Behind the Failed Auction of a 260 Million Yuan Courtyard in Beijing: Difficulty Evicting 35 Tenant Households, Lawyer Analyzes Three Major Legal Risks in Buying Foreclosed Properties

Recently, a courtyard house beside Prince Gong's Mansion in Beijing, with a starting bid of 260 million yuan, failed to sell at auction due to a lack of bidders, drawing widespread market attention. This rare property, adjacent to a national first-class protected cultural relic site, should have been a sought-after target for high-end buyers, yet it fell flat because of the extremely high difficulty in relocating 35 tenant households. This incident reflects the practical dilemma in judicial auction property transactions: the house is easy to buy, but the occupants are hard to clear. It also serves as a warning to buyers that behind the low prices of foreclosed properties often lie complex legal risks. From a lawyer's perspective, this article analyzes the core legal issues in the purchase and sale of judicial auction properties, drawing on the Civil Code and relevant judicial practice, to provide practical guidance for ordinary homebuyers and investors.

I. Event Review: Why Is the 260 Million Yuan Courtyard House Unsold?

This siheyuan (courtyard residence) is located near Prince Gong's Mansion in Xicheng District, Beijing, with a building area of approximately 1,000 square meters. The starting auction price is 260 million RMB, equivalent to a unit price of approximately 260,000 RMB per square meter. Despite the scarcity of the location and the seemingly attractive price, the auction notice explicitly states: the property is currently occupied by 35 tenants with complex lease arrangements, making eviction extremely difficult. Ultimately, the subject property failed to sell due to no bidders registering for the auction.

From a legal perspective, transactions involving auctioned foreclosed properties follow the "as-is auction" principle, meaning the court delivers the property in its current condition and bears no obligation to evict occupants. This implies that after winning the bid, the buyer must resolve the issue of removing existing tenants on their own. In this case, the presence of 35 tenants signifies a litigation and enforcement cycle that could last several years, with potential costs potentially reaching tens of millions of yuan, far exceeding the capacity of an average buyer to bear.

Lawyers warn that court-auctioned properties are not a "bargain-hunting" tool, and their legal risks are often directly proportional to the low price. Before participating in a bid, buyers must conduct comprehensive due diligence on the property's occupancy status, lease arrangements, household registration situation, and other relevant matters; otherwise, they may easily fall into the predicament of losing both their money and the property.

II. Core Legal Obstacle: Application and Exceptions of the Principle That Sale Does Not Break a Lease

In this case, the primary legal obstacle to the difficult eviction of the tenant is the principle of "sale does not break lease" established in Article 725 of the Civil Code. This article stipulates that if the ownership of the leased property changes during the tenant's possession under the lease contract, the validity of the lease contract shall not be affected. In other words, even if the buyer acquires ownership of the courtyard house, the original tenant still has the right to continue using the property until the lease term expires.

However, this principle is not absolute. According to Article 31 of the Provisions of the Supreme People's Court on the Auction and Sale of Property in Civil Execution by People's Courts, if the lease right is established after the mortgage, or if the lease right has not been legally registered before the court's seizure, the buyer may claim to have the lease eliminated. However, in practice, tenants often hold long-term leases (e.g., 20 years) with rents significantly below market rates, and the courts impose strict criteria for identifying such "bad-faith leases," making it difficult for the buyer to meet the burden of proof.

Furthermore, if the tenants assert their preemptive purchase right (Article 726 of the Civil Code), the auction procedure must also safeguard the exercise of that right; otherwise, the auction may be rendered invalid. In this case, if any of the 35 tenant households asserts the preemptive purchase right, the auction procedure will become even more complicated, which is also a significant reason why potential buyers are deterred.

III. Eviction Practice: Clearance Procedures, Compensation Standards, and Implementation Period

Even if the buyer decides to initiate the eviction procedure, they must still face a lengthy legal process. According to the Civil Procedure Law and relevant judicial interpretations, eviction disputes typically go through the following stages:

1. **Negotiation Stage**: The buyer shall negotiate with the tenant regarding compensation for vacating the premises. The compensation standard generally references the difference in market rent, relocation expenses, and business interruption losses; however, there is no unified legal standard, and in practice, the involvement of lawyers in negotiations is often necessary.

2. **Litigation Stage**: If negotiation fails, the buyer must file a lawsuit with the court for removal of obstruction. The adjudication period for such cases is typically 6 to 12 months; if disputes over the validity of the lease are involved, the period may be extended to more than 2 years.

3. **Execution Stage**: After winning the lawsuit, the court's enforcement of eviction must take into account the resettlement of tenants. If the tenants are elderly or low-income individuals, the court may require the buyer to provide a resettlement plan; otherwise, enforcement may be difficult to carry out.

In practice, tenants of siheyuan-style properties often include long-term residents, commercial operators, and legacy tenants from historical circumstances, each with distinct demands, making eviction exponentially more difficult. Lawyers advise that before participating in an auction, buyers should commission a professional team to conduct targeted due diligence on tenant composition, lease durations, rent payment status, and other relevant factors, assess eviction costs and timelines, and avoid blind bidding.

IV. Risk Prevention for Homebuyers: Due Diligence, Contract Design, and Legal Remedies

Risks in court-auctioned property transactions run through the three stages before, during, and after the auction. Prospective buyers need to build their defenses in the following aspects:

1. Pre-Auction Due Diligence

- Retrieve property records to verify ownership, mortgage, and seizure information.

Conduct on-site visits to confirm occupancy status, and interview tenants to understand lease details.

- Check for outstanding property fees, water, electricity, and utility arrears to assess hidden costs.

2. Contract Design in Auctions

- Apply to the court to review relevant documents within the scope permitted by the auction announcement.

When participating in an auction, clearly assess your own risk tolerance and set a maximum price limit.

- If it is a consignment auction, a detailed authorization agreement must be signed with the agent, clearly specifying the assumption of risks.

**3. Post-Auction Legal Remedies**

If significant undisclosed defects are discovered in the property, the auction may be revoked in accordance with Article 148 of the Civil Code.

If the tenant refuses to vacate, you may apply to the court for compulsory enforcement and claim compensation for the use of the property during the period of occupation.

If false leasing is involved, an action may be filed with the court to confirm the invalidity of the contract, and the responsible parties may be held liable.

"V. Legal Inspiration and Advice from Lawyers"

This case is not merely an instance of a property failing to sell at auction, but also a vivid lesson in legal risk education. For ordinary homebuyers, although foreclosed properties may be priced below market value, "buying cheap" does not equal "living with peace of mind." Before making a decision, it is essential to consult professional lawyers and conduct a systematic assessment of legal risks.

Guangdong Zhiming Law Firm has深耕 the real estate and enforcement fields for many years, having represented numerous cases involving the eviction of court-auctioned properties and lease contract disputes, and is familiar with judicial practices in Beijing, Shenzhen, and other regions. We recommend that homebuyers adopt a mindset of "conducting legal due diligence upfront," viewing attorney fees as a necessary cost rather than an additional burden. If you are facing a similar predicament, feel free to contact our professional team. We will provide you with comprehensive legal services from due diligence to enforcement, helping you navigate the complex court-auction market with confidence.

The foreclosed property market presents both opportunities and risks; only by using the law as a shield can one proceed steadily and far.