[Direct answer]You can legally withdraw from the contract and claim a refund of the paid housing deposit (including the down payment), but the speed and proportion of the refund depend on the developer's repayment ability. If the project is delayed in delivery after written notice and still not delivered within a reasonable timeframe, or if the project is halted and left unfinished, rendering the contract's purpose unattainable, you can rescind the purchase contract in accordance with Article 563 of the Civil Code of the People's Republic of China, and demand a refund of the paid purchase price and compensation for losses in accordance with Articles 566 and 577. The mortgage loan contract can be rescinded simultaneously, and the remaining loan shall be repaid by the developer. For consumers of commercial housing who have paid the full purchase price, the right to claim a refund of the purchase price shall enjoy priority protection in accordance with the order of compensation. It is recommended to do three things simultaneously: fix the evidence through written notice, file a lawsuit and apply for seizure and preservation, and keep track of the resumption of construction and bankruptcy developments. For a detailed explanation of the withdrawal path, please refer to the following link:Legal services for real estate transactions and construction projectsAndBeijing Henglu Law Firm.

I. Problem background and typical scenarios

Buying a stranded property often begins with the pre-sale of an off-plan project: buyers pay the down payment and arrange for a mortgage, but the developer misappropriates the pre-sale funds or experiences a funding crisis, leading to project suspension, repeated delays, and ultimately a stranded property. Buyers continue to make monthly payments while waiting indefinitely for delivery, and may also face the situation where the developer is listed as a dishonest person subject to enforcement or enters bankruptcy proceedings. Typical scenarios include: delivery being delayed by more than half a year beyond the contractual deadline; the project being suspended for a long time with no clear resumption plan; the sales office being empty and the whereabouts of the pre-sale funds in the supervision account being unclear; the developer announcing bankruptcy, leaving buyers unsure how to declare their rights and claim priority.

II. Key points of dispute

  • Whether the right of rescission has been exercised: If the contract stipulates a rescission clause, it shall be exercised in accordance with the agreement; if there is no agreement or the agreement is unclear, it is necessary to go through the notice procedure and keep the evidence. There is also a time limit for exercising the right of rescission, and delaying it may result in losing the right.
  • The order of repayment: The order in which the purchase price is refunded after check-out, the mortgage right on the construction project, the priority right to compensation for the construction project price, and the bank mortgage right are ranked directly determines the actual repayment ratio.
  • Is it better to check out or wait for the resumption of work? If the contract is terminated, the tenant will receive a claim. Waiting for the resumption of work may lead to the recovery of the house, but the process and uncertainties coexist. The pros and cons of the two approaches need to be weighed against the project's situation and the tenant's own needs.

III. Professional analysis by Henglue Law Firm

Henglue Law Firm's experience in handling disputes over unfinished buildings is: first diagnosing the project, then deciding whether to sue and how to proceed. The first step is to investigate the project's basic situation: check the online signing and filing status, the mortgage status of the construction project, the situation of the presale fund supervision account, the developer's litigation and dishonesty information, and whether the government has set up a special team to intervene in the resumption of work. Based on this, evaluate the project's self-rescue possibilities. The second step is to determine the strategy: for projects with clear resumption arrangements and small funding gaps, it is often more cost-effective to wait for delivery and claim late breach of contract penalties; for long-term construction stoppages and continuous loss of developer assets, it is better to sue early to terminate the contract, return the purchase price and compensate for losses, and apply for seizure of construction projects, land use rights and other properties to secure priority in compensation. The third step is to monitor enforcement and bankruptcy: apply for enforcement promptly after the judgment takes effect; if the developer enters bankruptcy proceedings, file a claim for creditor's rights within the time limit set by the court, and assert the priority protection of consumers and buyers. Timely raise objections to the manager's denial of priority status. Coordinating collective rights protection with judicial procedures can better promote problem-solving than acting alone.

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 reminded, 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 565 stipulates that the notice of rescission shall reach the other party or be rescinded by suing; Article 566 stipulates that after rescission, the party may request restoration of the status quo and compensation for losses; Article 577 stipulates the liability for breach of contract. The "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over Commodity Housing Sales Contracts" (effective January 1, 2021) clarifies that if the commodity housing sales contract is rescinded, the commodity housing guarantee loan contract may be rescinded concurrently, and the seller shall return the purchase loan and the principal and interest of the purchase price received; the "Reply of the Supreme People's Court on the Protection of Consumers' Rights in Commodity Housing" (effective April 20, 2023) clarifies that the claim for the return of the purchase price by consumers who have paid the full purchase price shall take priority over the right to priority compensation for the construction project price, the right of mortgage and other rights of priority compensation. Practical advice: Send a written reminder letter immediately after the delay in delivery and keep the evidence of delivery; preserve the purchase contract, payment receipts, photos of the construction site being suspended, and government responses; apply for preservation of evidence while suing; be vigilant against secondary frauds in the name of "funding for withdrawal" and "low price acquisition of claims".

