Court Awards CNY 18632.2 in Lease Termination Dispute
A court in Eastern China City has ruled in a dispute between a property company and a tenant over the occupation of a leased shop after a demolition notice terminated the contract. The plaintiff, Eastern China City Engineering Co., Ltd., sought possession of the premises and payment of occupancy fees and utility costs. The court granted partial relief, ordering the tenant to vacate and pay reduced occupancy charges but dismissing the utility claim and the tenant’s argument about relocation compensation.
The parties entered into a one-year lease agreement on 29 December 2009 for a 27.3-square-meter shop in Eastern China City, with rent set at CNY 75 per square meter per month. The lease ran from 1 January 2010 to 31 December 2010 and contained a clause stating that if the property was included in a lawful demolition zone due to urban construction, the contract would terminate without liability. In May 2010, the plaintiff received a demolition notice from the local planning authority. On 10 June 2010, it notified the defendant, Mr. Zhang, that the lease would end on 30 June 2010 and required him to vacate by 30 July 2010. Mr. Zhang did not return the property by that date. The plaintiff later issued two further notices demanding possession and payment, but Mr. Zhang retained the keys and refused to pay rent or utilities from July 2010 onward. The plaintiff filed suit on 28 December 2011.
At trial, the plaintiff submitted the lease agreement, the demolition notice, and copies of its written notifications to the tenant. Mr. Zhang presented a preliminary lease agreement dated 24 June 2010 for alternative premises in the Eastern China City International Building Materials Market, suggesting he had planned to relocate. Both parties gave oral testimony. The plaintiff also produced a self-prepared list of water and electricity charges for the period from 30 June 2010 to 30 June 2011, claiming CNY 52 for water and CNY 285.6 for electricity. Mr. Zhang disputed these figures, stating he had already vacated the shop on 20 August 2010 and that the list was unsupported by official bills.
The court held that the lease agreement was valid and binding. It found that the demolition event triggered the contractual termination clause, ending the lease on 30 June 2010. After termination, Mr. Zhang had no right to remain in the property and was obliged to return it. The court noted that the plaintiff had given a reasonable moving period until 30 July 2010. Therefore, occupancy fees for July 2010 were not awarded. From 1 August 2010 to 31 August 2011, Mr. Zhang occupied the premises without permission. The court determined a fee of 70 percent of the original rent to account for the fact that Mr. Zhang was not actively operating a business during that period. This resulted in an award of CNY 18,632.2. The court rejected the utility claim because the plaintiff provided only a self-made list that Mr. Zhang did not accept. It also declined to address Mr. Zhang’s argument that he was entitled to relocation compensation from the demolition, ruling that such compensation involved a different legal relationship.
On the legal reasoning, the court emphasized that a terminated contract extinguishes both parties’ obligations except for those related to restoring the property. The tenant’s continued possession was a wrongful occupation, giving rise to a claim for reasonable use and occupation fees. The court adjusted the fee downward from the contractual rent because the premises were not generating business income, reflecting fairness and the actual circumstances. Additionally, the court distinguished between contract claims and statutory compensation rights. Relocation benefits are a matter between the tenant and the demolition authority or property owner under separate regulations; they do not affect the duty to vacate after a lease ends. The court applied principles from contract law and judicial interpretations on urban lease disputes.
This case illustrates how courts handle lease terminations triggered by government-ordered demolition. Tenants should be aware that once a lease is lawfully terminated, they must return the property within a reasonable period, even if they have unresolved claims for relocation compensation. Occupancy fees may be reduced if the space is not in active use, but the obligation to pay for wrongful holding remains. Landlords should document utility charges with official invoices to support reimbursement claims.