[Direct answer]It can be contested. The losses caused by the suspension of production and business are statutory compensation items: according to Article 17 of the "Regulations on the Acquisition and Compensation of Houses on State-Owned Land" (implemented on January 21, 2011), the compensation includes the losses caused by the suspension of production and business due to the acquisition of houses; Article 23 stipulates that the specific amount shall be determined according to factors such as the efficiency of the house before its acquisition and the duration of the suspension of production and business. Enterprises should prepare all the necessary documents, including tax declarations, business transaction records, employee payrolls, lease contracts, etc., to claim compensation item by item; if they encounter forced demolition, they can sue to confirm the illegality of the forced demolition and then claim compensation. Enterprises can first understand the disputes over demolition and then take appropriate legal actions to safeguard their legitimate rights and interests.Legal services for land expropriation and demolition, and administrative litigation.

1. Problem background and typical scenarios

When factories, shops, and market-type business entities are subject to expropriation, the greatest losses often lie not in the buildings themselves, but in the loss of orders, the cost of employee relocation, and the cost of equipment removal caused by the suspension of production and business operations. Common adverse situations in practice include: appraisal institutions only calculating the replacement value of the buildings and omitting the calculation of operating losses; the expropriating party refusing to recognize the business entity's qualifications on the grounds that the business license is not located at the site; forcing relocation by cutting off water and electricity and blocking roads; and the sudden forced demolition of the enterprise before negotiations have been completed. Whether there are losses from the suspension of production and business operations, how much they are, and how to prove them, are the core battlefields of negotiations between the enterprise and the expropriating party, and also the most directly valuable part of lawyers' involvement.

II. Key points of dispute

  • Criteria for determining losses: According to Article 23 of the "Regulations on the Acquisition and Compensation of Houses on State-Owned Land" (implemented on January 21, 2011), the compensation shall be determined based on the benefits of the house before the acquisition and the duration of the suspension of production and business. However, there are significant differences in the specific implementation measures in various provinces. How to quantify the benefits and when the suspension period starts often become points of contention.
  • The main issues and supporting documents: If the registered address of the business license does not match the actual operating location, whether the lessee of the leased business can claim losses from production and business suspension, and what to do if the tax payment documents are incomplete, these factors directly determine whether the claim can be established.
  • The claim path after forced demolition: Ensuring the connection between the lawsuit against illegal forced demolition and administrative compensation, and the implementation of the principle of compensation before relocation, are prerequisites that enterprises must fulfill in order to protect their rights.

III. Professional analysis by Henglue Lawyers

Taking a case handled by Henglue Law Firm as an example, which confirmed the illegal demolition, the case demonstrates the basic path of "first confirming the violation, then claiming compensation" in the process of protecting rights against forced demolition. In the early morning of November 17, 2021, the house on the homestead of Liu * and Cui * in a village in Hanzhong City, Shaanxi Province was forcibly demolished: The Development and Service Center of a certain district in Hanzhong City dispatched a large number of personnel, including police, urban management personnel, and security guards, to use excavators and forklifts to demolish the house. The couple and their daughter and son-in-law were controlled and restricted in their personal freedom until the house was completely demolished after 5 p.m. that day. Only then were the couple able to return home, and all the houses and items inside were destroyed. The couple entrusted Attorney Wu Jiani of Beijing Henglue Law Firm to protect their rights.

The first difficulty in the case is who to sue: The demolition was carried out by the Development Service Center of a certain district, which is a public institution established by the Hanzhong Municipal Government and cannot independently bear legal responsibility; the Municipal Unified Seizure Office argued that the forced demolition exceeded the scope of its delegated authority. The lawyer argued in accordance with Article 26 Paragraph 5 of the Administrative Litigation Law of the People's Republic of China (amended on June 27, 2017) that for administrative acts carried out by organizations entrusted by administrative organs, the entrusting administrative organs are the defendants. The service center was entrusted by the Municipal Unified Seizure Office to carry out land expropriation and demolition, so the responsibility should be borne by the Hanzhong Municipal Government. The second difficulty is whether the forced demolition was illegal: The lawyer pointed out in accordance with Article 13 of the Administrative Enforcement Law of the People's Republic of China (implemented on January 1, 2012) that where the law does not provide for the forced enforcement by administrative organs, the administrative organ making the administrative decision shall apply to the people's court for forced enforcement. The current law does not grant administrative organs the right to directly enforce the demolition of legal houses. It is obviously illegal to carry out forced demolition without any unit applying to the court for enforcement, and it violates the principle of compensation first and relocation later. 案件的第一个难点是告谁：实施拆除的是某区发展服务中心，该中心是汉中市政府开办的事业单位，无法独立承担法律责任；市统征办又辩称强拆超越委托范围。律师依据《中华人民共和国行政诉讼法》（2017年6月27日修正）第26条第5款主张，行政机关委托的组织作出的行政行为，委托的行政机关是被告，该服务中心受市统征办委托实施征地拆迁，责任应由汉中市政府承担。第二个难点是强拆是否违法：律师依据《中华人民共和国行政强制法》（2012年1月1日实施）第13条指出，法律没有规定行政机关强制执行的，作出行政决定的行政机关应当申请人民法院强制执行，现行法律未赋予行政机关对合法房屋的直接强制执行权，在没有任何单位申请法院执行的情况下径行强拆明显违法，且违反先补偿、后搬迁原则。

