First-of-its-kind housing rental company with RMB 3 billion registered capital established; lawyers analyze five major legal risks in compliant operation of rental enterprises.
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According to the company’s industrial and commercial registration information, Beijing Capital Housing Rental (Beijing) Co., Ltd. was formally established recently, with a registered capital of up to RMB 3 billion. It was incorporated with capital from relevant entities under Beijing Capital Group, and its business scope covers housing rental, non-residential real estate leasing, property management, and other activities. This move is interpreted by the market as another major strategic deployment by a central state-owned enterprise in the long-term rental apartment sector, and it also signals that, after the defaults and industry reshuffling of previous years, the housing rental industry is entering a new round of competition in capital and compliance.
As a legal team that has long served the real estate and leasing industries, we focus not only on
I. Property Sourcing Stage: Title Defects and the Compliance Red Line for Partitioned Rooms
The first legal hurdle for residential rental enterprises is the legality of the property itself. In practice, many enterprises, in order to expand their scale rapidly, obtain properties through the sub-landlord model or convert commercial office premises and factory buildings into apartments for rent. This involves two high-frequency risk points.
First, defects in title and the right to sublease. Article 716 of the Civil Code provides that a lessee may sublease the leased property to a third party with the lessor’s consent; if the lessee subleases without the lessor’s consent, the lessor may terminate the contract. If a leasing company, when taking over properties from a “second landlord,” fails to verify whether the original lease contract permits subleasing, then once the primary landlord seeks termination, the company will face a triple blow: loss of housing resources, renovation losses, and tenant claims.
The second is the administrative compliance risk of partitioned rooms and group rentals. Under Article 8 of the Measures for the Administration of Commodity Housing Leasing issued by the Ministry of Housing and Urban-Rural Development, leased housing shall use the room as originally designed as the smallest rental unit, and the per capita rented floor area shall not be lower than the minimum standard prescribed by the local government. Although Beijing, Shanghai, and other places have loosened their stance on the N+1 model, fire safety and structural safety remain red lines that cannot be crossed. In 2023, a long-term rental apartment in Beijing was ordered by the housing and construction department to remove the partitions and was fined for dividing a two-bedroom apartment into five rooms for rent; it was also temporarily sealed by the fire rescue agency because the fire access was blocked. Lawyers recommend that enterprises establish a legal review checklist at the housing acquisition stage and verify the property ownership certificate, original lease contract, sublease authorization, and housing structural drawings item by item, so as to avoid expansion with compliance defects.
II. Signing of Lease Contracts: Compliance Boundaries of Standard Form Clauses and Rent Loans
Contracts offered by housing rental enterprises to tenants are usually pre-drafted standard-form contracts. Articles 496 to 498 of the Civil Code impose strict limits on the effect of standard terms: if the party providing a standard term fails to perform its duty to draw attention to or explain it, resulting in the other party’s failure to notice or understand a term that has a material bearing on its interests, the other party may assert that the term does not form part of the contract. In practice, terms such as conditions for deposit refund, liquidated damages for early lease termination, and allocation of maintenance responsibilities are most likely to be found by courts not to form part of the contract due to a failure to provide conspicuous notice.
Even more alarming is the rent loan model. Some rental enterprises induce tenants to sign loan contracts with financial institutions, obtaining a full year’s rent in a lump sum, while tenants repay the loan monthly. Under this model, once the enterprise’s capital chain breaks, tenants face the predicament of having the property repossessed while still having to repay the loan. In 2021, the Opinions on Strengthening the Regulation of Asset-Light Housing Rental Enterprises issued by six departments including the Ministry of Housing and Urban-Rural Development clearly provided that housing rental enterprises must not engage in financial business in disguised forms or induce tenants to use rent loans. Lawyers caution that when designing rent payment schemes, enterprises should ensure tenants have a genuine and sufficient right to choose, and must not make rent loans the default or sole option; otherwise, they may cross the criminal red line of illegally absorbing public deposits or fund-raising fraud.
III. Tenant Personal Information Protection: Data Compliance Cannot Be Ignored
Housing rental companies collect large amounts of tenant personal information during their operations, including ID card numbers, contact information, employers, facial recognition data, and movement trajectories. Once such information is leaked or misused, companies will face severe penalties under the Personal Information Protection Law.
