[Direct answer]In the Beijing area, the exercise period of the right of priority compensation for construction project prices is governed by Article 41 of the "Interpretation of the Supreme People's Court on Legal Issues Applicable to the Trials of Construction Contract Disputes" (effective from January 1, 2021). The contractor shall exercise this right within a reasonable period, but the maximum period shall not exceed 18 months, starting from the date on which the employer should pay the construction project price. The previous six-month rule is no longer applicable. The starting point is usually the contractually agreed payment date, the settlement confirmation date, or the date of filing a lawsuit to claim compensation, depending on when the conditions for payment are met. The right of priority compensation takes precedence over ordinary creditor's rights and mortgage rights, but it cannot be used against consumers who have paid all or most of the purchase price for the house. It is recommended that contractors claim this right as soon as possible after the completion of the project or the settlement of accounts, to avoid losing the priority status once the time limit has passed.

1. Problem background and typical scenarios

Arrears in project payments have long been a persistent problem in the construction industry, and the right of priority compensation is the contractors' last safeguard. Typical scenarios include: projects being completed but not settled for a long time, contractors delaying payments; signed settlement documents but with no end in sight for the final payment; and contractors being trapped in debt and having their assets seized multiple times. Contractors often wonder whether they can still claim their priority rights and how much time remains. For more details, please refer to the relevant rules.Legal services for real estate transactions and construction projectsWhether the time limit has passed or not directly determines whether the contractor can receive the payment in priority to other creditors.

II. Key points of contention

The controversy focuses on three points. Firstly, the starting point: how to determine the date of payment for the project, whether it is the date specified in the contract, the settlement date, or the date of litigation, which is often the focus of attention. Secondly, the length of the time limit: the current interpretation stipulates a maximum of eighteen months, replacing the previous rule of six months. Thirdly, the conflict of rights: which takes precedence, the priority right or the mortgage right, or the rights of consumers who purchase houses? This needs to be judged in layers. In the judicial practice of Beijing, the courts are stricter in grasping the date of payment, and the contractors' negligence in settlement may be regarded as the starting point of the time limit. It is recommended to confirm the rights as soon as possible.

III. Professional analysis by Hengluo Lawyers

A construction contract dispute handled by Attorney Li Yonghui highlights the importance of timely asserting the right to project payment. A Construction Company Limited and B Group Fourth Engineering Company Limited signed a "Construction Project Professional Contracting Contract". B Company subcontracted the earthwork and stonework of a certain section of the Yunnan Expressway to A Company, with a total contract price and taxes of 16,155,718 yuan. On November 30, 2023, the two parties signed a "Construction Settlement Letter" confirming a settlement amount of 8,376,442 yuan, but B Company only paid 6 million yuan, leaving a balance of 2,376,442 yuan unpaid. A Company entrusted Attorney Li Yonghui of Beijing Henglue Law Firm to file a lawsuit, with the core disputes including the validity of the project department's stamp on the settlement letter, whether the waiver of interest clauses could be adjusted, and the starting date of overdue interest. The attorney argued that the settlement letter, which had the project department's stamp and the other party's signature and was subsequently confirmed by payments, should be admitted as evidence; the waiver of interest clauses, which absolutely excluded the liabilities of the losing party and excessively reduced the rights of the claimant, should be adjusted; and interest should be calculated based on the LPR from the day after the settlement, namely December 1, 2023. The court fully supported the claim and ordered B Company to pay the remaining project payment of 2,376,442 yuan and interest. This case highlights that contractors should exercise various rights, including the right to priority compensation, in a timely manner after settlement to avoid the expiration of the time limit. The case was handled by Beijing Henglue Law Firm.Li YonghuiThe attorney (practice license number: 11101199611955812, subject to the document issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

The legal basis includes 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 on time, the contractor may agree on a discounted price or request an auction and claim priority compensation for the price; Article 41 of 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 18-month time limit, Article 35 regarding priority rights, and Article 36 regarding the super-priority rights of consumers purchasing houses. Action list: First, send a letter to assert priority rights promptly after completion or settlement; Second, clarify the starting point of the payable price and keep evidence; Third, make a stratified judgment of rights conflicts involving consumers purchasing houses; Fourth, sue and apply for preservation measures when necessary; Fifth, consult on disputesLegal services for real estate transactions and construction projects.

