[Direct answer]There is no unified national standard for the penalty for breach of contract for second-hand houses. It shall be subject to the provisions of the contract: in practice, it is common to stipulate a fixed penalty of 10% to 20% of the total house price, or to pay a daily penalty of a few thousandths of a percent; if the stipulated penalty is excessively higher than the actual loss, the breaching party may request the court to reduce it appropriately in accordance with Article 585 of the Civil Code of the People's Republic of China. In judicial practice, it is often taken as an important reference that the penalty exceeds 30% of the loss; the deposit and the penalty for breach of contract can only be claimed one at a time, and the deposit shall not exceed 20% of the subject matter of the main contract. In case of disputes, it is recommended to fix the contract, payment and reminder evidence as soon as possible, and you can consult for more information.Legal services for real estate transactions and construction projectsOr throughBeijing Henglue Law FirmEvaluate the plan.

I. Problem Background and Typical Scenarios

The transaction of second-hand houses involves multiple steps and a long cycle, from signing the contract, online registration, loan application, transfer of ownership to handover and vacating the house. Any problem in any of these steps may constitute a breach of contract, making the breach of contract clause the core content of the contract. Typical scenarios include: the seller reneging on the deal after the price of the house has risen and refusing to cooperate with the transfer of ownership, preferring to breach the contract and pay the deposit or breach of contract penalty instead; the buyer failing to obtain loan approval or having insufficient loan amount, and paying the purchase price late; the seller failing to deliver the house on time, transferring the household registration out of the house late, or concealing the mortgage or seizure status of the house; the seller selling the same house to two buyers, resulting in the contract being unable to be performed; and the contract failing to clearly stipulate the liability for breach of contract, leading to disputes between the parties after the fact. The breach of contract penalty is not only a tool for the party in compliance to mitigate losses, but also often becomes the focus of negotiations between the two parties.

II. Key points of dispute

  • The dispute over the amount of the penalty: When the agreed amount is too high, the defaulting party claims a reduction; when the agreed amount is too low, the complying party claims an adjustment based on the actual losses. How to measure the amount based on the actual losses, taking into account the performance of the contract and the degree of fault, is the core of the courtroom confrontation.
  • The application relationship between the deposit and the breach of contract penalty: If the contract stipulates both the deposit and the breach of contract penalty, the other party can only choose one of them when one party breaches the contract; if the deposit is not enough to compensate for the losses, the other party can continue to claim for the difference. The evidentiary threshold and the amount limit of the two approaches are different.
  • Determination of the defense of exemption from liability: Whether the adjustment of purchase and loan restriction policies, the pandemic and other factors can constitute force majeure or changes in circumstances to exempt from breach of contract liability? The court reviews this strictly, and the claimant needs to prove the direct causal relationship between the obstacle and the inability to perform the contract.

III. Professional analysis by Henglue Lawyers

Henglue Lawyers observed in handling disputes over breach of contract in real estate transactions that whether the claim for breach of contract penalty can be supported depends on three key factors: whether the calculation method stipulated in the contract is clear, whether the evidence of the breaching party's losses is sufficient, and whether the breaching party's defense is valid. Taking a case of breach of contract penalty for delayed delivery handled by Henglue as an example: Wang * signed a pre-sale contract with a real estate development company to purchase a house in a certain residential area with a total price of over 6.8 million yuan, stipulating that the house should be delivered before June 15, 2023. The supplementary agreement granted a 90-day grace period, and the breach of contract penalty would be calculated at 0.001% of the total payment per day of delay. However, the company failed to deliver the house until March 2024, nearly nine months after the deadline, and defended itself by citing the pandemic and bad weather as force majeure. Henglue Lawyers pointed out that the contract was signed in 2021, when the pandemic had already become a normal situation, so the developer should have foreseen it and could not be exempted from liability. Factors such as weather and government meetings were also not unforeseeable, unavoidable, or insurmountable objective circumstances. The grace period should be strictly applied according to the contract and not be arbitrarily extended. The court adopted the above view and ruled that the company should pay the breach of contract penalty of 118,366.12 yuan according to the contract and bear the litigation costs. This case shows that: as long as the breach of contract penalty stipulation is a true expression of the parties' intention and is not obviously unbalanced, the court will generally support it according to the contract; and the defense of force majeure will be strictly determined. For cases involving contract interpretation and breach of contract liability design, further legal advice can be provided.Business and contract dispute resolution services for enterprisesTeam collaborative evaluation.

IV. Practical suggestions and legal basis

At the legal basis level: Article 577 of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulates that if a party fails to perform its contractual obligations or performs them in a manner inconsistent with the agreement, it shall bear such contractual liabilities as continuing performance, taking remedial measures, or compensating for losses; Article 585 stipulates the rules for the determination and judicial adjustment of the contractual penalty, where the agreed amount is lower than the actual losses, the party may request an increase; where the agreed amount is excessively higher than the actual losses, the party may request a reasonable reduction; Articles 586 and 587 stipulate the penalty for the deposit, where the party receiving the deposit breaches the contract, it shall return twice the amount of the deposit; Article 588 stipulates that the deposit and the contractual penalty can only be applied one at a time, and if the deposit is insufficient to compensate for the losses, the party may request compensation for losses exceeding the amount of the deposit; Article 188 stipulates that the statute of limitations is three years. At the practical advice level: When signing the contract, specify the specific amount or calculation method of the contractual penalty and the starting point to avoid writing vague clauses such as "bear contractual liabilities"; retain written evidence for payment, reminders, and house acceptance; promptly send written reminders and collect evidence of losses after the other party breaches the contract; and, if necessary, apply for property preservation to prevent the house from being disposed of or transferred elsewhere.

