[Direct answer]When the developer fails to deliver the house on time, the statute of limitations for the owner to claim the breach of contract penalty is three years. According to Article 188 of the Civil Code of the People's Republic of China (effective from January 1, 2021), the statute of limitations begins from the date when the right holder knows that his rights have been infringed and the date when the obligee knows that he has breached his obligations. It usually begins from the day after the agreed delivery date. If the claim exceeds 20 years, it will not be protected. The basis of the claim is Article 577. If there is an agreed grace period, the statute of limitations begins from the day after the grace period expires.

I. Legal basis and interpretation of provisions

1. Article 188 of the Civil Code of the People's Republic of China (effective from January 1, 2021)

This article establishes a three-year ordinary statute of limitations and a maximum protection period of 20 years, aiming to urge right holders to exercise their rights in a timely manner. The prerequisite for its application are that the right holders already know or should know that their rights have been infringed and the obligors involved. The starting point for the statute of limitations for delayed delivery of the house is the agreed delivery date or the day following the expiration of the grace period. The owners can use the pre-sale contract, supplementary agreement, and move-in notice to prove the time nodes; and the statute of limitations can be interrupted by reminders or lawsuits.

2. Articles 577 and 585 of the Civil Code of the People's Republic of China (effective from January 1, 2021)

Article 577 stipulates that if a party fails to fulfill its contractual obligations, it shall bear such breach of contract liabilities as continuing to perform the contract and compensating for losses; Article 585 stipulates that the parties may agree on the amount of the breach of contract penalty, and if it is excessively high compared with the losses, the party may request a reduction. Where there is an agreement, the party shall provide evidence of the actual date of delivery to determine the number of days of delay; where there is no agreement, the party shall refer to the rental standards of similar houses in the same area.

3. Articles 563 and 590 of the Civil Code of the People's Republic of China (effective from January 1, 2021)

Article 563 stipulates that if a party delays in performing the main obligation and fails to perform within a reasonable period after being reminded, the other party may terminate the contract; Article 590 stipulates that if a party is unable to perform the contract due to force majeure, it shall be exempt from liability for the affected part or all of the contract. Accordingly, the owner has two options: to continue to demand the house and claim damages for breach of contract, or to terminate the contract and request a refund after being reminded. Force majeure must simultaneously meet the three conditions of unforeseeability, unavoidability, and insurmountability.

4. 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 (effective from January 1, 2021)

The interpretation details the rules for calculating the breach of contract penalty, determining losses, and terminating the contract, making it clear that the buyer can claim a breach of contract penalty or compensation when the delivery of the house is delayed. The owner does not need to prove actual losses when claiming a breach of contract penalty, but only needs to prove the fact of the delay and the contractual standards.

5. Practical adjudication guidelines

Practical Guidelines: 1. Force majeure shall be reviewed by the court regarding the occurrence time, foreseeability, and causality with the suspension of work. If the pandemic had already become a normal situation at the time of signing the contract, it is generally deemed foreseeable. 2. The grace period is a one-time buffer. If the house is not delivered by the expiration date, the buyer shall pay the breach of contract penalty. 3. Interest rates of 0.01% to 0.05% per day are common ranges. If they do not violate mandatory provisions, the court will generally support them.

II. Henglue Lawyer's Real Cases (Detailed Review)

Review of the case:On April 30, 2021, the owner (pseudonym Zhang Quan) signed a "Beijing Commercial Housing Pre-sale Contract" with Beijing A Real Estate Development Co., Ltd. to purchase Unit 302, with an indoor floor area of 99.41 square meters and a total price of 6,841,972 yuan, with delivery scheduled for June 15, 2023. On the same day, the supplementary agreement stipulated that if A Company delayed delivery due to its own reasons, the buyer would be granted a 90-day grace period. After the grace period expired, the buyer would pay a penalty of 0.01% of the total price per day. After Zhang Quan paid the full amount, he did not receive a delivery notice for a long time. A Company did not issue a move-in notice until February 27, 2024, and required him to move in on March 5. The delay in delivery was nearly nine months.

