[Direct answer]When the developer fails to deliver the house on time, the buyer cannot unilaterally stop repaying the loan or default on the mortgage—the counterparty to the loan contract is the bank, which exists independently of the purchase contract. Unilaterally stopping repayment will result in the bank charging penalty interest, reporting the default to the credit information system, and declaring the loan to be due in advance and disposing of the mortgaged property. The legal process is as follows: First, send a written notice of default. If the default meets the agreed upon conditions for termination, or if the developer still fails to deliver the house or suspend construction after the notice, rendering the contractual purpose impossible to achieve, the buyer may request the termination of the purchase contract in accordance with Article 563 of the Civil Code of the People's Republic of China (effective January 1, 2021) and simultaneously request the termination of the loan contract in accordance with 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 Housing Sales Contracts (effective January 1, 2021). The developer shall return the remaining principal and interest of the loan to the bank and refund the payments made by the buyer. It is recommended to gather evidence of the notice and suspension of construction and file a lawsuit as soon as possible. For more details, please refer to the following link:Legal services for real estate transactionsAndBeijing Henglue Law Firm.

I. Legal basis and interpretation of provisions

1. Article 563 of the Civil Code of the People's Republic of China (effective from January 1, 2021)

This article stipulates the statutory right of rescission: if the party fails to perform the main obligation within a reasonable period after being reminded, or if the delay in performance or other breaches of contract result in the failure to achieve the purpose of the contract, the party may rescind the contract. In the case of delayed delivery of the house, if the contract stipulates that the buyer has the right to rescind the contract if the delay reaches a certain number of days, the condition can be exercised once it is satisfied; if there is no such stipulation, the buyer must first send a written notice of default and give a reasonable period of time. If the construction is halted or the house is clearly impossible to deliver, the buyer can directly claim a fundamental breach of contract. The key evidence includes the notice of default and the delivery notice, as well as the materials for the completion and acceptance of the house. The core dispute is when the right of rescission is satisfied and whether it is exercised within the exclusionary period (Article 564 of the Civil Code: If the party fails to exercise the right of rescission within one year after knowing the grounds for rescission or within a reasonable period after being reminded, the right of rescission shall be extinguished).

2. Article 20 and Article 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 Housing Sales Contracts (effective from January 1, 2021)

Article 20 stipulates that if the contract for the sale of commercial housing is confirmed to be invalid, revoked or rescinded, and the purpose of the commercial housing guarantee loan contract cannot be achieved, the party requesting to rescind the commercial housing guarantee loan contract shall be supported. Article 21 further clarifies that the seller shall return the received purchase loan and the principal and interest of the purchase price to the guarantor and the buyer respectively. These two articles are the legal channels for "stopping loans" — it's not about stopping repayments privately, but about rescinding the loan contract and transferring the remaining repayment obligations back to the developer. After that, the buyer will no longer bear the monthly repayment obligations, and the repaid principal and interest can also be claimed back.

3. Practical adjudication guidelines

The court does not support the practice of "unilaterally terminating the supply of funds without dissolving the contract". The loan contract is independent, and the developer's breach of contract cannot be used as a reason to oppose the bank. Those who terminate the supply of funds will instead become the breaching party, and the bank may claim the full principal and interest as due in advance and seek priority compensation on the mortgaged property. For those who meet the conditions for dissolution of the contract, the court usually orders the dissolution of both contracts and the return of the funds according to the above rules. In some regions, the policy of suspending loans to ease the crisis only delays the collection of debts, but does not change the creditor-debtor relationship. The key point in practice is to list all litigation requests at once - dissolving the purchase contract, dissolving the loan contract, returning the paid principal and interest, and compensating for breach of contract, and simultaneously applying for preservation of the developer's assets to prevent winning the judgment but not being able to collect the money.

II. Real cases of Henglue Law Firm (detailed review)

Review of the case:In June 2018, Ms. D signed a "Commercial Housing Sales Contract (Pre-sale)" with Z Company to purchase a shop in X Project in City B, with the delivery date agreed to be December 31, 2018. After paying a down payment of 267,188 yuan, she signed a "Personal Purchase and Construction Guaranteed Loan Contract" with H Credit Cooperative to arrange a mortgage. However, Z Company failed to deliver the property on time for many years and the project was suspended. Despite repeated promises, Z Company still failed to fulfill its obligations. Ms. D subsequently entrusted Beijing Henglu Law Firm to handle the case for her.Liu DonghuaThe lawyer requests to rescind the purchase contract and the loan contract, return all the payments made, and hold the parties concerned accountable.

The focus of the controversy:First, whether the long-term overdue payments and the suspension of the project constitute a fundamental breach of contract; Second, whether the loan contract can be terminated simultaneously with the dissolution of the purchase contract, and who will repay the remaining loan; Third, whether the sole shareholder of Company Z should bear joint and several liability for the company's debts.

Attorney's Strategy and Legal Opinions:Attorney Liu Donghua focused on the issue of "fundamental breach of contract leading to the impossibility of achieving the contractual purpose": He argued that since Z Company has failed to deliver the houses on time for many years and the project has been suspended, the contractual purpose has been frustrated and should be terminated according to law; in accordance with Articles 20 and 21 of the Judicial Interpretation of the Sale of Commercial Houses, he claimed that the termination of the purchase contract should be accompanied by the termination of the loan contract, with the developer returning the remaining loan to the bank and refunding the purchaser for the payments already made; he calculated in detail the losses of funds occupied and public maintenance funds, stamp duty, and other paid fees; and he claimed that C, the sole shareholder of Z Company, cannot prove that the company's assets are independent of the company and should bear joint and several liability for the debts.

