Because of rising house prices, the developer sued itself.
Compiled from: China Court Network
Case review
In January 2014, Developer A signed a "Commercial Housing Sales Contract" with Xiao Liu, with a purchase price of over 670,000 yuan, which Xiao Liu paid in full. Developer A sued the court to confirm the contract as invalid on the grounds that the house had not obtained a commercial housing pre-sale permit. Xiao Liu argued that the regulations on commercial housing pre-sales are "administrative regulations" rather than "validity regulations" and should not affect the validity of the contract.
[1] Relevant laws and regulations
Article 2 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Disputes over Commercial Housing Sales Contracts
A pre-sale contract for commercial housing concluded between the seller and the buyer without the seller obtaining a commercial housing pre-sale permit shall be deemed invalid; however, if the seller obtains the commercial housing pre-sale permit before the lawsuit is filed, it may be deemed valid.
Article 14 of the Interpretation (II) of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China
The "mandatory provisions" referred to in Article 52, Item (5) of the Contract Law mean mandatory provisions on validity.
Article 52 of the Contract Law of the People's Republic of China Statutory circumstances for invalidity of a contract
A contract is void under any of the following circumstances: (1) the contract is concluded through fraud or coercion, harming the interests of the state; (2) malicious collusion harms the interests of the state, a collective, or a third party; (3) concealing illegal purposes under a lawful form; (4) harming public interests; (5) violating mandatory provisions of laws or administrative regulations.
[1] Court Opinion
According to Article 2 of the Supreme People's Court's Interpretation on Issues Concerning the Application of Law in the Trial of Disputes over Commercial Housing Sales Contracts, the house involved in the "Commercial Housing Sales Contract" signed by the plaintiff and defendant has not yet obtained a commercial housing pre-sale permit, and should be deemed void in accordance with the law.
The defendant's reference to Article 14 of the Supreme People's Court's Interpretation (II) on Issues Concerning the Application of the Contract Law of the People's Republic of China, which states that "mandatory provisions" refer to "validity mandatory provisions," is specifically a basic principle to be followed when determining contract invalidity under Article 52 of the Contract Law of the People's Republic of China. However, the invalidity of pre-sale contracts in the absence of a commercial housing pre-sale permit has been clearly interpreted by Article 2 of the Supreme People's Court's Interpretation on Issues Concerning the Application of Law in the Trial of Disputes over Commercial Housing Sales Contracts. In adjudicating such cases, the validity of commercial housing sales contracts should be determined based on this judicial interpretation. Therefore, the defendant's claim cannot be upheld. The purchase contract between both parties is void. The defendant may separately claim for losses caused by the contract's invalidity.
[1] The author's perspective
When the parties in this case signed the commercial housing sales contract, Developer A had not obtained a commercial housing pre-sale permit, and the involved house still has not obtained such a permit to date. According to the above judicial interpretation, the "Commercial Housing Sales Contract" signed between Developer A and Xiao Liu should be deemed void.
Furthermore, Article 45 of the Urban Real Estate Administration Law's provisions on commercial housing pre-sales are "administrative provisions" and do not constitute "validity mandatory provisions." Pre-selling commercial housing without a pre-sale permit only incurs administrative liability and does not affect the validity of the pre-sale contract itself. However, the validity of pre-sale contracts in the absence of a commercial housing pre-sale permit has been clearly stipulated by Article 2 of the Supreme People's Court's Interpretation on Issues Concerning the Application of Law in the Trial of Disputes over Commercial Housing Sales Contracts. Therefore, the author believes that ruling the involved commercial housing sales contract void based on this judicial interpretation is not improper.
Thus, whether a pre-sale permit is ultimately obtained has a certain impact on the court's determination of the validity of the purchase contract. Buyers cannot predict whether the developer will obtain a pre-sale permit later, and court rulings on such cases may vary. To avoid harm to their rights, buyers should carefully inspect important documents, including the pre-sale permit, before purchasing a house to prevent problems before they occur.