The focus of the controversy:The first focus is whether the epidemic, meetings, and bad weather constitute force majeure and exempt from liability; the second focus is whether the 90-day grace period can be cumulated with other extension reasons; and the third focus is whether the default penalty of one-ten-thousandth of the daily amount is effective and should be supported.

Our position and that of the other party are as follows:We request the court to order Company A to pay the penalty for late delivery of the house from September 14, 2023 to March 5, 2024, amounting to 118,366.12 yuan, and to bear the litigation costs. Company A argues that the construction was delayed due to the pandemic, government meetings, severe weather, exams, etc., which constitute force majeure. The total delay of 187 days should be deducted, and the grace period can be accumulated. Moreover, the house has already met the delivery conditions.

Attorney's Strategy and Legal Opinions:Beijing Henglu Law FirmTian JiayanThe lawyer (practice license number: 11101202111381309, subject to the document issued by the judicial administrative organ) reviewed three agreements, including the delivery time, the grace period, and the standard of the breach of contract penalty. He collected payment receipts, move-in notifications, and completion and acceptance filing materials to form a chain of evidence, and responded to each item as follows: First, according to Article 590 of the Civil Code, the contract was signed in 2021, and the pandemic had already become a normal situation at that time. A Company, as a professional development enterprise, should have had the ability to foresee this and it did not constitute force majeure. Second, bad weather, government meetings, and other non-mandatory full stoppages of work were foreseeable and could not be used as excuses for exemption from liability. Third, the grace period should be applied once according to the agreement, and there was no basis for claiming cumulative application. Fourth, the daily 0.01% interest rate was a true expression of intention, and it was valid according to Article 585 of the Civil Code.

The court's reasoning and the outcome of the case:The court determined that the contract and supplementary agreement were legal and valid, and adopted the agent's opinion, holding that the COVID-19 pandemic had become a normal phenomenon before the contract was signed and was foreseeable by Company A, so it did not constitute force majeure. Adverse weather and government meetings also did not constitute force majeure, and the grace period should be strictly applied in accordance with the contract. In the final judgment, the court ordered Company A to pay Zhang Quan a breach of contract penalty of 118,366.12 yuan for late delivery of the house and bear the litigation costs. The court also clarified the judicial standard that it would be difficult to gain support for invoking the "force majeure" defense after the pandemic had become a normal phenomenon, and that the grace period could not be arbitrarily extended.

This case is handled by Beijing Henglu Law FirmTian JiayanAttorney (Practice License No.: 11101202111381309) acting as the agent.View the full transcript of this case →

III. Frequently Asked Questions

Q1: When does the statute of limitations for suing for breach of contract for late delivery of the house start to count?

According to Article 188 of the Civil Code, the statute of limitations shall be calculated from the date when the right holder knows or should know that the rights have been infringed and the obligations have been breached. It can be grasped according to three key points: if no grace period is agreed upon, the statute of limitations shall be calculated from the day following the expiration of the agreed delivery date; if a grace period is agreed upon, the statute of limitations shall be calculated from the day following the expiration of the grace period; if the house has been delivered, the number of days of delay shall be calculated until the actual delivery date. The breach of contract penalty shall be accumulated on a daily basis and is a continuous payment. The court usually supports the claims within the past three years before the lawsuit is filed.

Q2: If I haven't claimed the breach of contract penalty for more than three years, can I still sue to claim it?

You can sue, but there is a risk of losing the case. The expiration of the statute of limitations does not extinguish substantive rights, but merely grants the other party the right to raise the statute of limitations defense, which the court will not actively apply. In practice, there are three remedial paths: first, prove the interruption of the statute of limitations, such as having sent a reminder letter, a lawyer's letter, or filed a lawsuit, or the developer's written commitment to postpone the delivery of the house, and the statute of limitations will be recalculated for three years; second, prove that the "day when you knew you were damaged" was actually later; third, if the other party has agreed to perform or has made partial payments, they cannot raise the defense of the statute of limitations having expired anymore.

