[Direct answer]In the Beijing area, when signing a second-hand housing sales contract, eight clauses should be designed to prevent breaches of contract. First, the clause on ownership verification requires the seller to promise that the house ownership is clear, free from mortgages or seizures, without disputes over shared ownership, and no unreported leases. It also stipulates the breach of contract liability and refund arrangements in the event that the contract cannot be performed due to ownership defects; at the same time, the seller is required to provide real estate registration information for the buyer to verify. Second, the clause on deposits and down payments stipulates that the amount of the deposit shall not exceed 20% of the subject matter of the main contract, and the excess part shall not have the effect of a deposit. The down payment shall be paid in installments and clear the payment milestones in the contract to avoid paying all the money too early. Third, the clause on fund supervision recommends using banks or third-party supervision agencies for fund supervision. The buyer's funds shall be released in installments according to the transfer milestones in the supervision account, which is the most effective means to prevent the seller from misappropriating funds. Fourth, the clause on loan arrangements stipulates the handling methods in the event of loan failure, such as converting to cash payment or terminating the contract and returning the paid amount, to avoid disputes caused by loan approval failure. Fifth, the clauses on online signing and transfer time stipulate the specific milestones and default penalties for online signing, loan approval, transfer, and delivery. Sixth, the clause on delivery stipulates the delivery time, the list of furniture and appliances, the handover of keys and documents, and the settlement of arrears. Seventh, the clause on breach of contract liability distinguishes between late performance and fundamental breach of contract, and sets different penalties and termination conditions. Eighth, the clause on contract termination and refund stipulates the termination conditions, notification methods, and refund deadlines. Articles 586 to 587 of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulate the rules on deposits and breach of contract penalties, which need to be accurately applied in the contract.Real estate transactions and construction projectsThe services in this column can assist in reviewing the contract terms.

I. Problem Background and Typical Scenarios

Common transaction concerns include: the house is mortgaged but the seller promises to redeem the mortgage by himself; the seller claims that there are no co-owners of the house but cannot be verified; the buyer requires a large down payment before the loan is approved; the seller delays the online signing and transfer of ownership; after the house price rises, the seller requests to terminate the contract and return the deposit.Business and contract disputes in enterprisesThe analysis of breach of contract liability in the column can be used for reference. In second-hand housing transactions, buyers often focus on the price and taxes, ignoring the risk control role of clause design.

II. Key points of dispute

Focus One: The depth of verification of ownership status. Focus Two: The choice of applying either a deposit or a breach of contract penalty. Focus Three: The specific arrangements for fund supervision. Focus Four: How to handle the situation if the loan fails to proceed. Focus Five: The quantification standard for late breach of contract penalties. Focus Six: The conditions for taking possession of the property and settling outstanding fees.Special services and other casesThe clause design description in the column can be used for reference. Focus 7: The verification time points of the housing units before and after signing the contract, and the response mechanisms when the housing unit status changes.

III. Professional analysis by Henglue Lawyers

Take an arbitration case of a commissioned creation contract handled by Attorney Xiong Binrong of our firm as an example: The client and the contractor signed a project outsourcing agreement stipulating the production of materials and payment of fees. After the work was accepted as qualified, the contractor delayed payment. The key point of the lawyer's representation in this case was to first request the confirmation of the agreement's termination, and then request the payment of the contract price, the breach of contract penalty, and the attorney's fees and arbitration fees, forming a hierarchy of main and alternative claims. The arbitration tribunal ultimately adopted the main claims. This design approach is also applicable to preventing breaches of contract in second-hand housing contracts: The contract terms should be structured hierarchically, clearly stipulating the termination of the contract, continued performance, payment of the breach of contract penalty, and compensation for losses, with corresponding applicable conditions. In addition, attention should be paid to the fact that excessive breach of contract penalties may be legally reduced. Therefore, the penalty should be set at a level commensurate with the actual losses to avoid the clause being unenforceable due to its excessive amount. The core of preventing breaches of contract lies in the enforceability of the clauses, rather than their formal completeness.Special services and other casesThe design ideas requested in the column can be used as a reference for further consideration. This case was handled by Beijing Henglue Law Firm.Xiong BinrongThe lawyer (practice certificate number: 11101202211410897, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Action recommendations: 1. Verify the property owner and registration information before signing the contract; 2. Design payment milestones for the deposit and down payment; 3. Implement bank fund supervision; 4. Clarify the handling procedures in case of loan failure; 5. Quantify all time milestones and default responsibilities; 6. Verify the lease and household registration transfer status. Legal basis: Articles 586, 587, and 577 of the Civil Code of the People's Republic of China (effective January 1, 2021) regarding deposits, penalties, and breach of contract liability; Article 514 regarding sales contracts; Regulations related to real estate registration and transactions; Specific applications shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Advice

Firstly, the property owner must be present to sign the contract and present their identification documents. Secondly, fund supervision is the most effective means of preventing misappropriation of funds. Thirdly, the amount of the deposit shall not exceed 20% of the subject matter of the main contract. Fourthly, the penalty clause should be reasonable, and excessive penalties will be reduced. Fifthly, clarify the handling of the loan failure to avoid being passive. Sixthly, verify whether there are unresolved issues such as unpaid rent and untransferred household registration before signing the contract. These measures can cover the vast majority of default risks in second-hand housing transactions.Special services and other casesThe column can also provide an explanation of the clause review process.