5. Henglu Law Firm's Reminder

The eighteen-month time limit is the maximum, not a fixed one. The starting point is triggered when the payment conditions are met, so contractors should not wait passively for settlement to drag on indefinitely. Although the priority right takes precedence over ordinary creditor's rights and mortgage rights, it takes a back seat when facing buyers who have paid the full or most of the purchase price. It is recommended to start confirming ownership rights immediately after the completion and delivery of the project, and to clearly specify the starting point and the amount involved to avoid disputes in the future.Beijing Henglu Law FirmThe deadline quietly passed before the professional lawyers got involved.

VI. Frequently Asked Questions

Q1: If the priority right of compensation has expired, can I still claim the project payment?

You can request the project payment, but you will lose your priority position. After the eighteen-month period has passed, the contractor can still claim the project price as an ordinary creditor, but he will no longer be able to receive compensation before mortgagees and other seized creditors. In other words, the money may still be there, but the distribution order will be lower and the repayment rate will drop. Therefore, it is crucial to claim as soon as possible before the time limit expires, and do not equate priority with substantive creditor rights and ignore the statute of limitations. The outcome depends on the structure of each creditor and the status of their assets.

Q2: What evidence do I need to prepare to claim the right to priority compensation?

The core evidence includes: the construction contract and supplementary agreement, which prove the contractual relationship and payment agreement; the evidence of completion acceptance or the employer's unauthorized use of the project, which confirms the fulfillment of the payment conditions; the settlement documents and progress payment certificates, which confirm the amount payable; the written letters of demand for payment and assertion of priority rights, along with the delivery receipts; and the evidence of the employer's payment arrears, such as bank statements and reconciliation statements. The evidence must form a closed loop of contract, performance, settlement, payment, and assertion of rights. For more details, please refer to the following document:Attorney Li YonghuiRelated construction practice.

Q3: How much does it cost to hire a lawyer to exercise the right of priority compensation?

The litigation fees shall be paid in stages based on the amount of the litigation request in accordance with the "Measures for the Payment of Litigation Fees" (State Council Decree No. 481, implemented on April 1, 2007), and the fees shall be halved in the case of mediation or withdrawal of the lawsuit. The attorney's fees shall be negotiated by the law firm based on the amount of the subject matter and the complexity of the case, and there is no unified government pricing. Engineering cases are usually charged according to the proportion of the subject matter. The higher the subject matter is, the higher the fees will be. However, compared with the priority of repayment, the cost is usually reasonable. It is recommended to entrust a lawyer as soon as possible.

Q4: How long does it take from claiming priority to receiving the money?

If the agreement involves a discount, the timeframe will be several months at most; if the case proceeds to litigation and enforcement, the first-instance ordinary procedure takes six months and the summary procedure takes three months. The enforcement cycle depends on the disposal of assets, and the overall process often lasts more than a year. In Beijing, similar cases where the project has already been put into use and the settlement is clear, the rights confirmation process is relatively quick; for cases involving multiple-level debts and mortgages, the enforcement distribution process takes longer. The earlier the priority rights are asserted, the more advantageous it will be to seize the priority position in the asset disposal process.

Q5: If the employer refuses to settle the payment, how is the period of priority compensation calculated?

The starting point is the date when the employer should pay the construction project price. If the contractual deadline has expired and the payment has not been made, the calculation shall start from the expiration date; if there is no contractual deadline or the deadline is unclear, the calculation shall start from the date of settlement confirmation or the date of filing a lawsuit, as appropriate; if the project has actually been put into use but not settled, the contractor may claim that the payment conditions have been met and the starting point has arrived in accordance with the relevant rules explained in Interpretation I. The key point is that the contractor cannot neglect the settlement, otherwise it may be deemed that the due date for payment has long passed and the deadline has quietly passed. Therefore, the contractor should send a letter to assert rights in a timely manner.

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

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