Under Article 66 of the Personal Information Protection Law, if unlawful processing of personal information involves serious circumstances, a maximum fine of up to RMB 50 million or up to 5% of the previous year's turnover may be imposed, and the entity may also be ordered to suspend the relevant business or to suspend operations for rectification. For housing rental companies, scenarios such as smart locks, facial recognition access control, and in-app apartment viewing all involve the collection of sensitive personal information. Lawyers recommend that companies establish a data classification and grading system, obtain separate consent for sensitive personal information such as biometric information, enter into data processing agreements with third-party technical service providers, and conduct regular compliance audits. In 2024, a leading apartment brand was ordered by the cyberspace administration to rectify and was fined for collecting tenants' facial information without separate consent; this case should serve as a warning to all practitioners in the industry.
IV. Lease Termination and Security Deposit Disputes: Observations on Judicial Decision-Making Tendencies
Deposit disputes are one of the most common types of litigation in the housing rental sector. Many companies deduct deposits under the guise of "property damage," "cleaning fees," or "depreciation charges," but without contractual basis and evidentiary support, they often lose in litigation.
From the adjudication rules of basic-level courts in Beijing, Shanghai, Guangzhou, and other places, courts generally require the lessor to bear the burden of proof for the grounds for deducting the deposit, and the deducted amount should be commensurate with the actual loss. For example, when a tenant terminated the lease, a 2,000 yuan deep cleaning fee was deducted, but the company could not provide before-and-after cleaning comparison photos or proof of actual expenditure, and the court ultimately ordered a full refund. In addition, Article 713 of the Civil Code provides that a lessee may request the lessor to repair the leased property within a reasonable period when repair is needed; if the lessor fails to perform the repair obligation, the lessee may repair it itself, and the repair costs shall be borne by the lessor. This means that companies cannot shift to tenants the repair responsibilities that should be borne by themselves.
Lawyers suggest that housing rental enterprises should establish standardized handover and move-out inspection procedures, use time-stamped photos and videos to record the condition of the premises, and specify in the contract the specific circumstances and calculation standards for deposit deductions, so as to reduce the room for disputes.
V. Criminal Risks in Scaled Operations: Capital Pools and Illegal Business Operations
When the number of housing units managed by a housing rental enterprise reaches a certain scale, the accumulated deposits and rents may form a huge capital pool. If the enterprise diverts these funds for high-risk investments, related-party lending, or even squandering, once its funding chain collapses, the actual controller may face criminal prosecution for misappropriation of funds, occupational embezzlement, or even fundraising fraud.
In addition, some companies absorb funds from unspecified members of the public under the names of “rent rebates,” “rent wealth management,” and the like, promising high returns. This has departed from the core business of housing rental and may constitute the crime of illegally absorbing public deposits. Among the typical cases of punishing financial crimes in accordance with the law released by the Supreme People's Court in 2022, there was a case in which a long-term rental apartment company was convicted of disguisedly absorbing public deposits in the name of “rent installments.” Lawyers remind that housing rental companies should adhere to the principle of “one-to-one correspondence between rent collection and payment,” avoid maturity mismatches, and must not use tenant funds for purposes unrelated to the company's operations.
Conclusion: Compliance Is the Strongest Trump Card for Housing Rental Enterprises
The entry of 3 billion yuan in registered capital shows that capital remains optimistic about the long-term value of rental housing. But the more capital-intensive an industry is, the more pronounced the leverage effect of legal risks becomes. For rental housing companies, compliance is not a cost but a moat. From listing review, contract design, funds supervision, to data protection, every step requires the deep involvement of professional legal expertise. For ordinary tenants, asking a few extra questions before signing—how the deposit will be refunded, who is responsible for repairs, and what the relationship is between the loan contract and the lease contract—can often give them the upper hand when a dispute arises.
Guangdong Zhiming Law Firm has long been deeply engaged in real estate and leasing legal services. It can provide housing rental enterprises with end-to-end legal support ranging from compliance review of business models, establishment of contract systems, and design of fund supervision schemes to dispute resolution, and can also provide tenants with specialized services such as lease contract review, deposit recovery, and rights protection against infringement. At this critical juncture when the housing rental industry is moving toward standardization and scale, let law serve as an escort for corporate expansion, not a fire brigade called in after the fact.
