[Direct answer]In the Beijing area, it was only after receiving the house that people found out that the house had been mortgaged, indicating that the developer may have concealed the rights defects when selling the house. According to the provisions of the Civil Code of the People's Republic of China on the seller's obligation to guarantee rights and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over the Sale of Commercial Housing Contracts, if the developer fails to inform the buyer of the mortgage, resulting in the buyer being unable to handle the property rights or having limited rights, the buyer may claim breach of contract and request to rescind the contract, return the paid house price and compensate for losses; if the house can still be used and the buyer does not want to rescind the contract, the buyer may also claim compensation for the reduction in value. The key is to ascertain whether the mortgage registration timepoint was disclosed at the time of signing the contract. It is recommended to retrieve the real estate registration information as soon as possible to fix the evidence. For more details, please refer to the following link:Real estate sales and construction project services.

1. Problem background and typical scenarios

The "delivery of the house being mortgaged immediately" is a common right defect dispute in pre-sale and on-sale transactions. Typical scenarios include: developers mortgaging the sold houses or ongoing construction projects to banks for financing without informing the buyers; buyers living in the houses for years but unable to obtain property ownership certificates, only to find out after verification that there is a mortgage on the house; and developers "mortgaging first and selling later" without cancelling the mortgage before online signing, resulting in obstacles to the transfer of ownership. Such problems directly jeopardize the buyers' ownership and right of disposition, and are often accompanied by risks such as delayed delivery and unfinished projects. For cases involving mortgages and enforcement, relevant provisions can be referenced.Creditor-debtor relations and enforcement case servicesEvaluate them together.

II. Key points of contention

The focus of the dispute centers on three points. Firstly, the obligation to disclose information: Whether the developer truthfully disclosed the mortgage when signing the contract, and whether the developer obtained the buyer's consent or promise to release the mortgage on time, are the core factors in determining breach of contract. Secondly, the exercise of rights: Whether the buyer can handle the transfer of ownership when the mortgage has not been cancelled, and the priority of the mortgage right and the buyer's purchase claims, determine the remedial path. Thirdly, the termination of the contract and compensation: Whether concealing the mortgage constitutes a fundamental breach of contract, and whether the buyer can terminate the contract and obtain a full refund. When handling similar cases in Beijing, the review of the developer's warranty for rights defects and the supervision of pre-sale funds are stricter. Buyers should focus on proving that "the mortgage existed at the time of signing the contract and was not disclosed". For cases involving seizure and enforcement, reference can be made to the relevant provisions.Business and contract dispute services for enterprises.

III. Professional analysis by Hengluo Lawyers

Based on the disputes over pre-sale contracts for commercial housing handled by our firm, it is clear to see the risks of rights defects in the developer's delivery process. Taking the case of breach of contract for delayed delivery handled by Attorney Tian Jiaoyan as an example: On April 30, 2021, Zhang Quan signed the "Beijing Commercial Housing Pre-sale Contract" with Beijing A Real Estate Company for the purchase of Room 302 in a certain residential community with a total price of 6,841,972 yuan, and agreed to deliver the house before June 15, 2023. The supplementary agreement granted a 90-day grace period, after which the developer would pay a breach of contract penalty of 0.1% of the total price per day. However, A Company did not deliver the house until March 5, 2024, a delay of nearly 9 months. Zhang Quan entrusted Attorney Tian Jiaoyan from Beijing Hengluo Law Firm to sue A Company, demanding a breach of contract penalty of 118,366.12 yuan from September 14, 2023 to March 5, 2024. The core disputes include whether the pandemic and other factors constitute force majeure, and whether the grace period can be cumulative and the standard of the breach of contract penalty. A Company claimed that the delay in construction was due to the pandemic and other force majeure, and that the grace period could be cumulative. However, the lawyer pointed out that the contract was signed in 2021, and the pandemic had already become a normal situation at that time. A Company should have foreseen this and it did not constitute force majeure. Therefore, the grace period should be strictly applied in accordance with the contract. The court accepted the lawyer's opinion and ordered A Company to pay the full breach of contract penalty of 118,366.12 yuan and the litigation fees. This case was handled by Beijing Hengluo Law Firm.Tian JiayanThe attorney (practice license number: 11101202111381309, subject to the document issued by the judicial administrative organ) acts as the agent.

The breach of contract situations involving similar developers also include unfinished projects and defective rights. In the case handled by Attorney Liu Donghua, Ms. D purchased a commercial property, but the developer failed to deliver the property on time for years and the project was suspended, constituting a fundamental breach of contract. Based on Articles 20 and 21 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over Commercial House Sale Contracts", the attorney claimed that the pre-sale contract and the loan contract should be terminated simultaneously. The court supported all claims and ordered the developer to return the down payment of 267,188 yuan, the principal and interest of the repaid loan of 1,547,83.01 yuan, the public maintenance fund of 5,079 yuan, and the stamp duty of 267.10 yuan, and to pay the breach of contract damages of 50,000 yuan, with the sole shareholder bearing joint and several liability. The case was handled by Attorney Liu Donghua of Beijing Henglu Law Firm (practice certificate number: 11101199911363364, subject to the documents issued by the judicial administrative authority). In the case of an unfinished pre-sale project without online registration handled by Attorney Wu Jianni, Rao Jie had paid 1,303,236 yuan for the purchase, but the developer failed to register the property online, the project was unfinished, and the delivery date of June 1, 2020 was not met. The attorney exposed the illegal pre-sale without a license and the alteration of the house number. The court ruled to terminate the contract, return the purchase price of 1,303,235 yuan with interest at an annual rate of 4.35%, and pay the breach of contract damages of 852 yuan. The case was handled by Attorney Wu Jianni of Beijing Henglu Law Firm (practice certificate number: 11101202011245064, subject to the documents issued by the judicial administrative authority). The above experience tips: When receiving the property, in addition to inspecting the actual property, it is also necessary to verify the status of rights such as mortgages, seizures, and pre-sale licenses.

