[Direct answer]For protecting rights against unfinished buildings, it's advisable to take collective action and proceed on multiple fronts: First, fix the purchase contracts, payment and evidence of construction suspension, and report the pre-sale fund supervision issues to the housing and construction department. At the same time, elect representatives of homeowners to initiate collective litigation. If the developer constitutes a fundamental breach of contract, the buyer may terminate the contract according to Article 563 of the Civil Code and claim the return of the paid purchase price and interest according to Article 577. According to the "Reply of the Supreme People's Court on the Protection of Consumer Rights in Commercial Housing" (effective April 20, 2023), buyers who have paid the full purchase price have priority in the right to request delivery of the house and the right to claim the return of the purchase price over the right to priority compensation for the construction project price and the right of mortgage. For more details, please consult the relevant departments.Legal services for real estate transactions and construction projectsAndBeijing Henglu Law Firm.

1. Problem background and typical scenarios

Many unfinished new housing projects are due to developers' broken capital chains, misappropriation of pre-sale funds, or projects being mired in debt. Owners not only face the uncertainty of receiving their homes, but also have to continue paying their mortgages every month. Typical scenarios include: the project being suspended for months, with the contractors leaving the site and the sales offices becoming empty; the developer entering debt restructuring or bankruptcy proceedings, leaving owners uncertain about the priority of their claims; the unclear whereabouts of funds in pre-sale supervision accounts, with owners' requests for information disclosure being met with excuses; some owners rushing to withdraw from the contract to limit their losses, while others wait and hesitate, making it difficult to coordinate collective actions. Protecting rights in unfinished projects is a typical collective and long-term struggle, and going it alone often misses the best opportunities for preservation, declaration, and litigation.

II. Key points of contention

  • Is it better to withdraw from the contract or to keep the house? Withdrawing from the contract can help mitigate losses and claim the refund of the paid purchase price and interest, but whether the claim can be executed after withdrawal depends on the developer's solvency. If you continue to wait for the resumption of construction, you will bear the risks of continued financing and a second-time project abandonment. The choice of path directly affects the outcome of compensation.
  • The organization of collective action: There are a large number of owners with diverse demands. According to the representative litigation system of the Civil Procedure Law, representatives are selected to conduct litigation on a unified basis, which can unify strategies and share costs; however, the disorganized nature of the group and the scattered evidence are the greatest internal obstacles to protecting rights.
  • Funding and priority: Whether the pre-sale funds are misappropriated and whether the supervision is neglected determine the possibility of resuming work; when the developer goes bankrupt, the buyer's right to request delivery and the right to request refund of the purchase price shall have priority over the right to be compensated for the construction project price and the mortgage right according to law. The priority of claims directly affects the recovery rate of funds.

III. Professional analysis by Henglue Law Firm

The practical experience of Henglue Law Firm in handling disputes over unfinished buildings can be summarized into four steps. **Step 1: Gathering Evidence and Establishing a Baseline**: Collect purchase contracts, payment receipts, mortgage contracts, notice of delayed delivery, and images of the stalled construction site. Compile a list of all owners’ payment records to form a creditor’s ledger. **Step 2: Investigating Funds and Entities**: Use government information disclosure requests to review pre-sale license and the transaction records of the pre-sale fund supervision account. Verify the developer’s equity and affiliated parties. Report any clues of misappropriated funds to regulatory authorities and urge the recovery of funds for resuming construction. **Step 3: Choosing Legal Strategies**: - If there’s still hope for resuming construction, prioritize coordinating with government task forces to resume development while simultaneously urging the developer to deliver on time and preserving evidence. - For fundamental breaches of contract with no delivery prospects, terminate the contract according to Article 563 of the Civil Code, seek refunds of paid purchase prices, interest, and damages, and claim priority rights as a housing consumer if eligible. - In the event of developer bankruptcy, timely file a creditor’s claim within the statutory period and initiate litigation to confirm priority rights if the administrator refuses to recognize them. **Step 4: Collective Coordination**: - Elect representatives to jointly hire lawyers. Group owners by building and payment method to standardize litigation claims and cost sharing to avoid individual settlements or defaulting payments that could jeopardize the overall plan. - For disputes over project payments and construction contracts, collaborate with relevant parties to resolve them through legal means.Real estate sales and construction project servicesThe team collaboratively evaluates the overall handling of the project.

IV. Practical suggestions and legal basis

Legal basis: Article 563 of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulates that if a party delays in performing the main obligation and fails to perform within a reasonable period after being urged, or if the delay in performing the obligation results in the failure to achieve the purpose of the contract, the other party may rescind the contract; Article 577 stipulates that the defaulting party shall bear such breach of contract liabilities as continuing to perform the obligation, taking remedial measures, or compensating for losses; Article 807 establishes the priority right of compensation for the construction project price. The "Reply of the Supreme People's Court on the Protection of the Rights of Commodity Housing Consumers" (effective April 20, 2023) clarifies that the right of the commodity housing consumers to request the delivery of the house and the right to request the return of the purchase price shall take precedence over the priority right of compensation for the construction project price, the mortgage right, and other creditor's rights. Article 56 of the Civil Procedure Law of the People's Republic of China stipulates that in a joint litigation with a large number of parties, the parties may elect a representative to conduct the litigation, and the representative's litigation acts shall be binding on the parties they represent. Practical suggestions: It is advisable to take unified actions after professional evaluation when protecting rights, so as to avoid individual early withdrawal from the house or blindly defaulting on the mortgage, which may lead to credit and breach of contract risks; before defaulting on the mortgage, it is necessary to review the liability arrangements of the mortgage contract and the connection with the rescission of the purchase contract.

