Research on the right to terminate the contract of commercial housing sales of developers

Summary:The buyer of the house purchases the commercial house in the form of mortgage loan. Before the registration of the property right of the house, the ownership of the house has not changed, and the real estate development enterprise bears the stage guarantee responsibility for the bank loan of the house buyer. Real estate development enterprises in order to protect their contractual claims will usually be in the "commercial housing sales contract" or "supplementary agreement" agreed that the buyer overdue loan developers enjoy the right to terminate the contract, the developer can be released from its contractual obligations and take back the house, while the buyer's liability for breach of contract.
In practice, the buyer overdue repayment of the loan, while carrying other debts, the developer sold the house was seized by the court, the developer at this time whether the exercise of the right of release is supported by different courts. Other creditors of the buyer of the house are able to protect their claims by sealing up the buyer's claims by the court, I .e., by sealing up the buyer's claims based on a valid contract for the sale of the house.
Based on the principle of equality of claims, if we want to coordinate the protection of the developer's claims and the claims of other creditors of the buyer of the house, the essence lies in how to coordinate the effectiveness of the confrontation between the developer's exercise of the right of release and the court seizure.
 
Key words:Commercial housing sales; overdue loan repayment; agreement to terminate; dual system of property debt; protection of third party claims.

Presentation of 1. issues
In the process of commercial housing transaction, the developer and the buyer agree on the right to terminate the contract in advance in the housing sales contract. The conflict between the developer's exercise of this right of termination and the court's seizure and execution is more difficult and novel. Specifically, the developer and the buyer of the house will generally state in the supplementary agreement of the sales contract that if the developer bears joint and several guarantee liability due to the buyer's overdue repayment of the bank loan, the developer has the right to terminate the contract. At this time, the developer exercises The right of cancellation is the right of cancellation. In practice, there are also cases where there is a debt dispute between the buyer of the house and a third party. If the third party applies to the court to seal up the commercial house [1] where the buyer has only gone through the registration and filing procedures of the commercial house presale contract, is the exercise of the developer's agreed right of rescission supported?

The focus of this paper is: the problem of how the real estate developer exercises the right of termination of the contract and whether the right of termination is supported when the buyer of the house is triggered by the late repayment of the bank loan by the buyer of the house or whether the purchase of the house is sealed up due to the debt to the third party.

The reasons for the exercise of the right to terminate the contract of 2. developers and the path of creditor's rights preservation.
(I) reasons for the exercise of the developer's right to terminate the contract
1. No external third party to join, the buyer overdue repayment of the loan, the developer in accordance with the contract to exercise the right of termination [2]
The buyer of the house purchases the commercial house in the form of mortgage loan. Before the registration of the property right of the house, the ownership of the house has not changed, and the real estate development enterprise bears the stage guarantee responsibility for the bank loan of the house buyer. In order to protect their contractual claims, real estate development enterprises usually agree in the "Commercial Housing Sales Contract" or "Supplementary Agreement" that if the buyer fails to repay the loan, the developer has the right to terminate the contract, so that the developer can terminate the contract with the buyer and recover the house, and can also pursue the buyer's liability for breach of contract.
This kind of rescission right is the agreed rescission right in the sense of the Contract Law, at this time there is no legal obstacle for the developer to exercise the rescission right, and the opinions on this point are more unified in practice. As long as the contract terms are not standard terms and the contract terms are valid, after the developer fulfills the notification obligation, the buyer still fails to pay the loan or provide a counter-guarantee on time, causing the bank to deduct the developer's deposit, and the contract is met Under the circumstances, the developer has the right to terminate the contract, and the buyer shall also bear liquidated damages based on its performance.
2. There is an external third party to join, the buyer overdue repayment of the loan, after the third party to apply to the court to seize the buyer mortgage loan housing, the developer for the "circumvention of execution" to exercise the right to terminate the contract.
This kind of rescission right is also the agreed rescission right in the sense of the Contract Law, at this time there are legal obstacles to the developer's exercise of the rescission right, and there are also great differences in practice on whether the developer can exercise the right to rescind the contract.
The reasons for the disagreement lie in the following points:(1) the basis for the developer to exercise the right of termination of the contract is the right of claim at the level of contract law, if the developer exercises the right of termination of the contract conditions, the ownership of the house has changed, the claim at the level of creditor's rights is difficult to oppose the ownership at the level of property rights. (2) If the house purchased by the buyer has been sealed up by a third party (pre-sealed up), based on the principle of equality of creditor's rights, the creditor's rights preservation of the developer and the creditor's rights preservation of the third party are in the same order in the legal level. If there are no special provisions, the creditor's rights are equal. At this time, if the court supports the developer to terminate the contract, it is tantamount to supporting the developer to taking back the buyer's house, to some extent, the decision to terminate and support the return is tantamount to recognizing that the developer's claim takes precedence over the third party's claim.
The Path of (II) Developer's Creditor's Rights Preservation
Before the buyer has not registered the property right of the house and mortgaged the house to the bank, the developer has the triple identity of the owner of the house, the seller of the house sale contract and the guarantor of the loan contract.

