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(News Focus) Lawyers, realtors locked in all-out war over real estate market

All News 18:05 April 06, 2016

By Choi Soo-hyang

SEOUL, April 6 (Yonhap) -- A turf war between lawyers and realtors erupted over the 2 trillion won (US$1.73 billion) local real estate market as state prosecutors launched an investigation into the legitimacy of lawyers' entering the realty business, experts said Wednesday.

The Seoul Central District Prosecutors' Office on Tuesday started investigating lawyer Kong Sung-bae, who was booked by police over opening a realty agency in southern Seoul.

Setting up Trust Lifestyle, the first real estate agency run by lawyers in South Korea, in January, the 44-year-old claimed lawyers have an edge in dealing with various business transactions. He argued that real estate brokerage is also a kind of a legal activity that should be open to lawyers.

Kong's agency set commission fees at the maximum of 990,000 won (US$857), much lower that the national average as a way of attracting customers.

In South Korea, consumers usually pay 0.5 percent on real estate transactions valued between 600 million and 900 million won. If a customer purchases a property valued at 900 million won or more, the broker can be paid more in the form of a special commission worth several million won.

The Korea Association of Realtors (KAR) immediately expressed outright opposition to Kong's move, saying it is a violation of the law on licensed real estate agents.

According to the law, brokerage service is a field reserved exclusively for certified realtors, the association emphasized.

In March, it brought criminal charges against Kong, saying he called his office a "real estate agency" when in fact none of the employees were certified real estate agents.

The law prohibits people without realtor certificates from using titles on their businesses similar to real estate agency, since such a move can confuse ordinary customers. Those who violate the law can be jailed up to one year or fined a minimum of 10 million won, according to police handling the case.

The Ministry of Land, Infrastructure and Transport made an authoritative interpretation that Kong's agency is illegitimate. The Gangnam district office, where Kong's agency is located, also filed a separate complaint against the lawyer, saying his actions conflicted with current rules.

After reviewing documents, local police concluded that Kong violated the law.

Trust Lifestyle, however, countered that it is helping customers so they can engage in direct deals that is beneficial to them.

"The money we receive is not a brokerage commission but a legal consultancy fee," the agency said, claiming that its actions are legitimate and it did not violate any existing law.

The police's decision on the matter, meanwhile, sparked a strong rebuff from the law community, which has long been struggling with a saturated market that has hurt earnings. The number of attorneys in the country surpassed the 20,000 mark in September 2014.

Fueling the controversy, a research center under the Korean Bar Association (KBA) said last February that there is no real problem with lawyers handling real estate transactions for clients.

"We will submit the research report to the state prosecutors," said Ha Chang-woo, chief of the association.

The real estate industry has been deemed an alternative for lawyers at a time when their numbers are increasing at an even faster pace with new graduates from law schools entering the legal sector in force.

Market watchers said that the situation is no different for realtors who have been hard pressed to make profits.

Reflecting this, KAR said that the action taken by lawyers is disrupting the country's already crowded real estate market and endangering the livelihood of brokers already struggling to make ends meet.

According to government data, the number of realtors in South Korea reached a record high of 90,000 in 2015.

KAR, meanwhile, said it is reviewing the option of bringing separate criminal charges against the agency over its real estate service advertisement.

"Both groups are fighting over the same market so there does not seem to be any compromise in sight," a local real estate market watcher said. He predicted that this controversy may drag on for some time.


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