Series Order
Part 1 | Unpaid Corporate Transactions: Liability Behind the Veil
Part 2 | Trade Name Continuity and the Liability of a Successor
Part 3 | Directors’ Liability for Damages
Part 4 | The Person Behind the Company Name
Part 5 | The Limits of Self-Defense in Assault Cases
Part 6 | Criminal Settlement Money: How Much Is Appropriate?
Part 7 | Can Quasi-Rape Be Established If One Has No Memory After Drinking?
Part 8 | Freelancers and Severance Pay: What Courts Really Examine
Part 9 | Assignment of Receivables for Business Financing
Part 10 | Can You Get Divorced If Your Foreign Spouse Disappears?
Part 11 | Can a Tenant Terminate a Lease if Repairs Are Refused?
Part 12 | Can a Subcontractor Recover Payment if the Main Contractor Disappears?
Part 13 | What You Must Know Before Your First Police Interview
Part 14 | Can a Real Estate Contract in a Land Transaction Permit Zone Be Cancelled Before Government Approval?
Part 15 | Is It Trespass to Enter Another Person's Home by Concealing Criminal Intent?
Part 16 | Impersonating Someone by Creating an Instagram Account Can Also Be a Criminal Offense
Part 17 | When Does an Indecent Act Become a Crime?
Part 18 | When a Water Leak Requires Repairs, Can the Tenant Decide the Repair Method?
Part 19 | How Far Does a Licensed Real Estate Agent’s Duty to Explain Extend?
By Hong Seung-kwon, Principal Attorney, PAN Law Firm (skh@law-pan.com)
Real estate regulations have become increasingly stringent in South Korea. In particular, more multiple-home owners are selling properties because of holding taxes and other tax burdens. In some cases, however, sellers receive an unexpected tax bill after completing a sale.
In one such case, a seller temporarily became the owner of two homes after purchasing a new property in the spouse’s name. The seller asked a licensed real estate agent to handle the sale of the previous home within the required period to qualify for a capital gains tax exemption.
The agent, however, provided incorrect information about the date from which the exemption period should be calculated. As a result, the seller failed to qualify for the exemption and incurred approximately KRW 50 million in taxes. The relevant date was the final payment date for the previous home, not the date on which the transfer of ownership was registered.
The seller filed a lawsuit against the agent and the Korea Association of Realtors. A key issue was whether the duty of explanation prescribed under Article 25 of the Licensed Real Estate Agents Act and its Enforcement Decree also covered tax matters, including capital gains tax.
The court found that the relationship between a real estate agent and a client is comparable to a mandate under the Civil Act. An agent therefore has a duty to perform the assigned work with the due care expected of a prudent professional. The court further held that even when a matter falls outside the agent’s statutory duty of explanation, the agent must not provide inaccurate information about an issue that could materially affect the client’s decision to enter into a contract.
In other words, the agent’s conduct may not constitute a breach of the statutory duty of explanation, but it can still amount to a breach of the professional duty of care.
The primary responsibility for determining tax liability and confirming the applicable exemption period nevertheless rests with the property owner. The seller also had sufficient time after requesting the sale to consult a tax professional before the exemption deadline expired. Taking these factors into account, the court limited the agent’s liability to approximately 20 percent—a reasonable conclusion.
Tax-related matters should always be confirmed with a certified tax accountant or another qualified professional before a property transaction is completed. It is also advisable to retain recordings of all relevant telephone conversations.
If financial loss has already occurred, the affected party should consider pursuing a damages claim against both the agent and the relevant association. Because a statutory limitation period may apply, legal action should not be delayed. As the recognition of negligence and the allocation of liability vary considerably from case to case, consulting a legal professional can help determine whether pursuing a claim would be worthwhile.
About the Author
Hong Seung-kwon is a principal attorney at PAN Law Firm who handles a wide range of legal matters, including civil and criminal litigation and legal issues emerging in the digital age. Hong continuously analyzes how technological innovation, the legal order governing property rights and changes in regulatory policy affect the law and market order.
