Supreme Court rules regional housing penalty based on lowest floor cost

The Supreme Court ruled April 30 that a regional housing association must calculate withdrawal penalties based on the lowest possible contribution amount when specific apartment units have not yet been assigned to members.

The case centered on a dispute between a housing cooperative in Cheonan and members who lost their eligibility before receiving assignments for specific building and unit numbers. The association had sought to collect a penalty equal to 10 percent of the total agreed contribution, arguing that the members breached their obligation to maintain membership status. However, the total contribution amount varied depending on which floor a member would eventually be assigned.

Under the contract structure, while down payments and interim payments were identical regardless of floor, the final balance differed by level, making the total contribution uncertain until the lottery assignment occurred after business plan approval.

Applying the principle that ambiguous terms in standard contracts must be interpreted to benefit the consumer, the court found it unreasonable to calculate the penalty based on a hypothetical higher-floor assignment. Instead, the penalty base should be calculated using the contribution total for a first-floor unit.

The justices also addressed whether the association could be held at fault for failing to secure business plan approval within three years of its initial establishment permit. The Supreme Court stated such administrative delays do not automatically negate responsibility for members' breach of obligation to maintain membership status.

The ruling reaffirmed that when a contract stipulates liquidated damages, creditors need only prove the breach occurred, while debtors can avoid payment only by proving they were not at fault for the default.