[Direct answer]In the Beijing area, mortgaged houses can be bought and sold, but the mortgage rights must be properly handled. According to Article 406 of the Civil Code of the People's Republic of China (effective January 1, 2021), during the mortgage period, the mortgagor may transfer the mortgaged property, unless otherwise agreed by the parties; if the mortgaged property is transferred, the mortgage rights shall not be affected. In practice, second-hand house transactions often proceed through the redemption of the mortgage to clear the loan and remove the mortgage before transferring ownership, or the buyer may repay the seller's loan after the supervision of the purchase price, or the transfer-with-mortgage policy may be applied. If the transfer registration is not approved by the mortgagee and the mortgage is not removed, the transfer registration will usually be blocked. For more details, please refer to the following link:Legal services for real estate transactions and construction projects.

1. Problem background and typical scenarios

Most second-hand houses are still subject to outstanding bank mortgages when they are sold, and the unresolved mortgage becomes the biggest obstacle to the transaction. Typical scenarios include: the seller is unable to raise funds to redeem the house and requires the buyer to use the down payment directly to repay the loan; the agent promises to handle the transfer with the mortgage in place, but fails to operate in accordance with regulations; the buyer and seller encounter a trust crisis due to loan approval and fund supervision before the transfer; the seller conceals the fact of the mortgage, resulting in the buyer being unable to complete the transfer. Such disputes involve both the conflict between the mortgage right and the ownership right under the Property Law and the issues of contract performance and fund safety. For related contract risks, please refer to the following materials for reference.Business and contract dispute resolution services for enterprises.

II. Key points of contention

  • The safety of the mortgage repayment funds: Whether the buyer's down payment is used to repay the loan or is misappropriated, and whether the funds are properly supervised, directly determine whether the transaction can be completed successfully.
  • The applicability of transferring ownership with a mortgage: Policies and the degree of cooperation between banks vary from region to region, and not all houses can be transferred in this way. It is necessary to confirm the requirements of the mortgage bank and the registration authority in advance.
  • The mortgagee's consent and notification: Although the Civil Code adopts the principle of free transfer, if the parties agree to prohibit the transfer, the agreement shall prevail, and the mortgagee shall be notified in a timely manner.

III. Professional analysis by Henglue Lawyers

In handling housing sale cases, Henglue Law Firm once represented a complex dispute where the nominal sale was actually a disguised loan: the company signed a housing sale contract with an employee and applied for a mortgage loan in the employee's name. Later, the employee refused to cooperate with the transfer of ownership, and the company sued to confirm the invalidity of the contract. Henglue Law Firm pointed out that the parties lacked genuine intent to purchase and sold the house, and their actions constituted collusion and fraudulent representation. According to Article 146 of the Civil Code, the firm argued that the sale was invalid, and systematically reconstructed the evidence chain involving the flow of funds, the holding of title certificates, and the agency agreement. The appellate court reversed the first-instance judgment, ruled that the contract was invalid, and ordered the house to be restored to the company's name. This case highlights that the core of mortgage and transfer disputes lies in the authenticity of the transaction purpose and the completeness of evidence. In cases involving false contracts and purchasing houses under someone else's name, it is essential to clarify fraudulent representations and hidden actions to prevent dual risks in both criminal and civil litigation. Relevant compliance reviews can be conducted in conjunction with this case.Special services and other case services.

IV. Practical suggestions and legal basis

Legal basis: Article 406 of the Civil Code establishes the principle of free transfer of mortgaged property and clarifies that the mortgage right shall not be affected; Article 209 stipulates that the real estate ownership right shall take effect upon registration; Articles 509 and 577 regulate the performance of contracts and the liability for breach of contract; the Interim Regulations on Real Estate Registration and the detailed rules on mortgaged transfer in various regions provide an operational framework. Practical suggestions: Check the status of mortgages and seizures before signing the contract; clarify the methods of redeeming the property, the account for fund supervision, and the breach of contract clauses; prioritize the use of official fund supervision and mortgaged transfer; if the seller conceals the mortgage or sells the same property to two buyers, apply for preservation measures in time. For disputes over the performance of contracts, you can seek advice from a professional.Creditor-debtor relations and enforcement case servicesTeam.

5. Henglu Law Firm's Reminder

The sale and purchase of mortgaged houses is not prohibited, but the safety of funds and the removal of mortgages are the key to the success or failure of the transaction. Buyers should check the mortgages, manage the funds, and clarify responsibilities throughout the entire process, giving priority to official supervision and transfer of ownership with a mortgage; sellers should truthfully disclose the mortgages and actively arrange for the redemption of the property, so as to avoid the risk of contract invalidation or compensation due to concealment. The house-buying and selling chain is long and involves many links. It is recommended that professional lawyers review the contract terms and transaction structure at the signing stage to prevent potential problems. This case was handled by Beijing Henglu Law Firm.Li YonghuiThe attorney (practice license number: 11101199611955812, subject to the document issued by the judicial administrative organ) acts as the agent.