5. Henglue Law Firm's Reminder

The fight to protect rights against unfinished buildings is a long-term battle. Before making a decision, it is essential to calculate three aspects: the probability of the project resuming construction, the developer's remaining assets, and one's own living and financial pressures. For those who urgently need housing and the project is likely to resume construction, it may be better to push for the resumption of construction and delivery rather than withdrawing from the contract; for those with investment purposes or projects that are completely hopeless, it is better to terminate the contract as soon as possible, protect one's property, and secure one's position. Regardless of the path chosen, it is crucial not to delay written reminders and evidence collection, as both the right to terminate the contract and the statute of limitations may be damaged by delays. For procedures involving enforcement distribution and bankruptcy filing, reference can be made to relevant legal provisions.Creditor-debtor relations and enforcement case servicesFor those who need an overall assessment, they can do so throughBeijing Henglue Law FirmOrSpecial services and other case-related servicesThe team made an appointment for an interview.

Q1: How long can a buyer request a refund if the developer fails to deliver the house on time?

First, let's look at the contract: Most pre-sale contracts stipulate that if the developer fails to deliver the property within a certain number of days (such as 90 days or 180 days) after the agreed delivery date, the buyer has the right to rescind the contract and exercise this right in accordance with the contract. If the contract does not stipulate this, the buyer should send a written notice to the developer demanding delivery within a specified time limit. If the developer still fails to deliver within a reasonable period of time (three months, as specified in relevant judicial interpretations) after the notice, the buyer may rescind the contract on the grounds of the developer's delay in performing the main obligation under Article 563 of the Civil Code. It should be noted that the right of rescission has a time limit for exercise. If the buyer fails to exercise the right of rescission within a reasonable period of time after being reminded by the other party, the right of rescission will be extinguished. If the buyer discovers signs of a failed project, they should not delay or wait and see.

Q2: After the court orders the dissolution of the contract, can I get my down payment back immediately?

Not necessarily. A successful judgment confirms the creditor's rights, but the actual recovery of the funds depends on the developer's financial status. If the developer has executable assets such as ongoing construction projects, land, and equity, the funds will be recovered through appraisal and auction, and the creditor will be compensated in accordance with the priority of claims. If the developer is already insolvent or has entered bankruptcy proceedings, the funds will be distributed according to the bankruptcy repayment order. Although the creditor's rights to the purchase price can be claimed for priority protection, the actual recovery rate still depends on the asset liquidation situation. The overall process often takes years, so it's necessary to be prepared for a long-term battle, continuously follow up on the execution clues and bankruptcy progress, and, if necessary, seek help from lawyers to investigate asset clues to avoid waiting in vain.

Q3: Do I still need to continue repaying the mortgage after checking out of the hotel?

No, but you need to follow the correct procedures. According to the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over Commodity Housing Sales Contracts" (effective from January 1, 2021), if the commodity housing sales contract is rescinded, the commodity housing guarantee loan contract may be rescinded simultaneously. The unpaid loans shall be repaid by the developer to the bank, and the buyer shall no longer bear the obligation to repay the loans. However, before the two contracts are rescinded, the loan contract remains independently effective. If you stop making repayments on your own, it will result in an overdue credit record and may lead to being sued by the bank. The correct approach is to sue both the developer and the bank in the litigation, requesting the simultaneous rescission of the two contracts and the return of the purchase price and the principal and interest of the loan by the developer.

Q4: If the developer goes bankrupt, what should the home buyers do?

Within the time limit for creditor's declaration set by the court, the creditor shall file a declaration with the administrator and assert rights according to the circumstances: For consumers of commercial housing who have paid the full purchase price, they may assert the right to request delivery of the house, which takes precedence over the right to priority compensation for the construction project price, mortgage rights, and other creditor's rights (The Interpretation of the Supreme People's Court on the Protection of the Rights of Commercial Housing Consumers, implemented on April 20, 2023); If the house cannot be delivered, they may claim a refund of the paid purchase price and enjoy the corresponding priority rights. If the creditor has objections to the review conclusion made by the administrator, he/she shall raise them in time and seek judicial remedies. It is recommended to entrust a lawyer to follow up on the bankruptcy proceedings, check the declaration materials and priority claims, and avoid being affected by procedural defects in the compensation process.

Q5: Between checking out of the hotel and waiting for work to resume, which should I choose?

There are three key factors to consider: 1. Project status: Check whether there is a buyer to take over the project, whether the government task force has intervened, and whether the pre-sale funds can be recovered. For projects with a clear resumption schedule and manageable funding gaps, it’s often more advantageous to wait for delivery and claim default penalties. 2. Developer’s assets: Check whether the land and in-progress projects have been sealed by multiple parties, and estimate the remaining value. For projects with severe asset loss, it’s advisable to withdraw from the contract early to protect your interests. 3. Personal needs: For those in urgent need of a home or under heavy mortgage pressure, waiting longer will incur higher costs. The two approaches can be implemented sequentially: First, sue to seize assets to secure the initiative in withdrawing from the contract and gain leverage in resumption negotiations. It’s recommended to consult a lawyer to draft a plan based on the results of due diligence.

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