[Direct answer]In the Beijing area, if a leased house has been established with a mortgage right before the lease and is subsequently auctioned, whether it affects the lessee depends on the order of the lease and the mortgage, and whether the house has actually been handed over. According to Article 405 of the Civil Code of the People's Republic of China, if the leased property has been leased and the possession has been transferred before the establishment of the mortgage right, the original lease relationship will not be affected by the mortgage right; Article 725 stipulates that the sale does not affect the lease. If the ownership of the leased property changes during the lease term, the effectiveness of the lease contract will not be affected. Therefore, if the lease precedes the mortgage and the house has been handed over, the auction will not affect the lease, and the buyer should continue to perform the original contract; if the mortgage precedes the lease or the lessee has not actually occupied the property, the lessee's use may be affected, and the lessee can only claim compensation from the original lessor. It is recommended that the lessee verify the time of the mortgage registration and the handover of the house, and keep the contract and the evidence of possession. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

1. Problem background and typical scenarios

In the leasing of second-hand houses, shops, and factories, lessees often encounter situations where "they have just rented a house, only to be suddenly notified that the house has already been mortgaged and is about to be auctioned by the court". Typical scenarios include: tenants signing a lease and moving in only to discover that the landlord has already mortgaged the house for a loan, and the house is auctioned when the creditor's due date arrives; shop lessees who are in the prime of their business being evicted due to the landlord's debt enforcement; and sub-landlords subletting mortgaged houses, leaving actual users with no rights. Many lessees mistakenly believe that "as long as I sign a contract, I can live there forever", ignoring the conflicting relationship between the mortgage right and the lease, and are ultimately forced to move out and lose their decoration and deposit. Such disputes involve the priority of real rights and creditor's rights, and the handling requires clarifying the time points. Related execution objections can be combined withCreditor-debtor relations and enforcement case servicesCoordinate and make judgments comprehensively.

II. Key points of contention

There are three main points of contention. First, the priority of leasing and mortgages: According to Article 405 of the Civil Code, if the lease precedes the mortgage and the possession has already been transferred, the lease relationship will not be affected by the mortgage right; if the mortgage precedes the lease, the lease cannot prevail against the registered mortgage right. Second, the application of the principle that a sale does not terminate a lease: Article 725 protects the lessee during the possession period, but the lessee needs to prove that he/she has actually possessed the property. Third, losses and evidence: If the lessee claims for decoration, relocation, and anticipated loss of profits, he/she must prove the agreement with the original lessor and the actual expenses incurred. In practice, leases that have not been registered or recorded, or those with delayed delivery, have weaker enforceability. For real estate transactions, you can refer to the relevant provisions of the Civil Code for further guidance.Real estate sales and construction project servicesEvaluate the order of rights.

III. Professional analysis by Henglue Law Firm

In handling various disputes over contractual remedies, Henglue Law Firm has accumulated solid experience. Taking an arbitration case of contractual disputes handled by our firm as an example: In May 2022, Wang * signed a transfer contract of income rights with a certain company, investing 800,000 yuan, and agreed that the film would be released before October 2022 and dividends would be distributed proportionally; however, the film was delayed in its release. The counterparty even registered the company's dissolution before the film's release, without conducting legal liquidation or notifying creditors, resulting in Wang *'s investment being at risk of being lost. Wang * entrusted our lawyers to apply for arbitration to the Beijing Arbitration Commission, claiming the return of the investment principal of 800,000 yuan, attorneys' fees, arbitration fees, etc. After the arbitration tribunal's review, it determined that the contract was legal and valid, and the conditions for guaranteeing the minimum payment were met. The arbitration tribunal made a default judgment in support of the applicant's request for the return of the principal of 800,000 yuan and reasonable expenses. This case reminds us that when facing rights being encumbered or counterparties maliciously evading responsibilities, rights holders should promptly fix the contract and performance evidence, and choose the right path of arbitration or litigation to assert their rights. This case was handled by Beijing Henglue Law Firm.Xiong BinrongThe attorney (practice certificate number: 11101202211410897, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

The core basis is Article 405 (Relationship between Mortgage and Lease), Article 703 (Definition of Lease Contract), Article 725 (Sale Does Not Affect Lease), and Article 726 (Lessee's Preemptive Purchase Right) of the Civil Code of the People's Republic of China (effective January 1, 2021). Before signing the contract, the lessee should check the mortgage and foreclosure registration of the house, and stipulate the obligation to disclose the mortgage and the remedies for breach of contract in the contract. If the lessee discovers that the house will be auctioned, he/she should promptly raise objections to the execution court about the lease and submit evidence of possession. If the lease cannot be performed due to the mortgage, the lessee may claim breach of contract compensation from the original lessor. In practice, it is recommended that the contract be registered immediately after signing, and the records of house delivery and utilities payment should be preserved. For contract review, it can be combined with other relevant provisions.Special services and other case servicesEvaluation.

