[Direct answer]It is recommended to take multiple measures simultaneously. Firstly, claim the project price and the interest on overdue payments and the breach of contract penalties, and calculate the amount according to the contract and settlement documents; Secondly, exercise the right of priority compensation for the project price in accordance with the law. According to Article 807 of the Civil Code of the People's Republic of China (effective from January 1, 2021), if the employer fails to pay the price as agreed, the contractor may give a notice of default. If the employer fails to pay within the time limit, except that the project is not suitable for discounting or auctioning according to the nature of the project, the contractor may agree with the employer to discount the project or request the people's court to auction the project according to law, and the contractor shall have priority compensation for the discounted or auctioned price of the project; Thirdly, sue and apply for property preservation in time, and seize the employer's ongoing projects, real estate or bank accounts; Fourthly, apply for compulsory execution after the judgment takes effect; Fifthly, eligible actual constructors may claim rights within the scope of the unpaid project price from the employer in accordance with relevant judicial interpretations. It should be noted that the maximum period for exercising the right of priority compensation shall not exceed eighteen months, starting from the date when the employer should pay the project price. It is necessary to claim within the time limit.

I. Problem background and typical scenarios

The construction project cycle is long and requires large amounts of advance funding. It is not uncommon for employers to default on project payments due to a disrupted funding chain, leaving contractors in a dilemma: continuing construction may lead to deeper financial troubles, while suspending work may result in breaching contractual obligations. In practice, some contractors fail to assert their priority compensation rights in a timely manner, leading to the loss of their rights due to exceeding the statute of limitations; others file lawsuits but fail to apply for preservation measures, leaving no enforceable assets after winning the case; and still others encounter difficulties in determining the amount of project payments due to unfinished settlement procedures or missing verification documents. When handling such cases in the Beijing area, the court will review the validity of the contract, whether the project has been completed and accepted, the basis for settlement, the amount of arrears, and the time limit for exercising priority compensation rights to determine whether the claim is valid. Understanding the combined application of litigation, preservation measures, and priority compensation rights can help contractors maximize the recovery of their claims.

II. Key points of contention

First, how is the amount of the project payment determined, and whether the settlement and verification materials are sufficient. Second, the conditions, scope, and 18-month time limit of the priority right to compensation for the construction project price. Third, whether the priority right to compensation can be realized through project discounting and auction. Fourth, the objects and timing of property preservation. Fifth, whether the actual constructor can break through the contractual relativity to claim rights against the employer.

III. Professional analysis by Henglue Law Firm

Henglue Lawyers believe that the key to resolving disputes over project payments lies in emphasizing both "property rights confirmation" and "property rights protection". On the aspect of property rights confirmation, the contractor should complete the settlement, fix the project quantity and sign the verification documents as soon as possible, and clarify the amount of unpaid project payments, interest, and penalties. On the aspect of property rights protection, the contractor should claim the right to priority compensation for construction project payments within the statutory time limit and apply for property preservation simultaneously to prevent the employer from transferring the ongoing projects, real estate, or funds. In practice, a common problem is that contractors repeatedly delay due to concerns about the cooperation relationship, only to find that the employer has gone bankrupt or had its property seized by other creditors first, resulting in a significant drop in the recovery rate. Based on the experience of our team in handling construction project and enforcement cases, we recommend the following combination strategies: First, send written notices and keep the delivery evidence to create conditions for exercising the right to priority compensation; Second, verify whether the project is not suitable for discounting or auctioning; Third, clarify the right to priority compensation through litigation or agreement discounting within the eighteen-month time limit; Fourth, apply for preservation of ongoing projects, real estate, and accounts; Fifth, apply for enforcement after the judgment takes effect, and, if necessary, apply for priority compensation for the discounted or auctioned project payments. It should be noted that the scope of the right to priority compensation is generally limited to the actual expenditure costs such as workers' compensation and material payments that the contractor should pay for the construction project. The specific scope shall be subject to the current effective laws, regulations, and judicial interpretations, and the outcome of each case shall be judged based on the facts.