The court's reasoning and the outcome of the case:The court fully supported the plaintiff's claims: to rescind the "Commercial Housing Sales Contract (Presale)" and the "Individual Housing Purchase and Construction Guarantee Loan Contract"; to require Z Company to return the down payment of 267,188 yuan, the principal and interest of the loan already repaid of 154,783.01 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; to require Z Company to repay the remaining principal and interest of the loan to H Credit Union; and to hold C jointly and severally liable for the above-mentioned debts. Ms. D achieved the goals of withdrawing from the contract, obtaining a refund, and being exempted from monthly mortgage payments, with the remaining mortgage repayments being transferred to the developer—this is precisely the legal way to realize the demand for "halting mortgage payments".

This case is handled by Beijing Henglu Law FirmLiu DonghuaAttorney (practice certificate number: 11101199911363364, subject to the certificate issued by the judicial administrative organ) acting as an agent.

III. Frequently Asked Questions

Q1: Can the lender directly suspend the loan if the developer fails to deliver the house on time?

No. The counterparty to the loan contract is the bank, and it is independent of the purchase contract. The developer's breach of contract does not constitute a defense against the bank; unilateral default on repayment will result in the charging of penalty interest and reporting to the credit information system. The bank may declare the loan to be due in advance, sue and dispose of the mortgaged property, and the buyer will instead become the breaching party instead of the complying party. The legal way to "stop the loan" is to rescind the loan contract through litigation and transfer the remaining repayment obligations to the developer, rather than stopping repayment on one's own. The legal consequences of the two methods are completely different.

Q2: How can I legally "stop" my mortgage payments?

The path to terminate the contract is as follows: if the buyer fails to take possession of the house within the agreed term, or if the developer fails to deliver the house within a reasonable period after being reminded in writing, or if the developer stops construction and makes it impossible to fulfill the contractual purpose, the buyer may request to terminate the purchase contract in accordance with Article 563 of the Civil Code. At the same time, the buyer may request to terminate the loan contract in accordance with Articles 20 and 21 of the Judicial Interpretation of the Sale and Purchase of Commercial Housing. The developer shall return the remaining principal and interest of the loan to the bank and refund the buyer the paid housing price and interest. After the judgment takes effect, the buyer shall no longer bear the monthly repayment obligation, and the remaining debt shall be paid off by the developer. The buyer's credit record will no longer be adversely affected by this loan.

Q3: What conditions must be met to terminate the contract?

The contract stipulates that if the buyer has the right to rescind the contract if the delay exceeds a certain number of days, they can exercise this right once the conditions are met; if there is no such stipulation, the buyer must first issue a written notice of default and grant a reasonable time limit (usually around three months in practice), or prove that the suspension of work and the unfinished project have rendered the contract's purpose impossible to achieve. Note the exclusionary period in Article 564 of the Civil Code: The right to rescind the contract shall be exercised within one year from the date on which the buyer becomes aware of the grounds for rescission, or within a reasonable time limit after being notified by the other party, and the right will be extinguished if not exercised within the time limit. It is recommended to rescind the contract by filing a lawsuit or issuing a written notice and keeping the relevant evidence, to avoid oral expressions that are not recognized by the court.

Q4: What should I do if I've been cut off from financing and my credit rating has been damaged?

Immediately cut losses: negotiate with the bank to resume repayment or apply for an extension arrangement, and proceed with the dismissal of litigation as soon as possible; if the bank has already sued, actively defend against the lawsuit, and claim in the litigation that the loan contract be rescinded and the remaining debt be borne by the developer. After the judgment is rescinded, it can resist the bank's claims for principal and interest. After the debt is settled or the liability subject is determined by the judgment, the bad credit record will be gradually eliminated according to the prescribed retention period. The longer the cut-off period is, the higher the penalty interest and default losses will be, and the earlier the correction is made, the lower the cost will be. Never confront the bank head-on like a David fighting a Goliath.

Q5: What should I do if I've only paid the down payment and haven't applied for a loan yet?

For those who have not signed a loan contract, there is no need to deal with the loan relationship. They can directly file a lawsuit according to the contract and the Civil Code to request the rescission of the purchase contract, the return of the down payment and interest, and compensation for losses; for those who have signed a loan contract but the bank has not yet disbursed the loan, they can also request the rescission of the loan contract. The down payment funds occupied losses, public maintenance funds, stamp duties, and other fees already paid should be included in the return list. All litigation requests should be listed at once to avoid increasing the cost of secondary litigation. The evidence should focus on fixing payment receipts, reminder records, and the current status of the project's suspension of work, forming a complete chain.

IV. Suggestions for Protecting Rights and Interests

  • Don't rush to cut off supplies: First, send a written reminder letter and keep the evidence of delivery, to confirm the developer's default fact and lay a foundation for terminating the contract.
  • Check the contract termination clauses: the number of days of overdue payment and the agreed grace period determine when the right to terminate the contract becomes effective. If the conditions are not met, initiating a lawsuit prematurely may result in the case being dismissed.
  • List all litigation requests at once: rescind the purchase contract, rescind the loan contract, return the principal and interest already paid, and compensate for breach of contract to avoid secondary litigation.
  • Identify the developer's associated assets: Claim the joint and several liability of the shareholders of the sole proprietorship company, apply for property preservation, and increase the actual recovery rate of payments.
  • The defendant, who has been sued by the bank, actively defends himself and claims that the loan contract should be terminated simultaneously, and strives to have the remaining debt transferred to the developer to bear.

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. →Legal services for real estate transactions·Attorney Liu Donghua·Beijing Henglu Law Firm