[2] Compiled from: Jufa, China Economic Net, The Beijing News
 
[3] Nowadays, soaring housing prices deter many people. At this point, because court-foreclosed properties (i.e., "foreclosure homes") are priced more advantageously than ordinary commercial housing, some turn their attention to them. However, others say that while buying a foreclosure home might be cheaper, actually living in it can bring plenty of troubles. So what hidden risks do foreclosure homes have? Are they worth buying?

 
 

Case review
[4] A young man buys a foreclosure home as a wedding house, delayed for over a year by "lease rights" without property transfer
 
[5] Wang, a resident of Xinyi, Xuzhou, had been in a long-term relationship with his girlfriend and had been searching for a new home in the Xinyi city area as a wedding house for the past two years. In February last year, he saw a foreclosure auction notice indicating that a house in a certain community in Xinyi city would be auctioned on March 21 of that year. Wang had visited the community where the property was located, and it matched his ideal living environment. The layout and floor specified in the auction notice also met his family's needs. The foreclosure property was auctioned by the Jiawang Court in Xuzhou, with a starting price of 549,528 yuan, an appraised value of 981,300 yuan, a one-day auction cycle, a bid increment of 2,000 yuan, and a deposit of 10,000 yuan. A total of 12 people registered for the auction, 87 set reminders, and 5,484 watched. The auction officially started at 10 a.m. on March 21. After more than 30 rounds of bidding, Wang ultimately won the bid at 801,528 yuan.

 
 

After Wang successfully won the auction, he paid the full house price and various handling fees on time as required, eagerly awaiting the notice to "get the house keys." The court soon called, not to notify him to go through the transfer procedures, but to inform him that there was an execution objection to the foreclosed property, and the procedures could not be processed temporarily. During communication with the court's enforcement bureau, Wang learned that an external executor had raised an execution objection on the grounds of a lease relationship with the foreclosed property. According to the principle of "sale does not break lease," when the leased property is auctioned by court enforcement, it does not necessarily lead to the termination of the lease right, and the lessee is not automatically entitled to file an execution objection lawsuit. Wang immediately questioned this, as the auction announcement for the foreclosed property clearly stated "none" in the lease relationship column. In response, the court said it had only received the lawsuit raising the execution objection, and whether a lease relationship existed for the property required a court ruling, but until the judgment was made, the enforcement of the property could only be temporarily suspended.
 
On April 17, 2019, the court issued an enforcement ruling, rejecting the external executor's objection request. Wang approached the court again, preparing to handle the property procedures. This time, the court replied that the external executor had filed another lawsuit, seeking to stop the enforcement of the property. On October 16, 2019, the court issued a judgment, again rejecting all claims of the external executor. However, Wang still did not receive a notice to proceed with the procedures, and the court replied that the external executor had appealed to the Xuzhou Intermediate Court.
 
This year-long wait has caused significant changes in Wang's life. His hometown house has been demolished, and his parents and he are now renting a place to live. Because he has been unable to move into the wedding house, his relationship with his girlfriend has hit a rough patch. Now, Wang has given up his job, traveling back and forth between Xinyi and Jiawang, just hoping for news that will allow him to move into the foreclosed property smoothly.

 
 

 
What is a foreclosed property?
A foreclosed property is short for a judicial auction property, referring to real estate subject to court enforcement. When a debtor is unable to fulfill a mortgage contract or repay debts, the creditor applies to the court for enforcement through various judicial procedures, auctioning the debtor's property to satisfy the debt with the proceeds.
 
 
What problems can arise with foreclosed properties?
In reality, foreclosed properties often come with many pitfalls. As seen in the above case, due to provisions in laws such as the Contract Law that stipulate "sale does not break lease," many foreclosed properties, even after being auctioned, may still face issues with existing lease rights, and false lawsuits related to lease relationships on foreclosed properties occur frequently.
 
Additionally, foreclosed properties may have other problems. For example, there may be outstanding fees such as property management fees, land use fees, utility bills, and various late fees. If the bidder is not fully aware, some of these costs may need to be borne by the buyer. Therefore, the foreclosed property purchased by the bidder may "not be cheap." Once the bidder defaults, the deposit paid may be deducted or even lost entirely. Moreover, some foreclosed properties may also involve issues such as the original owner's complex social relationships, occupants refusing to move out, or the original owner maliciously selling the property to multiple buyers. For these disputes, some courts do not take responsibility, and the buyer may need to file a separate lawsuit to resolve them.
 
 
[1] The author's perspective
In my opinion, regardless of whether it is a foreclosed property, buyers should thoroughly understand the property before purchasing. Regarding foreclosed properties, I have summarized the following four points for reference:
 
First, whether there is a lease relationship on the auctioned property.In particular, Chinese law stipulates "sale does not break lease," meaning that a change in ownership of the leased property during the lease term does not affect the validity of the lease contract. Therefore, if the auction announcement clearly indicates a lease relationship and the bidder still participates in the auction, it is deemed that the bidder is aware of and accepts the associated risks. Generally, the court is not responsible for subsequent coordination or resolution. Bidders must first understand the tenant's situation and the performance of the lease contract to avoid damage to their own rights.
 
On the other hand, according to Article 230 of the Contract Law, "If the lessor sells the leased property, it shall notify the lessee within a reasonable period before the sale, and the lessee has the right of first refusal under the same conditions." This means that the lessee also has the right of first refusal, and if the same price is offered during the auction, the lessee wins the bid.
 
Second, inspect the property in person to see if anyone is living there, and find out in advance whether it needs to be vacated.Before purchasing a property, it is absolutely necessary to apply for an in-person inspection. This allows you to directly see the current condition of the property and its surroundings, and also to determine whether anyone is living there, whether the occupants are tenants, the person subject to enforcement, or others, whether the property needs to be vacated, and whether the court will assist in vacating it, so you can be well-informed. This prevents the situation where you cannot move in after the transfer of ownership. If the occupant is a tenant, you can find out in advance the length of their remaining lease term and whether they are willing to move out.
 
Third, understand the local purchase restriction policies and the property's ownership status.Purchase restriction policies vary by city. Understanding the local purchase restriction policies in advance, combined with your own qualifications, will help you determine whether you are eligible to purchase before bidding, to avoid losses. Additionally, some properties have unclear ownership, no ownership, limited ownership, or shared ownership, which may pose risks of being unable to transfer ownership after bidding. Since property values are high, if you cannot transfer ownership due to your own reasons after bidding, you may also face the risk of losing a substantial deposit. In practice, to circumvent purchase restriction policies, many people take the risk of "buying property under someone else's name," which is widespread. Buying property under someone else's name carries risks, so it's best to address this in advance to avoid losing both the money and the property.
 
Fourth, the issue of tax payment.When purchasing a foreclosed property, you must understand the local tax policies in advance, as well as the fee-bearing methods specified in the auction announcement, to avoid the problem of "facing high taxes" due to information asymmetry. Additionally, you should clarify the nature of the property's land. If it is state-allocated land, you will need to pay a high land transfer fee for secondary transactions.