[Direct answer]In the Beijing area, there are clear time requirements for the exercise of the right of priority compensation for construction project prices. According to Article 807 of the Civil Code of the People's Republic of China (effective January 1, 2021), if the employer fails to pay the price as agreed, the contractor may urge the employer to pay the price within a reasonable period; if the employer fails to pay within the time limit, unless it is not appropriate to discount or auction the construction project 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; the construction project price shall be given priority compensation for the discounted or auctioned price of the project. The time limit for the exercise of the right of priority compensation is eighteen months, starting from the date when the employer should pay the construction project price.Property sales and construction projectsIn these types of services, deadline management is the first step.

I. Problem background and typical scenarios

There are four common dilemmas in the exercise of rights in practice: First, the employer defaults on the project payment but other creditors have already asserted their rights; Second, the project has not been settled yet, and it is impossible to determine the specific amount of priority compensation; Third, after the contractor subcontracts or divides the project, the actual constructor is hindered in asserting his rights; Fourth, if the employer enters bankruptcy proceedings, whether the right of priority compensation can be opposed to the distribution after the acceptance of bankruptcy. The connection rules between bankruptcy and enforcement are closely related to this.

II. Key points of contention

Focus One: Is the starting point of the exercise period the date on which the payment should be made? Focus Two: Can the right to priority compensation be claimed when the project has not yet been settled? Focus Three: Is the employer the counterparty and the responsible party? Focus Four: Does the contractor have the legal capacity, and how should subcontracting and sub-contracting situations be identified? Focus Five: Can the actual constructor claim directly? Focus Six: Is the nature of the construction project suitable for discounting or auctioning? Focus Seven: Should the exercise method be an agreement for discounting or a request for court auction?

III. Professional analysis by Henglue Lawyers

Henglue Lawyer believes that the exercise of the right of priority compensation requires addressing three issues simultaneously: the subject, the object, and the procedure. Regarding the subject, in practice, there are restrictions on the actual constructors claiming this right. Generally, it is only within the scope of the project payment owed by the employer, and only when the contractor has already paid all the project prices and the employer agrees to transfer this right, can it be supported. This point has been clearly stipulated in the judicial interpretations. Regarding the object, according to Article 807 of the Civil Code, the contractor may claim priority compensation for the project's discounted or auctioned proceeds, but except for those construction projects that are not suitable for discounting or auctioning, this directly limits the application of this right to agricultural land and some public welfare projects. Regarding the procedure, the exercise period is eighteen months, starting from the date when the employer should pay the project payment. Exceeding the time limit will result in the loss of the priority advantage of compensation. Therefore, in practice, it is necessary to first confirm the settlement and remind the other party of the starting point for claiming compensation, and then claim it in a timely manner.

IV. Practical suggestions and legal basis

Action recommendations: First, sort out the construction contract and supplementary agreements to confirm the payment conditions and settlement arrangements; Second, complete the settlement and final accounting to fix the amount of the project payment; Third, keep the reminder letters and delivery certificates to clarify the date when the payment should be made; Fourth, check whether the project is suitable for discount or auction; Fifth, verify your own subject qualifications to determine whether you are a contractor or meet the conditions for claiming as an actual constructor; Sixth, exercise your rights in a timely manner to avoid exceeding the 18-month time limit; Seventh, pay attention to whether the employer has gone bankrupt or whether other creditors are claiming rights against the employer. Legal basis: Article 807 of the Civil Code of the People's Republic of China (effective January 1, 2021); Article 36 and Article 37 of the Interpretation of the Supreme People's Court on the Application of Law in the Trials of Disputes over Construction Contracts (effective December 29, 2020, and effective January 1, 2021) regarding the priority right of compensation and the actual constructor. For details on project settlement, please refer to the relevant provisions.Business and contract disputes in enterprisesFor details concerning the bankruptcy proceedings, please refer to the following document.Special services and other casesThe specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

First, the exercise period is eighteen months, and it is necessary to assert the claim within the time limit. Second, the starting point is generally the date on which the employer should make the payment, and it is necessary to fix the evidence of urging and settlement. Third, if the nature of the project is not suitable for discounted auction, the priority compensation does not apply. Fourth, there are strict conditions for the actual constructor to assert the claim. Fifth, the exercise methods are limited to agreement discount or requesting the court to auction. Sixth, it is necessary to evaluate the risk of the order of compensation for ordinary creditor claims at the same time. Seventh, when the employer goes bankrupt, special attention should be paid to the declaration of rights and the order of priority.

