In June 2003, the Supreme People's Court issued a new Judicial Interpretation regarding the law on contractual disputes over the sale and purchase of private housing in the PRC. It covers a wide spectrum of issues, including the validity of sale and purchase agreements in uncompleted housing developments, the legal effect of any representation made in a sales advertisement relating to private housing or description as to the quality and size of the private house being sold or the laws concerning mortgage contracts etc.
In June 2003, the Supreme People's Court issued a new Judicial Interpretation regarding the law on contractual disputes over the sale and purchase of private housing in the PRC. It covers a wide spectrum of issues, including the validity of sale and purchase agreements in uncompleted housing developments, the legal effect of any representation made in a sales advertisement relating to private housing or description as to the quality and size of the private house being sold or the laws concerning mortgage contracts etc.
Compensation Provisions
One observation worth noting is that under Article 8 of the new Judicial Interpretation, a developer/vendor is obligated to pay compensation (up to a maximum of 100% of the down-payment deposit) and a purchaser is entitled to nullify the sale and purchase agreement if, inter alia, the property was sold by the develop/vendor to a third party after signing of the sale and purchase agreement between the develop/vendor and the original buyer. This judicial interpretation was recently confirmed in the first ever ruling on this issue in the Beijing City First Intermediate People's Court.
The Beijing First Intermediate People's Court Judgment
According to the China Legal News, the Plaintiff purchased a private apartment and signed a pre-sale contract with Company A (a former shareholder of the Developer) in January 2003. The parties agreed that the Developer would sell to the Plaintiff the apartment in Beijing for the price of RMB 7,125 per square metre, and that the formal sale and purchase agreement would be signed in April 2003. On the same day, the Plaintiff paid the Developer a sum of RMB400,000 as down-payment deposit. In April 2003, when the Plaintiff was about to sign the formal sale and purchase agreement, she discovered that the Developer had sold the property to a third party (without her knowledge) for the price of RMB 8,000 per square metre. The Plaintiff subsequently commenced proceedings against the Developer for a declaration that the sale and purchase agreement she signed was void and sought compensation in accordance with the new Judicial Interpretation.
The Beijing City First Intermediate People's Court held that by first accepting the Plaintiff's down-payment deposit and then reselling the property at a higher price to a third party, the Developer was liable to pay compensation to the Plaintiff in accordance with the new Judicial Interpretation. The court therefore ordered the Developer to refund the down-payment deposit of RMB400,000 and pay compensation of RMB190,000 to the Plaintiff.
Conclusion
It is expected that with the implementation of the new Judicial Interpretation, litigation regarding disputes on the sale and purchase of private housing will become more frequent. It is of course a decision welcomed by the public because it serves as a warning to dishonest enterprises that "cheating your customers" has a price.
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