VI. Frequently Asked Questions

Q1: Can the deposit and the breach of contract penalty be used simultaneously?

You can choose one of the claims, but not both at the same time. The selection rule stipulated by law is: if the party who pays the deposit fails to perform the obligation or performs it in a manner inconsistent with the agreement, resulting in the failure to achieve the purpose of the contract, he shall not have the right to request the return of the deposit; if the party who receives the deposit fails to perform the obligation or performs it in a manner inconsistent with the agreement, resulting in the failure to achieve the purpose of the contract, he shall return the deposit in double. When claiming the breach of contract penalty, it is necessary to prove the loss and the breach of contract penalty shall be limited to compensating for the loss; if the agreed breach of contract penalty is higher than the loss caused, the people's court may request that it be appropriately reduced. Therefore, in practice, it is recommended to choose the applicable one according to the circumstances of the breach of contract, and to pay attention to the precondition of the application of the deposit penalty is that the purpose of the contract cannot be achieved.

Q2: The seller said that the house is mortgaged, but he can redeem it. How can we prevent the risks?

A number of measures need to be taken. Firstly, verify the registration information of the mortgage, including the mortgagee, the amount of the mortgage, and the registration time, and evaluate whether the funding arrangements for releasing the mortgage are reliable. Secondly, agree on the specific time points for releasing the mortgage and the funding sources, and require the seller to provide corresponding guarantees or increase the down payment ratio to offset the risks. Thirdly, incorporate the release of the mortgage as a precondition for the transfer of ownership into the contract, and clarify the breach of contract liability and termination conditions for failing to release the mortgage on schedule. Finally, it is recommended to control the flow of funds through fund supervision to avoid the down payment being used for other purposes. In this way, even if there are problems with the capital chain, the losses can be controlled.

Q3: If the loan is not approved, can the contract be terminated?

It depends on how the contract is stipulated. There are three common arrangements in practice: First, it is stipulated that if the loan fails, the contract will be automatically terminated and the deposit and paid amounts will be fully refunded, which is most favorable to the buyer; Second, it is stipulated that the buyer needs to solve the funding problem by himself/herself, and the failure of the loan does not constitute a ground for exemption from liability, which is unfavorable to the buyer; Third, it is stipulated that the seller will assist and cooperate, but the buyer still needs to bear corresponding responsibilities. It is recommended to clearly adopt the first option or a compromise solution favorable to the buyer when signing the contract, and specify the refund time limit to avoid disputes over responsibilities after the loan fails. Additionally, it should be noted that there is uncertainty in loan approval, so it is not recommended to pay the full amount before the loan is approved.

Q4: How to prevent sellers from selling the same house to two different buyers at the same time?

The main reliance is on three lines of defense. The first is pre-contract verification: verifying the ownership through registration information and understanding whether there are other co-owners and heirs, as well as whether there are mortgages, seizures, and lease registrations. The second is the contract signing and online signing process: promptly handle online signing and registration, and publicize it through the registration system to gain legal effect against third parties. The third is fund and progress control: through fund supervision and phased payments, avoid the premature outflow of large amounts of funds; at the same time, clearly prohibit the breach of contract liability of selling the same house to two different buyers in the contract. It should be noted that if the house has been sealed by others, no large sums of money should be paid before the seal is lifted, and the seller should be required to provide a written commitment that there are no seals or mortgages on the house.

Q5: If the penalty for breach of contract specified in the contract is too low, is it valid?

It's effective, but it may not be enough to compensate for the actual losses. If the agreed penalty is lower than the actual losses, the party may request the people's court or arbitration institution to increase it; if the agreed penalty is excessively high compared to the losses caused, the party may request to reduce it appropriately. To determine whether it's too high or too low, it's usually based on the actual losses, which include not only the direct price difference but also the transaction costs, the interest on the occupied funds, and the reasonable costs of protecting rights. Therefore, when signing the contract, it's necessary to set a level that's not too high compared to the losses and is sufficient to play a deterrent role, so as to avoid the clause being reduced during the enforcement stage due to being too high.Real estate transactions and construction projectsThe column can also provide an explanation of the clause review process.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication standards in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Attorney Xiong Binrong·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public 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.