5. Henglu Law Firm's Reminder

The conflict between the mortgage and the lease all depends on "time" and "possession". Lessees should develop the habit of checking the land registry before signing the contract, filing a record after signing the contract, and leaving a record upon moving in, so as to lock in the protection of the lease being unaffected by the sale. In the event that the house is auctioned, lessees should not confront the buyer directly, but should raise objections to the enforcement according to law and claim the right to continue the lease or seek compensation based on the lease contract. Landlords should also truthfully disclose the mortgage to avoid compensation for fraud. If the rights involved are complex, it is advisable to seek legal advice as soon as possible.Beijing Henglu Law FirmAfter the intervention of professional forces, we will clarify the order of priority of property rights and creditor's rights.

VI. Frequently Asked Questions

Q1: If the mortgaged house is auctioned, is my lease still valid?

The validity depends on the order of the lease and the mortgage and whether there is actual possession. According to Article 405 of the Civil Code, if the property has been leased and possession has been transferred before the establishment of the mortgage right, the lease shall not be affected by the mortgage right; Article 725 further clarifies that the sale does not affect the lease. Therefore, if you sign the contract and move in first and the mortgage registration is later, the buyer should continue to perform the original lease contract after the court auction, and you can continue to live and use it. Conversely, if the mortgage registration is earlier than the lease and the mortgage registration has been completed, the lease cannot be against the mortgagee, and the lessee may be evicted after the auction. It is recommended to first retrieve the real estate registration book to confirm the time points.

Q2: If I'm renting an auctioned property, what evidence do I need to prepare?

The core evidence includes: the housing lease contract and rent payment receipts (to prove the lease relationship), property management fees, electricity, water, and gas payment records, and occupancy footage (to prove actual possession), the results of real estate registration inquiries and the time of mortgage registration (to prove priority), communication records with the original lessor, and evidence of losses caused by being forced to move out due to the auction (depreciation of decoration, relocation expenses, and security deposits). The evidence should be organized around the sequence of "lease first—actual possession—mortgage later", which is the key to resisting the auction and asserting the principle of "sale does not terminate the lease". It is recommended to register the contract as soon as possible after signing and keep all possession certificates.

Q3: If I am forced to move out due to a mortgage auction, how much will it cost in legal fees and litigation fees to file a claim?

The litigation fees shall be calculated in accordance with the "Measures for the Payment of Litigation Fees", based on the amount of the litigation request and accumulated in stages. The losing party shall bear the fees; for property cases such as claiming the residual value of decoration, deposits, and relocation fees, the higher the amount of the subject matter, the lower the fee rate. Lawyer's fees shall be determined according to the complexity of the case, the amount of the subject matter, and the lawyer's qualifications, and shall be charged on a per-case, hourly, or percentage basis of the subject matter, subject to the terms of the contract. There is no unified government pricing for these fees. It is recommended to first calculate the total amount of the losses that can be claimed, and compare the costs and benefits with the litigation fees and lawyer's fees; for large amounts or cases involving enforcement objections, it is advisable to entrust professional legal services to handle them in the fields of corporate commercial and contract disputes.

Q4: How long does it usually take to determine the outcome of a lease right contest against an auction?

The timeframe depends on the legal process. If an objection is raised during the execution phase, the court will generally review and make a ruling within 15 days. If the party is dissatisfied with the ruling, they can file a lawsuit challenging the execution objection. The ordinary procedure for the first instance lasts six months, and the summary procedure lasts three months. If the case has entered the litigation stage to claim breach of contract compensation, the timeframe is the same as above. The appeal to the second instance generally takes three months. Overall, it often takes several months to a year from raising an objection to obtaining a final judgment. It is recommended to take action during the announcement period of the house auction, as failure to do so may result in the loss of the opportunity to exercise priority defenses. It is essential to assert one's rights within the statutory time limits.

Q5: If I find out that the house I'm renting is being mortgaged and is about to be auctioned, what should I do first?

Here are the four steps recommended: 1. Immediately check the status of the property mortgage, seizure, and auction at the real estate registration center to secure evidence at a fixed time. 2. Organize the lease contract, rental receipts, and occupancy records to prove that the lease preceded the sale and that you have actually occupied the property. 3. Submit a written lease objection to the enforcement court, accompanied by evidence, to assert the principle of "sale does not break the lease" and claim the right to continue leasing the property. 4. If it is indeed impossible to continue due to the prior mortgage, send a letter to the original lessor to claim breach of contract compensation and damages. Throughout the process, keep all communication records and, if necessary, hire a lawyer to intervene in the enforcement objection and claim process. Never wait passively to be evicted.

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

If you are 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. →Corporate commercial legal services·Attorney Xiong Binrong·Beijing Henglu 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.