Eastern China Court Rules on Double Sale of Apartments: Developer Ordered to Refund and Pay Compensation of 1,767,642 Yu
Eastern China Court Rules on Double Sale of Apartments: Developer Ordered to Refund and Pay Compensation of 1,767,642 Yuan
Case Overview
In a dispute over a pre-sale housing contract, the Eastern China Intermediate People’s Court upheld a lower court’s decision that a developer must refund the buyer’s full purchase price of 883,821 yuan, pay an equal amount of 883,821 yuan as compensation, and cover interest on the payments. The court found that the developer had engaged in a double sale of two apartments, making it impossible for the buyer to obtain the properties. The court also rejected claims against a related company and denied the buyer’s request for additional damages for alleged transfer fees and market price losses due to insufficient evidence.
Case Background and Facts
The buyer, Mr. Lv, sought to purchase two apartments in a residential project known as Crown Garden, located in Eastern China. In 2007, with the developer’s knowledge, Mr. Lv paid 190,000 yuan to a third party to acquire the rights to the units. On March 10, 2008, he signed two formal商品房买卖合同 (commercial housing sales contracts) with the developer, Wanxiang Company, for units 2605a and 2605b. The total purchase price for both units was 923,821 yuan. Mr. Lv made payments totaling 883,821 yuan on three separate dates: November 26, 2007, March 13, 2008, and June 10, 2008. The contracts required the developer to register the sale with the local housing authority within 30 days. However, the developer failed to do so and instead sold the same two apartments to a third party, Mr. Zhou, in 2009, completing the registration for that sale. This prevented Mr. Lv from ever taking ownership of the apartments.
Court Proceedings and Evidence
Mr. Lv filed a lawsuit in the lower court, seeking to rescind the contracts, obtain a double refund of his purchase price plus interest, and receive 600,000 yuan in damages for his losses, which included the 190,000 yuan transfer fee and the difference between the original purchase price and the current market value. The developer argued that the double sale was a staff error and that it had not acted in bad faith. It also denied knowledge of the 190,000 yuan transfer fee. A second company, Crown Company, argued it was not a party to the contract and should not be held liable. The lower court found that the developer had indeed sold the apartments to another buyer, constituting a clear case of “one property sold twice.” The court rejected Mr. Lv’s claim for additional damages, stating he failed to provide evidence for the transfer fee or market price loss. Mr. Lv appealed, arguing that Crown Company was a co-developer and that the court should have awarded market price losses. On appeal, Mr. Lv submitted a previous court judgment involving the same project, claiming it showed Crown Company’s liability. The appellate court found this evidence irrelevant to the current case.
Court Findings and Judgment
The appellate court affirmed the lower court’s decision in full. It held that the contract was valid and that the developer had breached it by selling the apartments to a third party. The court applied the Supreme People’s Court’s judicial interpretation on housing contract disputes, which allows a buyer to rescind the contract, obtain a refund of the purchase price with interest, and claim compensation of up to one times the amount paid. The court ordered the developer to refund the full 883,821 yuan paid by Mr. Lv, pay an equal amount of 883,821 yuan as compensation, and pay interest on each installment from the date of payment. The court also dismissed the claim against Crown Company, finding no evidence that it was a co-developer or a party to the contract. Mr. Lv’s appeal for additional damages was denied due to lack of proof.
Key Legal Principles
The court applied the principle that a seller who sells a property to a third party after entering into a valid contract with a buyer, thereby frustrating the contract’s purpose, is liable for rescission, refund, interest, and a penalty of up to one times the purchase price. This is based on the Supreme People’s Court’s interpretation of the law on housing contract disputes. The court also reaffirmed the principle of privity of contract, holding that only parties to the contract can be held liable for its breach. A party claiming damages must provide sufficient evidence of actual losses.
Practical Insights
This case illustrates the serious consequences for developers who engage in double sales of pre-sold properties. Buyers who are victims of such practices can expect to recover their full purchase price, plus interest and a penalty equal to the amount paid. However, claims for additional losses, such as market price differences or transfer fees paid to third parties, must be supported by clear and convincing evidence. The case also shows that a parent company or shareholder will not be held liable for a developer’s breach unless there is proof of joint development or direct involvement in the contract.
Legal References
Supreme People’s Court Interpretation on Issues Concerning the Application of Law in the Trial of Disputes over Commercial Housing Sales Contracts, Article 8. Civil Procedure Law of the People’s Republic of China (2007 Revision), Article 153, Paragraph 1, Item 1.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for specific legal matters.