1. Exercise the right of rescission based on the Purchase Contract.
Based on the above, the purpose of the developer's exercise of the right to terminate the contract is to recover the house, and the basis for the developer's exercise of the right to request is the agreed right to terminate the purchase contract. Under the condition that the buyer does not involve other debts, the developer, as the only creditor of the buyer, is still the owner of the house as long as the ownership of the house has not changed. The developer can exercise the right of rescission according to the agreement of the House Purchase and Sale Contract, but in order to take into account the interests of the buyer (or the balance of interests), the court needs to make a "liquidation of interest" on the delivered house when it confirms the discharge and supports the return of the house ". The author calls it "liquidation support release and confirmation of return" in this image ".
2. The right of recovery is exercised on the basis of the guarantee liability to the bank in the Mortgage Loan Contract.
The exercise of this rescission right can be divided into two time nodes. China's current housing presale level more use developers "stage guarantee" "mortgage", in the "mortgage contract", the developer to assume the stage guarantee responsibility of the dividing line is the house ownership certificate and mortgage registration is completed or not.
Generally speaking, before the developer obtains the house ownership certificate and completes the mortgage registration, the buyer needs to borrow money from the bank to buy the house, but at this time the house is in the presale stage and has not yet obtained the house ownership certificate. The bank will require the developer to provide "phased" joint guarantee liability for the borrower's loan creditor's rights before the owner provides mortgage guarantee to the bank, at this time, the buyer overdue repayment of the loan, the ownership of the house has not yet been transferred, the developer has both the owner of the house, the seller of the contract of sale, the guarantor of the loan contract triple identity, the developer can choose the right of claim has a number of, its according to the contract agreed to terminate the right of release is obviously not improper.
3. Exercise the right of release based on the identity of the owner of the house.
Based on the rules and restrictions of the change of property rights in China, the developer is still the owner of the sold house before the developer has not applied to the buyer for the real estate title certificate, and the purpose of the developer's exercise of the right of rescission is to relieve the rights and obligations of both parties in the contract of sale and purchase, and to facilitate the developer's subsequent recovery of the house. At the legal level, at this time, the owner of the house is still the developer, and there seems to be no substantial objection to the simple recovery of the house, because at this time the developer has repaid the bank loan for the buyer, and the developer still has a loss of interest.
However, it is obviously inappropriate for the developer to exercise the right of rescission and claim compensation for the loss according to the housing purchase and sale contract. In practice, there may be a substantial premium in the housing price, and the buyer is overdue at this time. The greatest significance of the developer's exercise of the right of rescission is to terminate the contractual relationship with the buyer, and the subsequent disposal of the house can be continued and greater benefits can be obtained.

3. Court Judgment Viewpoint
Based on the above analysis, it can be found that developers have different identities at different stages, and the basis of their claims is also different. Specific to judicial cases, based on the different stages of each case, the court's decision is not universal, but It has case reference value.
(I) support developers to terminate the contract, but do not support the return of housing.
This view is still limited to the period before the developer assumes the "phased guarantee liability.
From the perspective of the change of real property right in the property law, the reason why the court supports the developer to terminate the contract stems from the provisions of the property law on the change of real property right. It is not the property right registration of real estate that the buyer has only gone through the registration procedures of commercial housing presale contract. Since the buyer and the developer have agreed on the right to terminate the contract, it is obviously not improper for the developer to exercise the right to terminate the contract.
From the point of view of seizure, based on the fact that the house has been seized, the house cannot be returned objectively. Therefore, the court will support the developer to terminate the contract, but will not support the return of the house that has been sealed up (pre-sealed).
(II) support developers to terminate the contract, but weigh the interests of the buyer.
This view supports the reason for the developer to terminate the contract with the first point above, but the reason for weighing the interests of all parties is that after the developer delivers the house, the buyer will produce value-added part of the house decoration. From the perspective of civil law and property law, at this time, the house does not handle the real estate property right certificate, and the ownership of the house still belongs to the developer. After the developer terminates the contract, the buyer loses the legal basis, therefore, the house needs to be returned.
This view is still limited to the developer to assume the "stage of guarantee liability" before the period, the author will be the image of this practice called "liquidation-type support release and confirmation of return".
The (III) does not support the developer to terminate the contract, but confirms the developer's right of recourse.
The court holding this view held that the developer assumed joint and several guarantee liability based on the loan contract between the buyer and the bank, and after assuming its guarantee liability, it could exercise its right of recovery in accordance with the law without having to terminate the contract.
The reason why the court holds this view is that the court subjectively helps the developer to establish the basis of the right of claim, forcing the developer to exercise the right of recovery as a guarantor. Therefore, the court will not support the developer to terminate the contract, but confirm the developer's right of recovery.