IV. Practical suggestions and legal basis

Action list: First, sort out the construction contracts, settlement documents, visas, and acceptance materials, and calculate the outstanding project payments, interest, and penalties; Second, promptly send written reminders to the employer to make payments and retain the delivery certificates; Third, verify whether the project is not suitable for discounting or auctioning, and evaluate the feasibility of the priority right of compensation; Fourth, within the 18-month period, claim the priority right of compensation through litigation or agreement; Fifth, file a lawsuit and apply for property preservation at the same time, and apply for forced execution after the judgment takes effect. For matters related to construction projects and enforcement, you can refer to the relevant provisions.Real estate transactions and construction projectsAndCreditor's rights and debts, and enforcementLegal basis: Article 807 of the Civil Code of the People's Republic of China (effective January 1, 2021), and the Interpretation of the Supreme People's Court on Legal Issues Applicable to the Trials of Disputes over Construction Contracts (effective January 1, 2021) regarding the settlement of project payments, the exercise period of the right of priority compensation, and the provisions on actual constructors. The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

First, the priority right of compensation has an eighteen-month time limit. If it expires, it may be lost, so it's essential to assert it as soon as possible. Second, the procedures of "property rights confirmation" and "preservation" should be carried out simultaneously to avoid winning the lawsuit but not being able to get the money. Third, the settlement and visa materials are the basis for determining the amount of the project payment, so they should be properly preserved during the construction process. Fourth, it's necessary to timely understand the contractor's financial status and litigation situation, and if necessary, apply for preservation or participate in the distribution. For matters involving construction projects and enforcement, you can seek help from a professional lawyer.Property sales and construction projectsThe service obtains an overall solution, which involves contract review and settlement disputes that can be combined togetherBusiness and contract disputes in enterprisesFor matters involving property preservation and enforcement, you can refer to the following for more information.Creditor's rights and debts, and enforcementFor matters related to funds and financing arrangements, please feel free to consult usFinance and cross-border affairs.

VI. Frequently Asked Questions

Q1: What should the contractor do if the employer doesn't have the money to pay the project fees?

It is necessary to promptly claim the project price, interest, and breach of contract penalties, and exercise the right of priority compensation for the construction project price within the statutory time limit. At the same time, initiate a lawsuit and apply for property preservation. After the judgment takes effect, apply for compulsory enforcement, and, if necessary, realize the priority compensation through project discounting or auction.

Q2: What is the right of priority compensation for construction project prices?

This refers to the right of the contractor to receive priority compensation for the discounted or auctioned price of the project when the employer fails to pay the agreed price and still refuses to pay after being reminded. This right takes precedence over ordinary creditor's rights, but it must be claimed within the statutory time limit and is not applicable to situations where the project is not suitable for discounting or auctioning according to its nature.

Q3: Within what timeframe must the right of priority compensation be exercised?

According to the "Interpretation of the Supreme People's Court on Legal Issues Applicable to the Trials of Disputes over Construction Contracts" (effective January 1, 2021), the contractor shall exercise the right of priority compensation within a reasonable period of time, but the maximum period shall not exceed eighteen months, starting from the date when the employer should pay the construction project price.

Q4: Can the actual contractors directly ask the employer for money?

Under certain conditions, it is possible. According to the relevant judicial interpretations, the actual constructor may, under certain circumstances, break through the principle of contractual privity and claim rights against the employer within the scope of unpaid project funds. Whether it is applicable depends on their identity, the validity of the contract, and the employer's unpaid situation, which requires specific analysis.

Q5: What preparations should be made before filing a lawsuit?

The contractor shall sort out the construction contract, settlement and visa materials, acceptance records, payment vouchers and reminder letters, and calculate the outstanding payment amount; inquire into the employer's property clues and prepare preservation applications; assess the feasibility and exercise period of the priority right of compensation, and, if necessary, entrust a lawyer to formulate litigation and preservation strategies.

The above answer is based on the judicial practice in Beijing. The adjudicative guidelines in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the necessary evidence, to avoid missing the statutory time limit. →Legal services for real estate transactions·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.