After trial, the court found that: The Development Service Center of a certain district is a public institution established by the Hanzhong Municipal Government, which does not have the ability to independently bear legal responsibility. The consequences of its actions shall be borne by the municipal government, and the municipal government is a qualified defendant in this case. During the expropriation, the center violated the principle of "compensation first, relocation later", and demolished the plaintiff's house without enforcement authority, which is inconsistent with Article 13 of the Administrative Enforcement Law. The court ultimately ruled that the Hanzhong Municipal Government's demolition of the plaintiff's house on November 17, 2021, was illegal. The confirmation of the illegal judgment provides a basis for subsequent claims for compensation - when a company encounters forced demolition, it also needs to go through this step to claim for losses such as production and business interruption and equipment damage.

IV. Practical suggestions and legal basis

Legal basis: Article 17 of the "Regulations on the Acquisition and Compensation of Houses on State-Owned Land" (implemented on January 21, 2011) clearly stipulates that compensation includes the value of the expropriated houses, relocation and temporary resettlement, and losses due to suspension of production and business operations; Article 23 stipulates that the losses due to suspension of production and business operations shall be determined according to the efficiency of the house before expropriation and the duration of suspension of production and business operations, and the specific measures shall be formulated by the provincial government; Article 27 prohibits forcing relocation by illegal means such as interrupting water and electricity supply and blocking road traffic; Article 13 of the "Administrative Enforcement Law of the People's Republic of China" (implemented on January 1, 2012) establishes the rule that administrative organs without enforcement powers shall apply to the court for enforcement; Article 26, paragraph 5 of the "Administrative Litigation Law of the People's Republic of China" (amended on June 27, 2017) addresses the issue of the defendant qualification of the entrusted implementation entities. Practical suggestions: Standardize tax declaration and financial books in daily operations, keep lease contracts, payrolls, and utility bills; conduct image evidence collection of factories, equipment, and inventory after the start of expropriation; report to the police and fix evidence in time when encountering forced eviction; file a lawsuit to confirm the illegality within 6 months after the demolition, and then claim losses in accordance with the relevant provisions of state compensation.

5. Henglue Law Firm's Reminder

The amount of losses from production and business suspension depends 70% on evidence and 30% on procedures: the basis of compensation is determined by the proof of benefits, and the procedural rights determine the negotiating position. Enterprises should not actively relocate before reaching an agreement, nor should they underestimate the role of confirming the lawsuit against illegal actions in laying the foundation for subsequent claims. This case was handled by Beijing Henglu Law Firm.Wu JianiThe lawyer (practice license number: 11101202011245064, subject to the documents issued by the judicial administrative organ) acts on behalf of the client. The court confirmed that the forced demolition by the Hanzhong Municipal People's Government was illegal. If you are currently facing disputes over compensation for enterprise expropriation or have already encountered forced demolition, it is recommended that you entrust a professional lawyer to evaluate the evidence and procedural solutions as soon as possible. You can first contact us for further consultation.Beijing Henglue Law FirmFor appointments for interviews, compensation payments, and enforcement issues, you can also combine them togetherCreditor-debtor relations and enforcement case servicesFollow up.

Q1: What production and business loss can enterprises claim during demolition?