4. this point of view
(I) prerequisite: deepening the understanding of the change of real property rights in China.
According to the current theory of property law in our country, the change mode of real right in our country is "creditor's rights formalism as the mainstay, and meaningism as the supplement". Specific to the real right change of real property, there is a dual system of real right and creditor's rights in our country, but the theory of real right behavior and creditor's rights behavior are not introduced. For the real right change of real property, it follows the formalism of creditor's rights, there are two consensuses: the consensual agreement to sign a creditor's rights contract and the consensual agreement to deliver real estate. However, real estate registration is required for real estate registration. This registration is the "form" of "creditor's rights formalism".
Therefore, the registration of the change of real right is the registration of the meaning of the publicity of real right, not the record registration of the contract, nor the registration of advance notice or objection.
(II) give developers the freedom to choose the basis of the right to claim, taking into account fairness and justice.
Before the buyer has not registered the real estate, the owner of the house is still the developer. Based on the different stages, the developer naturally has multiple identities. Based on this, there are also multiple claims. How the developer chooses the right of claim needs to be based on the contract it signs or its own identity, and once the basis of the claim is selected, its request must be specific.
The house buyer purchases the commercial house in the form of mortgage loan. Before the registration of the property right of the house, the ownership of the house has not changed. There is a contract relationship between the real estate development enterprise and the house buyer. The record registration of the contract of sale is not the real right registration in the sense of the property law. Based on the above discussion, after the buyer repays the loan overdue and the developer assumes the guarantee responsibility, the developer assumes the guarantee obligation, enjoy the right to recover from the buyer, and this right is based on the creditor's rights, at this time the developer's claim for recovery is based on the mortgage loan contract, not the commercial housing sales contract. Of course, the developer can also exercise its agreed right of rescission, but the effect of exercising the right of rescission is to relieve the contractual rights and obligations of both parties and request the buyer to return the "occupied" house. More precisely, the developer requests the buyer to return the original property (the developer is the owner) or requests the buyer to return the unjust enrichment (the developer is the seller in the contract).
(III) Taking into account the protection of third-party claims.
Based on the theory of civil law, creditor's rights have equality, while property rights have priority effect. Under the condition that the developer chooses to exercise the right to terminate the contract, the effect is ultimately to terminate the contract with the buyer and exempt it from performing the relevant obligations conferred on it in the contract of sale. The basic legal relationship of its claim for compensation lies in the joint and several guarantee liability of the mortgage loan contract, so the exercise of its right of recovery is based on the mortgage loan contract, so the developer has no right to exercise the right of recovery according to the contract of sale.
At this time, the claim of an external third party applying to the court for seizure is also a claim. How to coordinate the developer's claims and third-party claims requires a trade-off and structure of interests.

Comments
[1] The legal and logical relationship between the developer's termination of the contract and the seizure
First of all, according to the provisions of Article 15 of (Fa Fa [2004] No. 5), the people's court may pre-seal up the houses purchased by the person subject to execution that have gone through the registration procedures for the presale contract of commercial housing or the advance notice registration of commercial housing, although the houses have not been registered for ownership.
Secondly, according to Article 18 of Fafa [2004]5, the effect of pre-seizure is equivalent to formal seizure.
Finally, according to Article 18 of the Provisions of the Supreme People's Court on Seizure, Seizure, and Freezing of Property in Civil Execution by the People's Court, if a third party terminates the contract in accordance with the law, the people's court shall permit the seizure, seizure, and freezing measures that have been taken. It should be lifted, but the people's court may, on the basis of the application of the person applying for execution, execute the person's claim against the third party's rights formed by paying the price.
[2] Jinan Intermediate People's Court Announces "10 Typical Cases of Disputes over Housing Sales Contracts"
Mortgage loans to purchase commercial housing overdue repayment, should bear the liability for breach of contract, developers also enjoy the right to terminate the contract.

References
[1] Wang Zejian. Principles of Debt Law [M]. Beijing: Peking University Press, 2013.
[2] Xie Zin. Property Law [M]. Beijing: China University of Political Science and Law Press, 2011.
[3] Han Shiyuan. General Theory of Contract Law [M]. Beijing: Law Press, 2018.