In Shenzhen, 32 property owners purchased small property rights houses that were deemed invalid. A lawyer used this strategy to successfully confirm their property rights, and they received the full demolition compensation without a single yuan less.

Ms. Chen from Longhua purchased a small property rights house in 2018 for a total price of 860,000 yuan. At the time, she signed a "House Transfer Agreement," paid the money, received the keys, and lived there for five years without incident. It was not until last year, when the area was included in the urban renewal scope, that developers approached her to negotiate demolition compensation—calculated by building area, she could receive approximately 2.1 million yuan in compensation entitlements for this property.

The problem lies in the process of confirming property rights. The developer requires the owner to provide proof of legal property ownership, but Ms. Chen only has a written agreement in hand. What's more troublesome is that the original owner, Mr. Li, suddenly came forward, claiming that the sales contract for the small property rights housing violates mandatory legal provisions and is therefore a void contract. He demands the return of the property, with the compensation to go to him.

Conflict Escalates: 32 Homeowners Left Completely Stunned

Ms. Chen posted the situation in the homeowners' group and only then discovered that hers was not the only affected household. In the entire residential community, 32 homeowners were involved, all of whom had purchased properties years earlier from original villagers such as Li. The total purchase price exceeded 27 million yuan. On Li's side, lawyers were retained and notices were sent door-to-door, claiming the contracts were invalid and offering to refund the original purchase payments, but refusing to discuss demolition compensation.

The property owners were in an uproar—after living in their homes for seven or eight years, with demolition imminent, they were suddenly told the houses weren't theirs. No one could accept that. Some wanted to approach Li privately to talk, others advocated banding together to file a lawsuit, and still others hesitated over whether to just accept a refund and be done with it. After bickering for half a month, they came to our law firm.

Legal Analysis: Are All Transactions of Small Property Rights Housing Really Invalid?

Many people assume that contracts for small property rights housing are necessarily invalid, but this is not entirely accurate. Article 153 of the Civil Code provides that a civil juristic act that violates mandatory provisions of laws and administrative regulations is void, unless such mandatory provisions do not render the civil juristic act void. The key point is that the "mandatory provisions" referred to mean validity-affecting mandatory provisions, not administrative mandatory provisions.

Shenzhen's situation is even more distinctive. As early as 2004, Shenzhen established through the "Shenzhen Urban Renewal Measures" a pathway whereby buildings outside the legal framework could participate in urban renewal under specific conditions. In other words, when small property rights housing in Shenzhen undergoes demolition, the policy does not categorically deny compensation across the board; rather, it takes into account the actual state of possession and use, the historical circumstances of their creation, and the fault of the parties involved.

We carefully reviewed the materials of 32 property owners and found several key points: First, all owners purchased in good faith, paid market consideration, and have actually resided there for many years; second, the original villager Li did not raise any objections for a long time after selling the house, and only now wants to back out upon seeing the demolition benefits; third, under Shenzhen's current urban renewal policies, the demolition compensation rights for such houses tend in practice to protect the rights of the actual possessors.

Litigation strategy: do not challenge the validity of the contract; instead, pursue damages for breach of contract.

Our strategy is as follows: rather than disputing whether the sales contract is invalid, we will argue that even if the contract is invalid, Li should still bear liability for culpa in contrahendo and compensate the property owners for their loss of reliance interest — and that loss is precisely the difference in demolition compensation rights.

During the trial, we submitted three sets of evidence: first, the payment vouchers and residence certificates of the 32 property owners, proving the fact of actual possession and use; second, the announcement documents including the community in the urban renewal plan, proving that the specific amount of demolition compensation rights and interests has been clarified; third, the records showing that Li has not asserted his rights for nearly five years, proving that he allowed the owners to form reasonable reliance.

The core strategic point in this case is: if the contract is ruled invalid, the property owner can only recover the purchase price and interest, sustaining losses of nearly 20 million yuan; if Li is found to be at fault, he must compensate the owner for the loss of demolition rights and interests. We firmly advocate for the latter.

Outcome Reversed: Case Concluded Through Mediation, Rights of 32 Property Owners Successfully Confirmed

After three court hearings, when the court organized mediation, Li's attitude visibly softened. We calculated the costs: if he insisted on litigation, he would not only bear the court fees and attorney fees but also potentially face a compensation amount higher than the mediation proposal. Ultimately, both parties reached a mediation agreement: the 32 property owners had their rights confirmed at 85% of the demolition compensation entitlements, with Li retaining 15% as compensation for historical rights.

Ms. Chen called me the day she received the mediation document, saying that of the 2.1 million yuan in compensation rights, she ultimately received 1.785 million yuan in hand. After deducting the home purchase costs and litigation expenses, she still netted a profit of nearly 900,000 yuan. All 32 property owners signed and confirmed, with not a single one backing out.

Similar reminder: When buying a small property rights house, remember these three points.

First, don't fall for the "permanent property rights" nonsense. Transactions involving small property rights housing have inherent legal flaws, and if you buy one, you must be prepared to bear the risks.

Second, if you have already purchased, never misplace the contract and payment receipts. When it comes time for rights confirmation or demolition, these are your lifeline. Similar projects dealing with historical legacy issues are underway in Futian, Nanshan, and Longhua in Shenzhen, and the policy window may close at any moment.

Third, if the original owner tries to back out, don't panic. There is a fundamental principle in law—no one may profit from their own wrongdoing. If Li sells the house and then tries to claim the demolition compensation, neither the court nor mediation bodies will easily support such a demand.

Question: In the case of demolition of small property rights housing, can the owners directly file a lawsuit to request confirmation of their property rights?
Answer: Yes, but the cause of action is not "action for confirmation of rights" but rather "contract dispute" or "dispute over pre-contractual liability." The court will not directly confirm your ownership of the small property rights housing, but it can confirm the distribution ratio of your rights and interests in demolition compensation. Currently, several urban renewal projects in Shenzhen have been handled through this approach.

If you are also facing similar property disputes—whether you've been cheated when buying a house, the transfer has been held up, or there's a dual sale of one property or a dispute over "small property rights" housing—you are welcome to come and talk to us at Guangdong Zhiming Law Firm. We are located at Room 1802, Block A, Xintian Century Business Center, Shixia North Second Street, Futian District, Shenzhen. Tel: 0755-25986969. With 26 years of case-handling experience and over 10,000 cases represented cumulatively, our team is led by Director Lawyer Shen Longjin, who specializes in handling complex and difficult cross-disciplinary cases involving real estate and matrimonial/family matters.

(This article is for general legal education purposes only. As individual cases may vary, please consult a qualified attorney for specific advice. Guangdong Zhiming Law Firm—a well-established Shenzhen-based law firm with 26 years of experience. Tel: 0755-25986969; Address: Room 1802, Tower A, Xintian Century Business Center, Shisha North 2nd Street, Futian District, Shenzhen.)