According to Article 17 of the "Regulations on the Acquisition and Compensation of Houses on State-Owned Land" (implemented on January 21, 2011), the losses caused by the acquisition of houses, such as the suspension of production and business, are legally compensable items, on par with compensation for the value of the house and relocation and temporary resettlement compensation. The items that can be claimed typically include the loss of operating profits during the suspension period, employee salaries and social insurance expenses, losses due to breach of contract on orders, the cost of relocating and reinstalling equipment, and losses during the transition period of reopening. The specific calculation methods vary across provinces. Some provide a one-time compensation based on a certain percentage of the appraised value of the acquired house, while others calculate it by multiplying the monthly average profit by the duration of the suspension period. Enterprises should claim each item in accordance with local regulations and their own supporting documents. During negotiations, they should first list all the items and then discuss the amounts.

Q2: What evidence should be prepared for the losses caused by production and business suspension?

The key point is to prove that "there are benefits, deadlines, and losses": tax returns and tax payment certificates, VAT invoices can prove the scale of business operations; bank statements and transaction records of corporate accounts can corroborate income levels; employee rosters, payrolls, and social insurance payment records can prove labor costs; lease contracts and rental payment certificates can prove venue rights; purchase and sales contracts, orders, and breach of contract compensation certificates can prove the direct losses caused by production stoppages; and water and electricity bills and production capacity data before and after the production stoppage can corroborate the disparity. When the evaluation agency conducts on-site investigations, it should submit the relevant materials simultaneously. If the evaluation report omits any business factors, the applicant should apply for a review in a timely manner. For missing certificates, it is advisable to supplement and retrieve them through taxation, market supervision, and other channels as soon as possible, rather than waiting until the litigation stage to take action.

Q3: Can enterprises operating under a lease agreement claim compensation for losses due to production and business suspension?

It can be claimed, but the approach depends on the compensation scheme and the provisions of the lease contract. Although the lessee is not the owner of the property, the compensation for the loss of production and business operations essentially aims to make up for the losses of the operator. In most local regulations, it is clearly stipulated that the property owner and the lessee shall distribute the compensation according to the agreement, or provide separate compensation to the actual operator. The lessee should pay attention to three points: first, check the time of issuance of the expropriation decision and the lease term to confirm that they are eligible for compensation; second, review whether there are provisions on the distribution of expropriation compensation in the lease contract to avoid the owner monopolizing the compensation; third, if the property owner omits to declare the operating losses when applying for compensation, the lessee should promptly raise objections in the capacity of the actual operator and apply to participate in the consultation. If necessary, they should verify the declaration details through information disclosure.

Q4: What should I do if I encounter water and power outages or sudden forced demolitions?

The first step is to secure evidence: Take photos and videos of the water and power outage notifications and the on-site situation, and request the power and water supply departments to provide power outage records. Report the forced eviction immediately to the police and obtain a receipt; The second step is to assert rights according to law: On the grounds that the forced eviction methods such as cutting off water and electricity violate the prohibitive provisions of Article 27 of the "Regulations on the Acquisition and Compensation of Houses on State-Owned Land" (implemented on January 21, 2011), file a complaint and report to the superior authority of the acquisition department and claim compensation for losses; The third step is to respond to forced demolition: Within the 6-month litigation period, file a lawsuit to confirm the illegality of the forced demolition, and after winning the case, claim compensation for the house, items, and production losses according to relevant national compensation regulations. Never resort to violence. Personal safety should be the top priority, and evidence and procedures are the right way to recover losses.

Q5: After confirming that the forced demolition is illegal, how should the compensation process proceed?

Confirming the illegality of the demolition is the preliminary step for claiming compensation. After the judgment takes effect, the claimant can first file an administrative compensation application with the compensation-liable authority. If no agreement can be reached, the claimant may initiate an administrative compensation lawsuit separately. The scope of compensation includes housing losses, losses of items in the house, and losses of production and business operations caused by the forced demolition. The key points of evidence collection are the same as those for ordinary compensation claims: the value of the house can be claimed by referring to the expropriation compensation plan and the appraisal price; the losses of items can be verified by video evidence and purchase receipts; and the losses of production can be supported by tax payment and transaction records. According to the relevant provisions of the Administrative Procedure Law of the People's Republic of China (amended on June 27, 2017), the defendant bears the burden of proof for the legality of the forced demolition, while the expropriated person needs to provide sufficient evidence of the amount of losses. It is recommended that lawyers coordinate the connection between the two lawsuits to avoid exceeding the statutory time limit.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limits. →Land expropriation and demolition legal services·Attorney Wu Jiani·Beijing Henglu Law Firm