VI. Frequently Asked Questions

Q1: What is the time limit for exercising the right of priority compensation for construction project prices?

The time limit for claiming compensation for construction projects shall be calculated from the date when the employer pays the construction project price. According to Article 807 of the Civil Code of the People's Republic of China (effective January 1, 2021), the contractor shall, when the employer fails to pay the price on time, urge the employer to pay within a reasonable period of time. If the employer still fails to pay within the time limit, the contractor may claim priority compensation. In practice, the starting point of the time limit often causes disputes, so it is necessary to clarify the date when the payment should be made through settlement documents and reminder records, and to pay attention to claiming rights within the time limit.

Q2: The project payment has not been settled yet. Can I claim the right of priority compensation?

There are disputes in practice. The subject of the priority right of compensation is the discounted value of the project or the proceeds from the auction. If the project has not been settled and the cost has not been determined, the project price can be determined through settlement audit or project cost appraisal first, and then the priority right of compensation can be claimed. In practice, it is often the case that the priority right of compensation is confirmed after the cost appraisal is applied for and the project price is determined. It is recommended to give a reminder and initiate the settlement procedure within a reasonable period of time, and at the same time, keep the intention of claiming the priority right of compensation in writing to avoid exceeding the time limit.Business and contract disputes in enterprisesThe column provides further explanations on this matter.

Q3: Can the actual constructor claim the right to priority compensation?

There are strict restrictions. According to Article 37 of the Interpretation of the Supreme People's Court on Legal Issues Applicable to the Trial of Disputes over Construction Contracts, the actual constructor can only claim the right of priority compensation if the employer defaults on the project payment, the contractor has already paid all the project price, and the employer agrees to transfer this right to the actual constructor, etc. In practice, it is usually difficult to obtain support if the actual constructor claims directly based on his identity. Therefore, it is necessary to first obtain evidence of the advance payment and the employer's consent.

Q4: Which has priority, the right of priority compensation or the mortgage right?

Generally, if a mortgage has been set up on a construction project and the mortgage right has been registered in accordance with the law, and the mortgagee's creditor's rights arise before the exercise of the priority right to compensation, the court may give priority to protecting the mortgagee's creditor's rights when distributing the auction proceeds. In practice, the order of judgment is closely related to the time of the creditor's rights arising, the time of the mortgage registration, and the time of bankruptcy acceptance. When there are disputes, it is necessary to evaluate them in light of the specific circumstances of each case. It is recommended to complete the verification of the priority order before making a claim.Special services and other casesThe column provides a way to judge the ranking of candidates.

Q5: How much does it cost to hire a lawyer to claim priority compensation for project payments?

The fees are determined through consultation between the law firm and the client, and mainly depend on the project amount, whether the settlement has been completed, whether cost appraisal is needed, whether it is necessary to participate in the discount or auction process, and whether it involves bankruptcy and complex situations with multiple creditors. It costs relatively little to simply assert rights and submit opinions; however, if it is necessary to complete the settlement audit, project cost appraisal, and participate in litigation and distribution procedures, the investment will obviously increase. It is recommended to first complete the settlement and ranking evaluation, and then determine the scope of services and phase arrangements.

The above content is based on the judicial practice in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm about specific situations.

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

Disclaimer: This article is compiled based on the current laws and regulations and publicly available 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 a dispute arises, please consult a practicing lawyer in a timely manner.