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 protecting 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 is exempted and detailing how the rights and interests of all involved parties can be effectively safeguarded.
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, clarifying the developer's scope of responsibility, and defining 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—disputes that frequently escalate into legal conflicts. This article will examine the core logic behind this issue by integrating relevant legal provisions, judicial precedents, and practical insights, while also outlining the conditions under which liability can be exempted and identifying effective strategies to safeguard 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 purchaser obtains the property ownership certificate for a pre-sale residential property, making it impossible to complete the 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 liability guarantees to the bank, meaning that if the homebuyer fails to repay the loan within this timeframe, the bank can require the developer to assume full joint and several liability—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 as the mortgagee." If the homebuyer fails to complete the formal mortgage registration (including cases where preliminary mortgage registration has not 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 been finished, the creditor is not entitled to claim priority for repayment; meanwhile, the developer shall still bear joint and several guarantee liability as stipulated in 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, as stipulated in the contract, 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]
3. Why is the developer's phased guarantee responsibility not 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 a 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 complete the initial registration of ownership for the building, inconsistency between the property subject to pre-registration and the property registered at the time of initial ownership registration, or the expiration of the pre-registration of the mortgage—thus rendering the conditions for formal mortgage registration unmet—the people's court shall not grant support. However, if the examination confirms that the initial registration of ownership for the building has indeed been completed and there is no other reason for the pre-registration to have lapsed, 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. However, merely 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, simply 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 providing phased guarantee, shall bear joint and several liability for the principal and interest of the loan in question until the formal mortgage registration procedures are completed; thereafter, the developer's guarantee responsibility will be discharged." According to this provision, the developer's phased guarantee obligation is only relieved once the formal mortgage registration has been successfully processed.
IV. From a Lawyer's Perspective: How to Safeguard Developers' Rights in Practice?
After the above analysis, from both a legal perspective and according to the contractual agreement, the developer's phased guarantee responsibility 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 speaking, 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 registration—is not attributable to the developer itself—would clearly violate principles of fairness and good faith, as well as contradict the original intent behind the phased joint and several guarantee contract signed among the developer, the homebuyer, and the 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 contingent upon a specific condition—namely, 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 preventing the fulfillment of the condition for discharging the developer's guarantee liability. As a result, the condition shall be considered fulfilled, meaning the developer's guarantee obligation has already been waived.
For banks, to avoid the invalidity of preliminary mortgage registration, they should promptly inform homebuyers to proceed with the formal mortgage registration within 90 days from the date they know or reasonably should know that formal registration can be completed. 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 improperly obstructs the completion of the mortgage registration, the mortgage right shall be deemed automatically registered, and the bank will thus rightfully hold the mortgage interest.
In summary, simply registering a preliminary mortgage does not automatically exempt the developer from its phased guarantee obligations. Such liability can only be discharged—both under statutory provisions and contractual agreements—after it is confirmed that the bank legally holds the mortgage right. In practice, if either the bank or the homebuyer fails to fulfill their duty to complete the formal mortgage registration, resulting in the bank being unable to enforce its mortgage rights, the developer may invoke the Civil Code's provisions on conditional civil legal acts to safeguard its legitimate interests. Meanwhile, banks are advised to proactively collaborate with homebuyers in completing the formal mortgage registration, thereby mitigating the legal risks associated with failing to register in time and potentially losing the ability to claim mortgage rights altogether.
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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