Perspective | Can the Developer's Phased Guarantee Liability Be Exempted After Pre-Registration of Mortgage?
Published:
2025-09-28
In off-plan mortgage transactions, the seamless connection between "pre-mortgage registration" and the developer's "stage-specific guarantee liability" is crucial for balancing the bank's security of credit rights, defining the developer's scope of responsibility, and safeguarding the homebuyer's obligations. In practice, parties often dispute whether the developer's stage-specific guarantee liability is automatically discharged once the pre-mortgage registration has been completed—disagreements on this issue frequently lead to legal disputes. This article will clarify the core logic behind this matter by integrating relevant legal provisions, judicial precedents, and practical insights, while also outlining the specific conditions under which liability may be exempted and identifying effective pathways to protect the rights and interests of all involved parties.
In off-plan mortgage transactions, the seamless connection between "pre-mortgage registration" and the developer's "stage-specific guarantee liability" is crucial for balancing the bank's security of credit rights, defining the developer's scope of responsibility, and safeguarding the homebuyer's obligations. In practice, parties often dispute whether the developer's stage-specific guarantee liability is automatically discharged once the pre-mortgage registration has been completed—disagreements that frequently lead to legal disputes. This article will clarify the core logic behind this issue by integrating relevant legal provisions, judicial precedents, and practical insights, while also outlining the specific conditions under which liability may be exempted and identifying effective strategies to protect the rights and interests of all involved parties.
I. What are "Pre-mortgage Registration" and "Phased Guarantee"?
1. Pre-mortgage Registration: This refers to a type of preliminary registration conducted before the property owner receives the real estate ownership certificate for a pre-sale residential property, making it impossible to complete formal mortgage registration. The purpose of this registration is to safeguard the bank’s future loan funds by ensuring the security of its investment. Pre-mortgage registration effectively prevents developers from selling the same property to multiple buyers and establishes an expectancy right to secure a mortgage on that particular property.
2. Phased Guarantee: After the bank disburses the loan, to Mortgage Lien During the officially designated period, the developer provides joint and several guarantee liability to the bank, meaning that if the homebuyer fails to repay the loan within this timeframe, the bank may require the developer to assume the joint and several guarantee responsibility—this measure is designed to ensure the bank can recover its loan.
II. Judicial Views from Existing Case Law
Viewpoint 1: Before the formal mortgage registration is completed, the developer's Phased Guarantee Liability Not exempt
According to the contract agreement, the developer’s phased guarantee liability period is "from the date the loan is disbursed until the day when the mortgage registration procedure is completed, with the lender designated as the mortgagee." If the homebuyer fails to complete the formal mortgage registration (including cases where preliminary mortgage registration has not yet been converted into a formal one), the developer’s guarantee liability will not terminate and will remain jointly and severally liable for repayment.
See Case: [(2024) Lu 0306 Min Chu 5664]
Viewpoint 2: Mortgage Pre-Registration Since it does not create the legal effects of a mortgage, the developer cannot claim exemption from liability.
Before the Civil Code came into effect, mortgage pre-registration only had the effect of preserving creditors' rights and did not create property rights. Mortgage Effectiveness Even if a pre-mortgage registration is completed, if the formal mortgage registration has not yet been finished, the creditor is not entitled to claim priority for repayment; meanwhile, the developer shall still bear joint and several liability under the contract.
See case: [(2021) Lu 07 Min Zhong No. 9673]
Viewpoint 3: Developers have the right to require homebuyers to fulfill their obligation to complete mortgage registration in order to terminate their own liabilities.
If the commercial property meets the conditions for real estate registration, the developer may, according to the contract terms, request the buyer to cooperate in handling the property ownership and mortgage registration. If the buyer refuses to cooperate, resulting in the incomplete mortgage registration, the developer shall still remain liable for the guarantee obligation; however, the developer can pursue legal action to compel the buyer to fulfill the registration obligation, thereby terminating its liability.
See case: [(2021) Lu 0911 Min Chu 155 Hao]
3. Why has the developer's phased guarantee responsibility not been waived after the pre-mortgage registration has been completed?
Article 221, Paragraph 2 of the Civil Code of the People's Republic of China stipulates: "After a pre-registration is made, if the creditor's right is extinguished or no application for registration is filed within ninety days from the date when real estate registration can be carried out, the pre-registration shall become invalid."