5. Henglu Law Firm's Reminder

The penalty for breaching a second-hand housing contract not only involves "settling accounts after the fact", but also requires clear provisions in the contract: the amount or percentage, the calculation period, the relationship with the deposit, and the obligations to move out and vacate the house should all be included in the contract terms. When there are signs of breach of contract, the first step should be to send a letter of reminder and preserve the evidence, and then decide whether to demand continued performance or to terminate the contract and claim compensation to avoid losses being expanded and leading to a reduction of liability. The above-mentioned case of a penalty for late delivery of the house also suggests that the defenses of force majeure should be verified item by item for their foreseeable possibility and causality. If you are currently facing similar disputes, it is recommended to consult and evaluate as soon as possible to seize the opportunity for claiming compensation and preserving evidence. This case is handled by Beijing Henglu Law Firm.Tian JiayanThe lawyer (practice certificate number: 11101202111381309, subject to the certificate issued by the judicial administrative organ) acts as the agent.

Q1: What is a reasonable amount for the penalty clause in a second-hand housing contract, and will the court fully support it?

A common practice is to stipulate a fixed breach of contract penalty of 10% to 20% of the total purchase price, or to stipulate a standard of a few thousandths of a percent per day for late payments and late delivery. As long as the agreement reflects the true intention of both parties, the court will generally support it according to the agreement. However, if the breaching party provides evidence to prove that the agreed penalty is excessively high compared to the actual losses, the court may reduce it in accordance with Article 585 of the Civil Code of the People's Republic of China. In judicial practice, the court often takes the amount exceeding 30% of the losses as an important reference, and comprehensively assesses it in light of the degree of performance and the fault of the parties. An overly high penalty may not yield more benefits, while an overly low penalty may fail to cover the losses. It is recommended to refer to transaction practices and set a reasonable amount based on possible losses.

Q2: After signing the contract, the seller regrets selling at a low price and refuses to sell. How much breach of contract penalty can I claim?

According to the contract, the party may claim the penalty for breach of contract or the penalty for the deposit: if the contract stipulates the amount or calculation method of the penalty for breach of contract, the party shall claim according to the agreement; if the contract also stipulates the penalty for the deposit, the party may choose to apply the penalty clause. If the party receiving the deposit breaches the contract, it shall return double the amount. If the penalty for breach of contract is not sufficient to compensate for the loss of the price difference of the house, the party may request an increase. In practice, the difference between the market price of similar houses at the same period and the contract price is often used as a reference for the loss. In addition to monetary compensation, the party may also request the performance of the contract and assistance in handling the transfer of ownership according to Article 577 of the Civil Code of the People's Republic of China. The choice between the two should be based on the party's own needs for purchasing the house, the other party's willingness to perform the contract, and the feasibility of enforcement.

Q3: I've paid the deposit, but the other party breached the contract. Can I both confiscate the deposit and demand the breach of contract penalty?

This cannot be claimed simultaneously. According to Article 588 of the Civil Code of the People's Republic of China, if the parties have agreed on both a penalty for breach of contract and a deposit, the other party may choose to apply either the penalty for breach of contract or the deposit clause when one party breaches the contract, and the two can only be chosen one at a time; but if the deposit is insufficient to compensate for the actual losses, the party in compliance with the contract may, while claiming the deposit, request compensation for losses exceeding the amount of the deposit. When making a choice, first estimate the obtainable amount and the difficulty of providing evidence for the two approaches: the deposit penalty does not require proof of losses, has a low burden of proof but is subject to a 20% cap; the penalty for breach of contract or compensation for losses requires sufficient evidence to support it, and the amount cap may also be higher. You can consult a lawyer to estimate the advantages and disadvantages of each approach and then choose the most favorable one to claim.

Q4: If the buyer's loan is not approved, is it considered a breach of contract and do they have to pay a breach of contract penalty?

It all depends on the contractual provisions and the reasons for the loan not being approved. If the contract clearly stipulates that the insufficient portion of the loan shall be supplemented with cash or raised elsewhere, the failure to approve the loan generally does not exempt the payment obligation, and the overdue payment constitutes a breach of contract; if the loan is not approved due to the buyer's poor credit record or unmet income requirements, it also constitutes a breach of contract; if the contract cannot be performed due to policy adjustments such as purchase restrictions and loan restrictions, the buyer may claim to rescind the contract. In practice, it is often determined that neither party shall bear breach of contract liability, and the paid housing deposit shall be refunded. It is recommended to pre-agree on the handling methods and termination mechanisms for the failure to approve the loan in the contract, and to handle disputes according to the agreed procedures to avoid being passive.

Q5: If the other party breaches the contract and delays it for a long time, can I still sue for the breach of contract penalty?

According to Article 188 of the Civil Code of the People's Republic of China, the statute of limitations for suing in the people's court to protect civil rights is three years, calculated from the date when the claimant knows or should have known that his rights have been infringed and the date when the obligee knows or should have known that his obligations have been breached. Each time the claimant asserts his rights against the other party during this period, the statute of limitations will be interrupted and restarted. The longer the dispute over the breach of contract for second-hand houses lasts, the more difficult it will be to collect evidence such as contracts, payment receipts, and records of reminders. The house may also be disposed of, making enforcement more difficult. It is recommended that the claimant promptly send a written reminder to the other party after discovering the breach of contract, interrupt the statute of limitations, and fix the evidence. If necessary, apply for property preservation and sue as soon as possible before the statute of limitations expires.

If you are currently 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 limits. →Legal services for the purchase and sale of real estate·Attorney Tian Jiayan·Beijing Henglue Law Firm