As much as 69% of Consumers Suffering Condominium-related Damages
Could NOT Get Their Money Back
Measures to Guarantee the Return of Admission Fees are Necessary 

The number of condominium-related victims is increasing every year. Among the damages consumers suffered related to the use of condominiums, 7 out of 10 those damages were regarding unreturned admission fees which consumers are supposed to get back after the expiration of their subscription periods, or delay in the return. However, there is no system that guarantees the return of admission fees for condominium subscribers, which seems to be a serious problem that requires urgent measures.

This is the report from the Korea Consumer Agency (KCA) which analyzed 830 damage redress cases related to the subscription of condominium reported to the Agency from the beginning of 2002 to 2007(by June). The Agency said that the country needs to introduce a reimbursement guarantee system of initial admission fees for condominium subscribers and restrictions on the number of subscribers per condominium room businesses can take.

□ 69% of the Consumer Damages were Related to Non-returning or Delay in Returning the Admission Fees

Between 2004 and 2007 (June), 830 consumer requests for damage redress related to the use of condominium have been received, which shows a sharp increase since 2005. Among those consumer complaints, 573 cases were regarding the non-returning or delay in the return of admission fees, accounting for 69%, followed by the refusal of consumers’ requests for contract cancellation (97 cases, 11.7%), refusal of contract cancellation requested as a result of consumers’ deaths or disabilities caused by accidents (37cases, 4.5%), and other damages related to usage fees or room reservation (32 cases, 3.9%).

< Type of Consumer Damage related to the Use of Condominiums>
(Unit: Cases, %)

□ Unreturned Admission Fees Amount to 1.17billion Won

Among the sufferings caused by unreturned admission fees claimed by consumers, the actual amount of admission fees were confirmed only in 572 cases. The total amount of unreturned admission fees was 1.17 billion won, with average 3.63 million won per case. By the range of amount, “more than 2 million won~ less than 3 million won” accounted for 23.9% (193 cases), while “less than 1 million won,””more than 3 million won~less than 4 million won” accounted for 18.6% (150cases) and 17.1%(138 cases), respectively. “More than 10million won” accounted for 5.2%.

When the timing of contract conclusion was analyzed, 52.1% (434cases) were “between 1998 and 2001,” with 9.8% (81cases) in 2007 and 7.6% (63cases) in 2006.

< No. of Condominium Subscription Contracts based on When They were Concluded >
Unit: cases, %

□ A Guarantee System for the Return of Condominium Admission Fees are Necessary

The admission fees consumers pay when they subscribe condominium service are a kind of bond that will be returned at maturity. However, Tourism Promotion Act which controls condominium rental service does not include institutional framework that guarantees business operators’ return of admission fees.

Without proper guarantee measures or regulations that mandate service providers to prepare “reserve” money for the return of admission fees to condominium subscribers at maturity, it is highly likely that consumers cannot get their money back.

□ With the Removal of Upper Limit for the Number of Subscribers per Condominium Room, Consumers Found it Harder to Use the Service

In 1999, the government changed the criteria related to the limited number of subscribers per condominium room from “less than 10” to “more than 2”, in order to lesson the financial difficulties of business operators after the financial crisis. As a result, it became more difficult for consumers to use condominium even they held the membership.

Based on its study result, the KCA is planning to ask the Ministry of Culture & Tourism △ to mandate condominium service operators to subscribe “guarantee insurance policies” or to come up with other measures to guarantee the return of admission fees, △ to limit the number of users per condominium room, and △ to strengthen its management and supervision of protecting subscribers. Also, the Agency will recommend the relevant business association to voluntarily correct their own problems and improve their system not to inflict consumer damages.   

 Sep 28, 2007 [Consumer Dispute Settlement Department I]