[Direct answer]In the Beijing area, after a real estate project is left unfinished, it's not necessarily legal for buyers to unilaterally "stop repaying their mortgages collectively". Directly suspending mortgage repayments may lead to being sued by banks, having their credit records affected, and facing forced execution. It's not advisable to stop repayments rashly. According to Article 563 of the Civil Code of the People's Republic of China (effective January 1, 2021), if the developer's fundamental breach of contract results in the failure to achieve the contractual purpose, the buyer may claim to rescind the commercial housing sales contract; after the contract is rescinded, the buyer may, in accordance with relevant judicial interpretations and the approvals of the Supreme People's Court, request to rescind the mortgage loan contract and have the developer return the paid purchase price and the principal and interest of the loan. The key lies in "rescinding the contract and stopping repayments" through litigation or negotiation, rather than simply suspending repayments. For more details, please refer to the following link:Special services and other case services.

I. Problem background and typical scenarios

The phenomenon of defaulted loans on unfinished buildings is more common in pre-sale projects during the downward cycle of the real estate market. Typical scenarios include: the project being halted for months, with no delivery date in sight, leaving homeowners having to repay their mortgages while having no place to live; some homeowners voluntarily "banding together to stop repaying loans" and issuing notices to pressure the bank; developers facing funding crises and having their supervision accounts misappropriated, resulting in huge shortages in pre-sale funds; and individual homeowners who have already defaulted on their loans being sued by the bank for early repayment. In practice, while the sentiment of stopping repayments is understandable, unilateral default on loans does not automatically exempt borrowers from their repayment obligations. They must follow legal procedures such as "termination of the contract" or "stopping payments", otherwise the bank will have legal grounds to claim breach of contract based on the loan agreement. For cases involving the supervision of pre-sale funds, relevant legal provisions can be referred to for further analysis.Criminal defense and criminal case filing servicesCheck the whereabouts of the funds through civil litigation channels other than criminal prosecution.

II. Key points of contention

There are three key points of contention in the legal disputes over unfinished buildings. Firstly, the right to rescind the contract: whether the developer's long-term suspension of construction and delayed delivery of the house constitute a fundamental breach of contract, and whether the purchaser can exercise the statutory right of rescission according to Article 563 of the Civil Code. Secondly, the linkage between the loan contract and the sales contract: after the sales contract is rescinded, if the purpose of the loan contract is frustrated, can the loan contract be rescinded simultaneously and the principal and interest be returned by the developer? This is the core concern of the Supreme People's Court's approval. Thirdly, the choice between collective action and individual litigation: collective litigation can share costs and create pressure, but it requires unified evidence and strategies. For cases involving project payments and mortgage priority, reference can be made to relevant judicial interpretations.Real estate sales and construction project servicesClarify the hierarchy of rights.

III. Professional analysis by Henglue Lawyers

Based on the practical experience of handling difficult rights and interests disputes in our firm, the core of protecting rights against unfinished buildings does not lie in "whether the loan should be stopped", but in "how to legally terminate and stop payment". Taking a private lending rehearing appeal case handled by Attorney Wang Fangli of our firm as an example: after ten years of dispute, the debtors reached a settlement with the help of professional lawyers in the appeal stage, repaid 750,000 yuan and lifted all the seizures, freezes, and high-consumption restrictions on the client's property. The client was able to keep his only house. This case was handled by Beijing Henglu Law Firm.Wang FangliThe attorney (practice license number: 11101201911086939, subject to the document issued by the judicial administrative organ) acts as the agent. For example, in the administrative licensing dispute handled by Attorney Qie Chao Li of our firm, the "inaction" of the administrative organ was successfully rectified through reconsideration, demonstrating the ability of professional lawyers to safeguard rights through both procedural and substantive means. Similarly, in the case of unfinished buildings, it is necessary to advance the process through both legal rescission and regulatory complaints to legally transfer the individual's repayment risk. Relevant fields can be connected to each other.Creditor-debtor relations and enforcement case services.

IV. Practical Suggestions and Legal Basis

The legal basis is Article 563 (Statutory Right of Termination) and Article 566 (Consequences of Contract Termination) of the Civil Code (effective January 1, 2021); the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over Commodity Housing Sales Contracts, which stipulates the buyer's right of termination when the seller breaches the contract fundamentally; and the "Reply of the Supreme People's Court on the Protection of Consumer Rights in Commodity Housing" (Fa Shi [2023] No.1, effective April 20, 2023), which explicitly protects the rights of house buyers when the house cannot be delivered and there is no possibility of actual delivery. Practical suggestions: First, fix the evidence of suspension of construction and breach of contract, and unite to appoint a lawyer; terminate the sales and loan contracts through litigation; simultaneously file complaints with the housing construction department and regulatory authorities about the illegal use of pre-sale funds; and be cautious about the "voluntary suspension of loan notice", taking legal termination as the final goal.

