Home Buyer Loses Appeal in CNY 584,600 Property Dispute

In a long-running property dispute in Central China City, a home buyer who paid full price for an office unit but never obtained title was ordered to return the property to the seller after the contract was rescinded. The buyer, Mr. Li, had sued for a refund and interest after discovering that the same property had been transferred to a third party years earlier. The appellate court upheld the lower court’s decision, requiring Mr. Li to vacate the premises and return the property to the seller, despite the fact that the seller had already lost ownership through a separate transaction.

The case began in September 1998, when Mr. Li signed a purchase agreement with Heat Source Real Estate Company for a third-floor office unit measuring 327.75 square meters at a price of CNY 1,800 per square meter. He paid the full purchase price of CNY 584,600. The seller promised to provide an invoice and all necessary documents for title registration. Mr. Li took possession of the unit and used it immediately. However, the seller never delivered the promised documents. In June 2008, Mr. Li visited the local property office to inquire about registering title and learned that the same office unit had been transferred by Equipment Procurement Bureau – the seller’s parent company – to a third party, Mr. Wang, in September 2003 through a debt settlement agreement. Title had been registered in Mr. Wang’s name in October 2003. Mr. Li then sued both companies, seeking rescission of the contract, return of his purchase price, and interest of CNY 432,000.

During the trial, the court examined the original purchase agreement, payment receipts, and rental records. The evidence showed that Mr. Li had leased the property from January 2002 through March 2011, earning total rental income of CNY 156,000. Both defendant companies argued that Mr. Li had no actual loss and that any benefit he received should be offset. The trial court also heard that Heat Source Real Estate Company had been dissolved in August 2001 without forming a liquidation committee. Equipment Procurement Bureau claimed it had sold a different portion of the same building, but this was contradicted by the registration records.

The trial court found that the purchase contract was valid and binding. Heat Source Real Estate Company had committed a fundamental breach by failing to provide the necessary documents and by allowing a third party to acquire title to the same property. The court held that the contract could no longer be performed and ordered its rescission. Both defendants were ordered to jointly return the purchase price of CNY 584,600 plus interest from the date of payment at the People’s Bank of China loan rate. However, the court also ruled that Mr. Li must surrender the property back to the seller and pay back CNY 55,000 of the rental income earned during the period from January 2002 to October 30, 2003 – before the third party acquired title. Mr. Li was given ten days to vacate the premises. He appealed only the order to return the property, arguing that since the property had already been transferred to a third party, the seller no longer had any right to demand its return.

The appellate court rejected Mr. Li’s argument. It noted that under contract law, once a contract is rescinded, each party must restore what it received from the other. Because Mr. Li had taken possession of the property under the contract, and that contract was now terminated, he had no legal basis to continue occupying the unit. The court emphasized the principle of privity: the seller was entitled to receive back the property from the buyer, regardless of any subsequent transaction involving a third party. The third party was not a party to this case and could pursue any claims separately. The court also found that the trial court had correctly calculated the rental income to be returned, as it only covered the period before the third party became the registered owner. The appeal was dismissed, and Mr. Li was ordered to pay the appellate costs of CNY 9,646. The original judgment was affirmed in full.

This case highlights the risks that buyers face when title is not registered promptly after purchase. Even after full payment and physical possession, a buyer may lose the right to keep the property if the seller breaches and the contract is rescinded. The decision also demonstrates that a buyer who earns rental income from property later deemed to belong to the seller may be required to account for that income. For property transactions, obtaining timely title registration remains the most secure way to protect ownership rights. The court’s ruling reaffirms that a seller’s subsequent transfer of the same property to a third party does not relieve the buyer of the duty to return possession after rescission, as the buyer’s claim lies against the seller for damages, not against the subsequent owner.

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