Background
A purchaser of an income-producing property (an office unit) sought rescission of the pre-sale contract and refund of the purchase price on the ground of deception (Civil Act art. 110), claiming to have contracted on the understanding that "simply buying the unit guaranteed a fixed monthly rental income," which did not materialize. Changchun represented the developer.
The Issue — Did the Developer Promise a "Fixed Guarantee"?
For rescission of a declaration of intent induced by deception (Civil Act art. 110), the developer must have actively communicated information contrary to fact on a matter material to the transaction, or concealed a matter it was under a duty to disclose, thereby leading the other party into error. The meaning of pre-sale advertising, moreover, is interpreted not by the advertiser's inner intention but by the objective wording as an ordinarily attentive member of the public would understand it. The question was ultimately whether "guaranteed rental income" really meant a guarantee "by the developer, unconditionally and definitively."
How Changchun Helped
Changchun (attorneys Jaesun Yoon and Donghwan Shin) proved the point by breaking down the structure and the responsible party behind the rental income guarantee. We showed point by point, with supporting materials, that ① the rental income was not paid by the developer but arose only if the purchaser entered into a separate management agreement with a rental management company; ② the sales consultation materials expressly stated that such agreements come in a "self-managed" form, in which the company guarantees a fixed rent and takes the actual rent, and an "entrusted management" form, in which the purchaser leases directly and the company takes only a fee — so that whether a fixed rent is guaranteed depends on the option chosen; and ③ nothing in the advertising or consultation materials spoke of an "unconditional guarantee," leasing risk (vacancy, rent arrears) is inherently borne by the purchaser as investor, and the pre-sale contract imposed no rental income guarantee obligation on the developer.
Conclusion
The court dismissed the claim, holding that the developer had never guaranteed a fixed rental income and that no deception was established (judgment for our client).
A "guarantee" in advertising for income-producing real estate does not itself become a legal obligation of the developer: who owes the obligation, and on what conditions, must be tested against the documents. The case shows that precisely analyzing the objective meaning of the advertising and the structure of the contract is the essence of a pre-sale dispute. (Outcomes may differ depending on the facts of each matter.)