Court Awards CNY 4,893 in Delayed Property Delivery Dispute
A court in Eastern China City has ruled in favour of a property buyer who sued a real estate developer for delayed delivery of an apartment, awarding CNY 4,893 in liquidated damages. The dispute arose from a 2008 sales contract that required the developer to deliver a completed and inspected unit by 30 December 2009. The developer failed to meet that deadline, and the buyer sought additional penalties for a further period of delay after an earlier judgment had already compensated him for earlier late delivery.
The plaintiff, Mr. Liu, entered into a商品房买卖合同 (commercial housing sales contract) with Eastern China City Real Estate Co., Ltd. on 23 May 2008. The contract covered an apartment and a parking space for a total price of CNY 330,608. The agreement stipulated that the developer would deliver the unit, having passed a final inspection, by 30 December 2009. If the developer delayed delivery by more than 90 days, the contract would remain in force and the developer would pay the buyer a daily penalty of 0.05% of the total purchase price for each day of delay. Mr. Liu paid the full purchase price on time. However, the developer did not deliver the unit by the agreed date. In an earlier legal case, the court had already ordered the developer to pay penalties for the period from 31 December 2009 to 15 June 2011. Mr. Liu then brought a new lawsuit seeking additional penalties from 16 June 2011 to 31 December 2011, amounting to CNY 32,730.19.
During the hearing, both sides presented evidence. Mr. Liu submitted the sales contract, payment receipts, and his identity documents to prove his standing and the developer’s breach. The developer provided a notification letter dated 22 July 2011, which informed Mr. Liu that the property was ready for handover. It also presented a construction supervision report showing that the building had passed final inspection on 20 June 2011. The developer argued that the penalty rate was too high and asked the court to reduce it. It also claimed that part of the delay was caused by quality inspections sought by other buyers, and that Mr. Liu himself had delayed his mortgage payments, for which the developer sought a separate penalty of CNY 5,180. Mr. Liu countered that any payment delay was due to the developer’s instructions on when and where to apply for the mortgage, and that the developer had not yet provided all required inspection certificates.
The court found that the developer had indeed breached the contract by failing to deliver the unit on time. Based on the supervision report, the building passed final inspection on 20 June 2011, and the developer sent the handover notice on 22 July 2011. Therefore, the additional delay period ran from 16 June 2011 to 22 July 2011, a total of 37 days. The court rejected the developer’s argument that the time spent on quality inspections should be excluded from the delay period, reasoning that the buyers had a legitimate right to raise concerns about construction materials and that the resulting government-ordered halt to construction could not be attributed to Mr. Liu. As for the developer’s claim regarding Mr. Liu’s delayed mortgage payment, the court noted that the developer had not filed a counterclaim in this case and could pursue that matter separately.
On the question of the penalty rate, the court applied the principle that liquidated damages serve primarily a compensatory function, with a secondary punitive role. It held that the contractual daily rate of 0.05% was excessive and reduced it to 0.04% per day. Using this adjusted rate, the court calculated the penalty as follows: CNY 330,608 multiplied by 0.0004 multiplied by 37 days, yielding a total of CNY 4,893. The court ordered the developer to pay this amount within ten days of the judgment becoming effective, plus double interest on overdue payments if delayed. The court also apportioned the litigation costs: Mr. Liu was to bear CNY 284 of the reduced fee, and the developer CNY 25.
This case illustrates how Chinese courts approach disputes over delayed property delivery and contractual penalty clauses. The court enforced the developer’s