Article 52, Paragraph 1 of the "Interpretation by the Supreme People's Court on the Application of the Security System under the Civil Code of the People's Republic of China" stipulates: "After the parties have completed the pre-registration of mortgage, if the holder of the pre-registration right requests priority payment from the mortgaged property, but upon examination, circumstances such as the failure to register the initial ownership of the building, inconsistency between the property subject to pre-registration and the property registered for initial ownership, or the expiration of the pre-registration of mortgage—thus rendering the conditions for formal mortgage registration unmet—are found to exist, the people's court shall not grant support. However, if it is verified that the initial registration of the building's ownership has indeed been completed and no grounds for invalidating the pre-registration exist, the people's court shall grant support and shall recognize that the mortgage right was established from the date of the pre-registration."
From a legal perspective, the developer's phased guarantee liability can only be waived if it is ensured that the bank holds a mortgage right over the property. Simply registering for a preliminary mortgage does not automatically create the legal effect of establishing a mortgage. Moreover, according to the provisions of the Civil Code, if a formal registration is not applied for within 90 days from the date when real estate registration becomes possible, the preliminary mortgage registration will become invalid. Therefore, merely completing the preliminary mortgage registration does not directly relieve the developer of its phased guarantee obligations.
From the perspective of contractual agreements, the "Personal Housing Loan and Guarantee Contract" typically stipulates that "the developer, as the guarantor for the phased guarantee, shall provide a phased joint and several liability guarantee for the principal and interest of the loan involved; however, once the formal mortgage registration procedures are completed, the developer will be released from its guarantee obligations." According to this agreement, the developer's phased guarantee responsibility is only discharged after the official mortgage registration has been duly processed.
IV. Lawyer's Perspective: How to Protect Developers' Rights in Practice?
After the above analysis, from both a legal perspective and according to the contractual agreement, the developer's phased guarantee liability is, in principle, only discharged after the formal mortgage registration of the property has been completed (confirming the bank's ownership of the mortgage right). However, in practice, the initiative to obtain the property ownership certificate (small certificate) rests with the homebuyer, while the decision on when to proceed with the formal mortgage registration lies jointly with both the bank and the homebuyer. When either the buyer or the bank fails to fulfill their obligations to register the property and secure the mortgage rights, the developer objectively lacks any mandatory means to seek redress. Moreover, requiring the developer to continue bearing the phased guarantee responsibility even when the failure to complete the formal mortgage registration—or the resulting invalidation of the preliminary mortgage—stems not from the developer's fault, would clearly violate principles of fairness, good faith, and the original intent behind the phased joint and several guarantee contract signed by the developer, homebuyer, and bank.
So, when banks or homebuyers fail to promptly complete the formal mortgage registration, how should developers safeguard their legitimate rights and interests?
Article 159 of the Civil Code of the People's Republic of China stipulates: "In a conditional civil legal act, if a party improperly prevents the condition from being fulfilled for their own benefit, it shall be deemed that the condition has been fulfilled. Conversely, if a party improperly facilitates the fulfillment of the condition, it shall be deemed that the condition has not been fulfilled."
In the "Individual Housing Loan and Guarantee Contract" signed among the developer, the homebuyer, and the bank, the developer's guarantee to the bank and the homebuyer is subject to a condition precedent—specifically, the developer's guarantee liability will be discharged once the bank successfully obtains the mortgage right. According to this provision, if either the bank or the homebuyer fails to promptly complete the formal mortgage registration, it can be deemed that they are improperly obstructing the fulfillment of the condition for releasing the developer from its guarantee obligations. As a result, the condition shall be considered fulfilled, meaning the developer's guarantee liability has already been discharged.
For banks, to avoid the invalidation of preliminary mortgage registration, they should promptly inform homebuyers to proceed with the formal mortgage registration within 90 days from the date they become aware—or reasonably should have become aware—that formal registration is possible. If the buyer refuses to cooperate, the bank should actively pursue legal action to confirm its right to the mortgage. Furthermore, in accordance with Article 159 of the Civil Code, if the buyer unreasonably obstructs the completion of the mortgage registration, the mortgage right shall be deemed automatically registered, and the bank will thus be entitled to enforce its mortgage rights.
In summary, simply registering for a preliminary mortgage does not automatically exempt the developer from its phased guarantee obligations. Only after it is determined that the bank legally holds the mortgage right can this guarantee liability be discharged as stipulated by law and contract. In practice, if the bank or the homebuyer fails to fulfill their duty to complete the formal mortgage registration, thereby preventing the bank from exercising its mortgage rights, the developer may invoke the provisions of the Civil Code regarding conditional civil legal acts to safeguard its legitimate interests. Meanwhile, banks are advised to proactively collaborate with homebuyers in completing the formal mortgage registration, thus avoiding the legal risks associated with failing to do so and potentially losing the ability to enforce their mortgage rights.
Disclaimer: This article is intended solely for the sharing of legal knowledge and does not constitute legal advice of any kind. For specific cases, please consult a professional lawyer.
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