Government legislation ministry says joint housing ventures need new lender consent

The Ministry of Government Legislation said June 4 that joint housing developers must submit fresh consent forms from lenders if mortgage rights on construction land change after initial project approval. The ruling clarifies that business plan approval authorities can demand these documents when reviewing applications for modified project plans.

This interpretation addresses scenarios where provisional attachments on mortgaged debts lead to a change in the identity of the rights holder after the initial business plan has been sanctioned. The ministry determined that such changes could threaten the stability of housing projects if the new creditor enforces their rights, potentially causing the developer to lose ownership of the land.

Under existing regulations, joint venture entities comprising housing cooperatives and registered builders must either clear all mortgages or obtain consent from rights holders before receiving initial approval. The ministry reasoned that this requirement for stable land usage should logically extend to the modification stage.

Authorities noted that approving a modified business plan is a discretionary administrative act that requires verifying whether the project still meets all implementation prerequisites. Since a change in mortgage rights could substantially restrict the ability to carry out construction, officials must confirm there is no risk to project stability before granting further approvals.

The ministry rejected counterarguments that applying these initial requirements to modification requests constitutes an excessive expansion of the law, emphasizing that without such checks, the enforcement of newly attached claims could effectively halt construction.

This decision builds on a previous interpretation from March stating that creditors holding provisional attachments on mortgaged debts fall within the scope of rights holders whose consent is mandatory. The agency concluded that ensuring continuous stability of land usage aligns with the legislative intent of the Housing Act.

Alongside this ruling, the ministry issued recommendations to amend relevant laws to explicitly state that joint ventures must meet implementation requirements during modification requests and clarify the specific scope of rights holders required to provide consent.