SOUTH KOREA Law and Practice Contributed by: Junghwan Lee, Dong Seok Woo, Jun Woo Cho and Jee In Kim, Lee & Ko
Trust Arrangements and Beneficial Interests Real estate trusts are a prevalent investment vehicle in Korea, particularly for development and financing. Under these arrangements, legal title is transferred to a licensed trust company (the trustee), while the inves - tor acquires a trust beneficial interest. This structure allows the beneficiary to enjoy the economic benefits of the property, while the trustee holds and manages legal title in accordance with the trust agreement. 2.2 Laws Applicable to Transfer of Title The Civil Code governs real estate transfers in Korea, with ownership taking effect upon registration. The Registration of Real Estate Act sets out registration procedures, while the Act on the Reporting of Real Estate Transactions requires transactions to be report - ed (generally within 30 days of agreement). Certain assets are subject to additional regulations: • Residential: The Housing Act and Urban Improve - ment Act may apply to housing supply and trans - fers. • Agricultural: The Farmland Act imposes purchaser qualification requirements to prevent speculation. • Industrial: The Industrial Cluster Development Act regulates transfers within industrial complexes. • Foreign Investment: Additional reporting or approv - als may be required under real estate reporting and foreign exchange laws, particularly in restricted areas. 2.3 Effecting Lawful and Proper Transfer of Title A transfer of title to real estate becomes effective upon registration in the real estate registry. To complete the registration, documents such as the sale agreement, title documents (including the registration certificate) and the seller’s seal certificate must be submitted to the relevant registry office. Although the Korean sys - tem does not recognise the “public faith” of the reg - istry (ie, a good faith purchaser may not be protected against prior defects in title), such cases are relatively rare in practice. As a result, title insurance is not com - monly used in Korea.
opment projects to reduce reliance on high-leverage structures, and higher-equity Project-REIT structures are being introduced as an alternative to traditional PFV-based development. These measures are already being implemented and are expected to continue shaping the development financing market.
2. Sale and Purchase 2.1 Categories of Property Rights Ownership and Co-Ownership
The principal real property right in Korea is ownership ( so-yu-gwon ), equivalent to fee simple, granting rights to use, profit from and dispose of property. Land and buildings are treated as separate assets and may be owned and registered independently. Co-ownership ( gong-yu ) is also recognised, where multiple parties hold undivided fractional interests. Other Property Rights Common additional rights include: • superficies ( ji-sang-gwon ): a real right allowing the holder to use another’s land for the purpose of owning buildings or other structures; • jeonse-gwon a real right under which the holder provides a lump-sum deposit in exchange for the right to use a property for a fixed term; • mortgage ( jeo-dang-gwon ): a security interest that allows a creditor to be repaid from the proceeds of the secured property in the event of default; and • leasehold (i m-cha-gwon ): a contractual (personal) right that allows a person to use another’s property in exchange for rent, often protected under special statutes. Sectional Ownership and Condominiums For multi-unit structures, the Act on Ownership and Management of Condominium Buildings governs sec - tional ownership. This framework allows individuals to hold exclusive title to specific units while sharing ownership of common areas and the underlying land. These rights are recorded in the registry, and their administration is typically handled by a management body comprising all unit owners.
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