Court Rules on Home Purchase Dispute Involving CNY 584,600
A buyer who paid the full purchase price for an office property in Eastern China City in 1998 but never received title documents later discovered the property had been transferred to a third party in 2003. The buyer sued the seller and its parent company for breach of contract, seeking rescission, return of the purchase price, and interest. The court ultimately upheld the lower court’s decision, ordering the seller to refund the purchase price with interest, while requiring the buyer to return the property and account for rental income earned during possession.
In 1998, Mr. Li entered into a written agreement with a real estate development company to purchase an office unit of 327.75 square meters at a price of CNY 1,800 per square meter. He paid the full amount of CNY 584,600. The seller promised to provide a purchase invoice and all documents necessary for property registration. Mr. Li took possession of the unit and later rented it out. In 2008, he discovered that the seller’s parent company, a machinery equipment bureau, had transferred the same property to a third party in 2003 via an offset agreement, and the third party had obtained a valid property certificate. Mr. Li could not obtain title and sued both the seller and the parent company for rescission and damages.
During the proceedings, the court examined the original purchase agreement, payment receipts, and records of the property transfer. Evidence showed that the seller was a subsidiary of the parent company and had been dissolved in 2001 without a liquidation committee. The buyer admitted that he had rented the property from 2002 to 2011, earning CNY 156,000 in total. Both the seller and the parent company argued that the buyer had no actual loss and that any benefit from the property should offset the purchase price. The parent company claimed it had sold the northern section, not the southern section that Mr. Li had bought.
The court held that the purchase contract was valid and binding. The seller failed to provide the promised documents, and the parent company later disposed of the property to a third party without the buyer’s consent. These actions prevented the buyer from ever obtaining ownership, constituting a fundamental breach. The court ruled that the contract must be rescinded, and the seller and parent company were jointly and severally liable to return the purchase price of CNY 584,600 plus interest at the central bank’s lending rate from the date of payment. The court also ordered the buyer to return the property to the seller and to pay back CNY 55,000 in rental income earned from January 2002 to October 2003, which would be deducted from the refund.
The legal analysis focused on the principle of relative contract rights. Since the contract was rescinded, the buyer had no legal basis to continue occupying the property and had to return it. The court distinguished between the buyer’s claim against the seller and any separate claim the third-party owner might have against the parent company. The buyer’s rental income from the period before the third party’s registration had to be returned because the buyer was not the owner. However, rental income after the registration belonged to a different legal relationship. The court also noted that the buyer’s appeal against the order to vacate failed because the contract was no longer in effect.
This case highlights the risks of purchasing property without obtaining timely title registration. Even after full payment and possession, a buyer may lose ownership if the seller or related parties transfer the property to others. The judgment demonstrates that courts will enforce contract rescission and restitution, but buyers must also account for benefits received during possession. Property buyers should conduct thorough due diligence and ensure that title documents are obtained promptly to avoid such disputes.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.