IV. Practical suggestions and legal basis

The core basis is Article 394 (Mortgage Rights), Article 597, and Article 612 (Guarantee for Defects in Rights) of the Civil Code of the People's Republic of China (effective January 1, 2021), as well as Article 563 (Statutory Termination) and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over Commercial Housing Sales Contracts regarding the provisions that conceal defects in rights such as mortgages and seizures, which may result in the termination of the contract and compensation. Practical advice: Before purchasing a house, check the status of the house mortgage and seizure at the real estate registration center; when signing the contract, require the developer to provide a written commitment that there are no defects in rights and stipulate the deadline for lifting the mortgage and the consequences of breach of contract; if the house has not been transferred after delivery, immediately verify the situation; if any concealed mortgage is discovered, send a letter to the developer as soon as possible and entrust a lawyer to handle the matter, and consider terminating the contract or claiming compensation according to the situation. For special and difficult cases, you can seek assistance from professionals.Special services and other case services.

5. Hengluo Law Firm's Advice

The fact that a house is "visible and habitable" doesn't mean that its ownership rights are clear. Mortgages, seizures, and other hidden liabilities must be verified before signing the contract. It is recommended that buyers include real estate registration inquiries as a mandatory step and incorporate the developer's commitment to "lifting the mortgage before delivery" into the breach of contract clause. If it's impossible to obtain ownership certificates after moving in, buyers should be vigilant against rights defects and promptly preserve evidence. Never trust verbal guarantees; written and registered information is the foundation for protecting rights. For more ways to protect rights against rights defects, please refer to the following resources:Real estate sales and construction project services.

VI. Frequently Asked Questions

Q1: I only found out after receiving the house that it was mortgaged. Can I terminate the contract, get a refund, or claim compensation?

There is room for negotiation. If the mortgage existed at the time of signing the contract and the developer failed to disclose it, this violates the obligation to guarantee the absence of rights defects. You can claim breach of contract and demand the rescission of the contract, the return of the purchase price, and compensation. If the house is still usable and you do not wish to rescind the contract, you can also claim compensation for the reduction in value. Whether this claim is valid depends on the time of the mortgage registration and whether it was disclosed. The lawyer will build a rescission or compensation plan based on this, rather than making unrealistic promises of victory in the lawsuit.

Q2: If I claim that the developer concealed the mortgage, what evidence should I prepare?

The core evidence includes: the purchase contract, payment receipts, and online signing and filing information; mortgage and seizure inquiry certificates issued by the real estate registration center (to prove the existence of the mortgage at the time of signing the contract); the developer's written commitment or communication records regarding the absence of rights defects; proof of the inability to obtain a property ownership certificate; and evidence of the reduction in the value of the house or loan losses. The evidence should prove that "the mortgage existed at the time of signing the contract, the buyer was not informed, and this resulted in limited rights or losses". The more complete the evidence is, the more favorable it will be for the buyer.

Q3: How much does it cost to hire a lawyer to handle a mortgage concealment dispute?

The attorney's fees are negotiated between the law firm and the client. They are typically charged on a per-case basis or as a percentage of the case value, with the specific fees determined by the client contract. There is no nationwide standard pricing. If terminating the contract involves refunding the purchase price, it's more common to charge a percentage of the case value when the amount involved is large. It is recommended to first understand the fee details and whether they include the litigation stage, and then weigh the costs against the potential refunds and compensation amounts that can be obtained.

Q4: How long does it usually take from discovering a mortgage to completing the processing?

The negotiation or letter-sending stage often takes several weeks. If a lawsuit is filed, the first-instance civil litigation will be concluded within six months under the ordinary procedure and three months under the summary procedure. Cases involving the participation or enforcement of the mortgagee (the bank) will take even longer. The earlier the registration information is retrieved and the evidence is fixed, the shorter the cycle will be. It is recommended to start the inquiry and legal procedures immediately when it is found that it is impossible to obtain the certificate.

Q5: After receiving the house, I found that it was mortgaged. What should I do first?

It is recommended to proceed in four steps: First, check the complete status and registration time of the house mortgage and seizure at the real estate registration center; Second, organize contracts, payment receipts, and the developer's promises, and fix the evidence of "non-disclosure"; Third, send a written letter to the developer requiring them to lift the mortgage or provide an explanation within a specified time limit, and claim breach of contract; Fourth, if no agreement can be reached, consult a lawyer in time and, if necessary, file a lawsuit for contract termination and refund or a lawsuit for compensation, and add the mortgagee as a party if necessary. Throughout the process, keep all written evidence to prevent further damage to your rights.

The above content is based on the compilation of judicial practices 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 for specific cases.

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 the purchase and sale of real estate·Attorney Tian Jiayan·Beijing Hengluo 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.