Q3: Can developers exempt themselves from liability by citing the pandemic and bad weather as force majeure?

It depends on whether the three conditions set forth in Article 590 of the Civil Code — unforeseeable, unavoidable, and insurmountable — can be met simultaneously. The key lies in the date of signing the contract. If the epidemic situation had already become normal at the time of signing, the developer, as a professional entity, should have foreseen it and would generally not be exempt from liability. In this case, Attorney Tian Jiaoyan successfully convinced the court with this argument. Regarding short-term factors such as bad weather and government meetings, the court required the developer to provide evidence of a causal relationship with the suspension of work. If there were only general claims but no evidence such as a suspension order or supervision records, it would be difficult to establish a defense.

Q4: Can the 90-day grace period in the contract be cumulated with other extensions by the developer?

Generally, this is not allowed. The grace period is a one-time buffer period granted by the buyer to the seller, which is in nature a limited exemption from the liability for breach of contract. The start and end dates of the grace period have been clearly specified in the supplementary agreement. After the expiration of the grace period, the seller shall bear the liability for breach of contract if the delivery has not been made. If the developer claims that the grace period should be cumulated with other reasons for delay, there must be clear contractual provisions or legal basis for this, otherwise the claim will not be supported. If the grace period is obviously too long and overrides the main contract's delivery time, the owner may claim that it is unreasonable.

Q5: I have already moved into the house, can I still claim the overdue breach of contract penalty from before?

Yes. Accepting the delivery of the house merely indicates that the contract continues to be performed and that the owner accepts the delivery, but it does not constitute an exemption from liability for past breaches of contract. The developer should still pay the breach of contract penalty during the overdue period. Developers often argue that "the house has met the delivery conditions" and "the owner's acceptance of the delivery is deemed as approval", but the delivery obligation should be performed in accordance with the time and conditions stipulated in the contract. In this case, Zhang Quan checked in on March 5, 2024, but the lawyer still claimed the breach of contract penalty of 118,366.12 yuan during that period and was fully supported by the court.

IV. Suggestions for Protecting Rights and Interests

  • First, make an agreement, then calculate the number of days.By comparing the pre-sale contract and the supplementary agreement, the three items of the lock-in agreement, including the delivery date, the start and end of the grace period, and the standard of the penalty for breach of contract, the number of days of delay is generally calculated from the day after the expiration of the grace period to the actual delivery date.
  • Send a written reminder and keep a record of it.By sending an EMS express delivery, sending a lawyer's letter as a reminder, and keeping the express delivery receipt and signature records, we can not only interrupt the statute of limitations and restart the three-year calculation, but also lay a procedural foundation for future termination of the contract on the basis of "the other party still fails to perform the contract within a reasonable period after being reminded".
  • Synchronize and fix the evidence.Keep the payment receipts, purchase invoices, move-in notifications, delivery confirmation letters, and WeChat message records; in the event of disputes involving force majeure, you may apply to retrieve the construction permits and completion and acceptance filing materials.
  • Be careful when signing and receiving the housing documents.When checking in, if you still insist on the breach of contract penalty, you should handwrite and note on the receipt of the house: "Reserve the right to pursue the responsibility for breach of contract for late delivery of the house", and never sign a settlement agreement containing the words "there are no further disputes between the two parties" or "waive other claims".
  • Unite with other homeowners in the same community to protect their rights.The fact that the same project was delayed is highly similar to the contract terms. The jointly appointed lawyers formulated a unified litigation strategy, which gave them an advantage in evidence collection and determining the standard of the breach of contract penalty.

If you are currently facing issues such as delayed handover of the property or refusal to pay the breach of contract penalty, it is recommended that you consult a professional lawyer as soon as possible, bringing along the commercial housing sales contract, supplementary agreement, payment receipts, and handover notice, to avoid missing the statutory time limits. →Legal services for real estate transactions and construction projects·Attorney Tian Jiaoyan·Beijing Henglu Law Firm