued, "Administrative agencies, too, rather than relying only on a formal calculation of the period, need to closely review the actual circumstances of the transaction and the substance of the dispute," advising, "If you have been unfairly imposed a long-term non-registration penalty surcharge, it is important to secure sufficient related materials and then have your rights remedied through appropriate legal procedures such as administrative litigation."

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