5. Henglue Law Firm's Advice

For unfinished buildings, it is essential to follow legal procedures to terminate the loan agreement, rather than simply suspending payments based on a notice and bearing the consequences of default and damage to credit ratings. The first step is to collect evidence of construction stoppages, delays, and illegal fund use with homeowners; the second step is to terminate the sales contract and mortgage loan contract through litigation or mediation, and legally transfer the repayment responsibility back to the developer; the third step is to report the case to the housing and urban-rural development authorities and financial regulatory departments, and push for accountability for pre-sale funds and the resumption of project construction. During the process, it is important to maintain a unified strategy and control individual impulsive actions. If professional support is needed, assistance can be sought from relevant institutions.Business and contract dispute services for enterprisesDevelop a collective rights protection plan to minimize individual risks and costs.

VI. Frequently Asked Questions

Q1: If unfinished buildings are collectively subject to a moratorium on loans, will the banks sue them, and is this legal?

There are indeed practical risks involved in directly suspending loan repayments: The loan contract is signed between you and the bank, and the bank has fulfilled its obligation to disburse the loan according to the agreement. If you stop repaying the loan, you will constitute a breach of contract, and the bank may sue you to demand early repayment and charge penalty interest; overdue and litigation information will be recorded in your credit report, which will affect future loans; if you still fail to perform after the judgment, you will be subject to forced execution. However, this doesn't mean that you "must lose the case" — if you can prove that the developer has fundamentally breached the contract, that it is no longer possible to deliver the house, and that the sales contract and loan contract can be rescinded through litigation, then the repayment obligation can be legally transferred to the developer to bear. It is crucial not to suspend repayments solely based on emotions. Instead, you should follow the legal path of "rescinding the contract and stopping payments" to minimize personal risks.

Q2: For protecting their rights against unfinished buildings, what evidence do owners need to prepare?

Key evidence includes: the commercial housing sales contract and mortgage loan contract (to prove rights and obligations), proof of down payment and monthly repayment (to prove performance), photos and videos of the project's suspension and official announcements (to prove the developer's breach of contract), responses from the housing and urban-rural development department or letters from the government information office (to prove regulatory intervention), written notifications or announcements from the developer regarding late delivery, and construction progress records jointly collected by owners. The evidence should be organized around the "developer's fundamental breach of contract—delivery failure—failure of the loan contract's purpose". The more systematic the materials are, the higher the success rate of contract termination will be. It is recommended to establish an evidence database shared by owners to avoid duplicated efforts and unify the evidence-gathering approach.

Q3: How much will it cost in attorney's fees and litigation fees to terminate the contract and protect rights against a poorly constructed unfinished building?

The litigation fees are calculated in accordance with the "Measures for the Payment of Litigation Fees", based on the amount of the litigation subject (usually the total of the paid purchase price and the principal and interest of the loan), and are borne by the losing party. In group cases, due to the concentration of the litigation subject, the cost per household can be diluted. Lawyer's fees are generally charged on a per-case basis or as a percentage of the litigation subject. Collective litigation often allows for better fee rates. It should be noted that contingency fees in civil and commercial cases involving property relations are subject to a percentage cap, which is specifically stipulated in the entrustment contract. It is recommended that owners jointly entrust lawyers, negotiate prices uniformly, and require that the scope of fees and refund conditions be specified in the contract to avoid excessive individual case costs eroding the already limited repayment funds.

Q4: How long does it usually take for litigation against unfinished buildings to reach a conclusion, and is it possible to recover the money involved?

The litigation cycle is affected by procedures and the nature of the case: the first-instance ordinary procedure takes six months, and the summary procedure takes three months; cases involving group litigation or developers' bankruptcies may take longer, possibly spanning multiple years. Whether the money can be recovered depends on the developer's remaining assets and the recovery of pre-sale funds—if the project can be resumed and completed, the focus is on pushing for resumption of construction and delivery of the houses; if the developer is insolvent, it will be necessary to participate in the distribution of assets during the enforcement and bankruptcy procedures, and there is uncertainty about the recovery of funds. Therefore, the litigation goal should be "to terminate the contract and stop payments + recover the payments already made", rather than simply stopping loans. It is recommended to apply for property preservation in the litigation, seize the developer's accounts and unsold assets, and increase the likelihood of actual recovery of funds.

Q5: As the owner of an unfinished building, what should I do specifically?

It is recommended to follow four steps: First, form a group and collectively gather purchase contracts, repayment receipts, images of construction suspensions, and official announcements to establish a shared evidence database; Second, consult professional lawyers to assess the right of rescission and determine whether there are facts of fundamental breach of contract and failure to deliver; Third, rescind the sales contract and mortgage loan contract through collective litigation or model judgments, stop payments according to law, and recover the payments already made; Fourth, file complaints with departments such as housing and urban-rural development and financial supervision regarding the misappropriation of pre-sale funds, and promote accountability and the resumption of project construction. It is essential to avoid acting independently or suspending payments rashly. Unified action and legal rescission are the only reliable solutions. For cases involving project payments and mortgages, it is necessary to clarify the rights hierarchy through the connection between property sales and construction service contracts.

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 evidence materials, to avoid missing the statutory time limit. →Specialised services - Legal services·Attorney Wang Fangli·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective 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. In the event of a dispute, please consult a practicing lawyer in a timely manner.