Dispute Over Unpaid Rent and Shop Return Highlights CNY 14,558 Claim

The Shenzhen Luohu District People’s Court recently resolved a civil dispute between a property owner and a hotel company over a small shop unit in Eastern China City. The plaintiff, Mr. Liu, sued the defendant, Eastern China City Hotel Company Ltd., alleging breach of a lease agreement and wrongful occupation of the shop after the contract expired. Mr. Liu sought the return of the shop, payment of unpaid rent and usage fees totalling CNY 14,558, plus interest. The court largely upheld Mr. Liu’s claims, ordering the defendant to vacate the property and pay the outstanding amounts.

In 2000, Mr. Liu purchased a 2.1-square-metre shop unit at Windsor Plaza in Eastern China City for CNY 99,756. The sale contract included fixtures such as IDD phone lines and electrical outlets. A property certificate was issued in 2005. On 25 May 2005, Mr. Liu signed a contract titled ‘Entrustment Contract’ with the defendant, granting the defendant the right to lease and manage the shop on his behalf. The lease period ran from 8 September 2005 to 28 February 2010. Rent was adjusted over time, with monthly amounts of CNY 302.4 (after tax) from March 2008 to February 2009, and CNY 378 after tax from March 2009 onward. The defendant was to pay Mr. Liu by the 28th of each month after deducting taxes. After 30 November 2008, the defendant made only one payment of CNY 283.95 on 29 December 2009, which Mr. Liu attributed to December 2008 rent. No further payments were made. After the contract expired, the defendant did not return the shop or pay usage fees. Mr. Liu sued for back rent from January 2009 to February 2010 (CNY 4,930), usage fees from March 2010 onward (CNY 8,316 claimed up to December 2011), plus interest.

During the hearing, both parties presented evidence. Mr. Liu submitted the sale contract, the entrustment contract, the property certificate, and a record of the single rental payment. The defendant argued that the area suffered business losses due to construction of Subway Line 3, which altered the circumstances of the lease, and claimed the shop had been vacant from 18 November 2011. The defendant provided a notarised certificate showing the shop was empty on 22 November 2011. The court also examined rental guidance prices for the same area in 2009, 2010, and 2011, which were all set at CNY 150 per square metre per month.

The court held that the ‘Entrustment Contract’ was in substance a lease agreement because it transferred possession and use of the property for a fixed term in exchange for rent. Both parties had voluntarily signed the contract, which did not violate any laws. The defendant failed to prove it had paid the rent from January 2009 to February 2010, and the single payment in December 2009 was properly allocated to December 2008. Therefore, the defendant owed CNY 4,930 in back rent. Since the contract ended on 28 February 2010 and no new lease was signed, the defendant had no right to remain in the shop. The court rejected the defendant’s argument that vacancy alone excused payment, because the defendant did not return possession to Mr. Liu. Consequently, the defendant must pay usage fees based on the local rental guidance price of CNY 150 per square metre per month from 1 March 2010 until the shop is actually returned. The court also awarded interest on unpaid rent and usage fees at the one-year benchmark lending rate set by the People’s Bank of China, with interest accruing from the 29th of each month for rent and from the 1st of the following month for usage fees.

The court’s legal reasoning focused on distinguishing the contract’s true nature from its label. Under Chinese contract law, a lease exists when one party grants the right to use property for a term in exchange for consideration. The defendant’s obligation to pay rent was independent of external factors like subway construction; no clause allowed rent reduction due to changed circumstances without mutual agreement. The guidance rental price provided a reasonable market benchmark for the post-termination period. The court also emphasised that a tenant cannot avoid payment merely by leaving a property vacant if possession has not been formally returned. The interest calculation ensured the plaintiff was compensated for the time value of money lost due to late payments.

This case underscores the importance of clearly defining lease terms and the consequences of non-payment. The court enforced the parties’ original bargain, requiring the defendant to pay all overdue rent and market-rate usage fees for the period of unauthorised occupation. Property owners should ensure that contracts are labelled accurately and that all rent adjustments and tax deductions are explicitly stated. The ruling also clarifies that a tenant’s unilateral abandonment does not discharge the obligation to pay until the property is surrendered. For landlords, maintaining proper records of payments and communications is essential to support claims for arrears.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.