5. Henglue Law Firm's Reminder

The key to protecting rights against unfinished buildings lies in information, organization, and timing: the earlier the evidence is fixed, the earlier the priority claims are raised, and the higher the probability of compensation; if the owners are disorganized or act independently, they are often defeated one by one. The collective litigation cycle lasts for years, so owners should have reasonable expectations and use administrative appeals, information disclosure, civil litigation, and bankruptcy procedures in conjunction with each other, rather than taking a desperate gamble. For cases involving a large number of owners and huge amounts of money, it is recommended to entrust lawyers to coordinate as soon as possible and start withSpecial services and legal services for other casesOr visitBeijing Henglue Law FirmEvaluate the options and then decide whether to check out, keep the room, or wait for the resumption of work.

Q1: For unfinished buildings where the buyer wants to withdraw from the contract and get a refund, can they get back all the money they paid for the purchase?

For those who meet the conditions for termination, they may claim the return of the paid purchase price, interest payments, and compensation for losses. However, the actual recovery of funds depends on the developer's repayment capacity and the order of repayment. According to the "Reply of the Supreme People's Court on the Protection of Consumers' Rights in Commercial Housing" (effective April 20, 2023), the right of the purchaser who has paid the full purchase price to request the return of the purchase price takes precedence over the right to priority compensation for the construction project price and the mortgage right. This can significantly increase the possibility of recovering funds when the developer goes bankrupt or lacks sufficient assets to repay; if the developer has no executable assets, there is still uncertainty as to whether the judgment can be enforced. It is necessary to comprehensively judge the value of the project's continuation and the recovery of funds before deciding whether to return the house or keep it.

Q2: There are too many owners with different opinions. How can we organize a class action lawsuit?

According to Article 56 of the Civil Procedure Law, in the case of a large number of joint litigants, representatives can be elected to conduct the litigation, and the litigation actions of the representatives shall be effective for the parties they represent. In practice, two to five representatives are usually elected. The process involves three steps: first, establishing a list of owners and unifying the statistics of contracts, payments, and mortgage information to form a baseline; second, unifying the signing of power of attorney documents and determining the core demands of terminating the contract or continuing its performance; finally, the lawyer will coordinate the filing of the case, preservation of evidence, and court hearing schedules. If there are major differences of opinion, the litigants can be divided into groups according to their demands and proceed separately to avoid internal procedures delaying the overall plan.

Q3: Approximately how much does it cost to seek collective legal protection?

The main costs are case acceptance fees and attorney fees: the acceptance fees are accumulated in stages according to the amount of the litigation request. For cases involving check-out refunds, the subject matter is large and the fees are correspondingly higher. For cases settled through mediation or withdrawal of the lawsuit, the fees can be paid at half the normal rate. Attorney fees are usually charged per case or as a percentage of the disputed amount, and collective cases are divided among the owners according to their shares, with the unit cost being significantly lower than that of individual commissions. Actual expenses such as property preservation fees, announcement fees, and appraisal fees are calculated separately. Before starting the process, it is advisable for lawyers to provide a written cost estimate and a cost-sharing plan, which should be confirmed by the owners' representatives before making payments collectively, so as to avoid the process being halted due to disputes over fees midway.

Q4: How long will the lawsuit over the unfinished building take, and do I still need to continue paying the mortgage?

The first-instance trial of a class action lawsuit typically lasts about six months. However, for unfinished projects, the actual duration often spans years due to factors such as service delivery, appraisal, and group dynamics. If the defendant appeals, the second-instance trial period will add approximately three months, so homeowners should prepare for a long-term wait. Regarding mortgages, the repayment obligation under the mortgage contract remains in effect until the house is delivered. Those who unilaterally default on payments will bear contractual liability and face negative credit records. If the purchase contract is terminated, the mortgage contract can be terminated simultaneously. According to 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" (amended in 2020 and effective from January 1, 2021), the seller shall return the received housing loans and the principal and interest of the purchase price to the guarantors and buyers respectively. Specific procedures should be discussed and handled with the bank.

Q5: If the developer goes bankrupt, can the owners still get their money back?

Creditors may declare their claims and assert their priority rights in accordance with the law. For purchasers who have paid the full purchase price, their right to request the delivery of the house and their right to request the return of the purchase price shall, in accordance with the "Reply No. [2023] 1", take precedence over the right to priority compensation of the construction project price, the right of mortgage and other creditor's rights; if the project still has a residual construction value, the administrator may decide to continue to perform the purchase contract and organize the delivery. Owners shall declare their claims in time within the time limit for creditor's declaration, and attach evidence such as the purchase contract, payment receipts, and mortgage contracts; if the administrator refuses to confirm the priority rights, they may initiate a lawsuit for creditor's rights confirmation. Collective unified declaration and assertion of priority rights are key to the recovery of repayment ratios.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, to avoid missing the statutory time limit.Legal services for the purchase and sale of real estate·Beijing Henglu Law Firm