Court Says Use of `Officetels` as Residences Legal

The Seoul High Court yesterday said "officetels," or studio apartments, which are classified for business use under the Construction Act, can be considered residential buildings.

Should the Supreme Court uphold the ruling, the government will lose the legal basis to regulate more than 300,000 studio apartments built for business purposes but are used as residences to qualify for tax benefits.

Studio apartments exclusively used for residential purposes will also be allowed to mushroom in commercial zones whose floor area ratio is far higher than that of residential zones. Accordingly, amendments to corresponding laws and regulations are inevitable.

The Seoul High Court struck down the ruling made at the first trial that found six employees of Korean German Institute of Technology at Digital Media City guilty of building studio apartments and promoting them as residential places. The six were found partially guilty of the charges, however.

“We cannot recognize the validity of current standards on studio apartments that could result in arbitrary interpretation since studio apartments for business use cannot be clearly differentiated from those for residential use under the current standards,” the Seoul High Court said.

“Certainly, the majority of Koreans use studio apartments for residential purposes. We believe it is more desirable to allow studio apartments to be used for this purpose and adjust tax rates on them to prevent side effects such as tax evasion.”

Under the Construction Act, space for business use should account for more than 70 percent of a building’s area. The government has regulated studio apartments based on this law, but has faced difficulty in supervising studio apartments given the ambiguity in the standards separating those for business use from those for residential use.

bell@donga.com