VI. Frequently Asked Questions

Q1: If the house still has an outstanding loan, can it be directly sold to someone else and transferred to the buyer's name?

Yes, it's possible, but it requires removing the mortgage or handling a transfer with the mortgage in place. According to Article 406 of the Civil Code, during the mortgage period, the mortgagor may transfer the mortgaged property, and the mortgage right will not be affected, meaning that the law allows a transfer with the mortgage in place. In practical operations, there are mainly three approaches: First, the seller either self-finances or borrows money to pay off the loan and cancel the mortgage before transferring the ownership, which is the most reliable option; Second, the buyer places the funds corresponding to the mortgage repayment under financial supervision and directly clears the mortgage on behalf of the seller to remove the mortgage; Third, a transfer with the mortgage in place that complies with local policies, where the ownership transfer registration is completed while the mortgage is still in effect, and the buyer's lending bank assumes the mortgage. Regardless of the approach, it is necessary to clearly define the responsibilities for redeeming the property, the financial supervision measures, and the breach of contract clauses in the contract to prevent the transfer from being stalled at the mortgage stage.

Q2: If the seller refuses to cooperate with the redemption of the property, can the buyer force the transfer of ownership?

Generally, it is not possible to force the transfer of ownership itself, but it is possible to request the seller to continue to perform the contract and have the court remove the mortgage during enforcement. If the seller fails to redeem the property as agreed, resulting in the inability to transfer ownership, the buyer may sue the seller for breach of contract, requesting the seller to continue to perform the contract, assist in the transfer of ownership, and after winning the lawsuit, use the purchase price to pay off the mortgage debt and cancel the mortgage registration through the enforcement process. However, whether the court can directly order the transfer of ownership with a mortgage depends on local policies and the attitude of the mortgage bank; if the value of the house is insufficient to cover the mortgage or the seller has other debts that have been seized, the forced transfer of ownership will be hindered. It is more prudent for the buyer to set up fund supervision, specify the redemption period and high-amount breach of contract clauses when signing the contract, and, if necessary, apply for property preservation and seize the house to prevent the seller from selling the same house to two buyers or maliciously mortgaging it.

Q3: Is it safe to transfer ownership with a mortgage in place? Will the loan still be my responsibility after the ownership transfer?

A standard mortgage transfer is safe, but the key lies in the order of assuming and canceling the mortgage liabilities. The essence of a mortgage transfer is: without canceling the original mortgage, by connecting the new and old loan banks, supervising the funds, and jointly handling the registration, the transfer registration, the establishment of a new mortgage, and the cancellation of the original mortgage can be completed simultaneously, so that the buyer will not unnecessarily assume the seller's old loan. The potential risks include: first, whether local policies and banks support it; second, operational connection errors leading to the original mortgage not being timely canceled and the funds not being supervised; third, the seller having hidden debts resulting in the house being sealed off. The buyer should require official fund supervision, confirm the bank's assumption plan, and lock in the order of paying off the debt before transferring ownership or completing the registration simultaneously in the contract and registration process, and never transfer the purchase price privately.

Q4: How to check whether a mortgaged house has been sealed up or subject to a second mortgage?

Before signing the contract, it is essential to retrieve the real estate registration booklet. The buyer may request the seller to cooperate in checking the mortgage registration, seizure registration, and objection registration information of the house at the real estate registration center to confirm whether there is a bank mortgage (first mortgage), a second mortgage by other institutions or individuals, and a court seizure. At the same time, check the seller's credit information and debt clues, and be vigilant against the seller concealing a second mortgage or selling the house despite it being seized. The contract should stipulate that the seller guarantees there are no undisclosed rights encumbrances. If the seller breaches this obligation, the buyer shall have the right to rescind the contract and claim compensation. If a seizure is discovered, the buyer may claim that the seller has committed a fundamental breach of contract, rescind the contract, and claim compensation. If necessary, apply for property preservation. It is not safe to complete the transaction solely based on the property ownership certificate or the verbal promises of the intermediary. It is more reliable to refer to the records in the registration booklet.

Q5: If the seller conceals the fact that the house is mortgaged, can the buyer rescind the contract and get a refund?

Yes. If the seller fails to disclose the mortgage truthfully, causing the buyer to be unable to achieve the contractual purpose or constituting fraud, the buyer has the right to claim the rescission of the sales contract, the return of the paid purchase price and interest, and compensation for losses in accordance with the provisions of the Civil Code on the rescission of contracts and breach of contract liability. If the house cannot be transferred for a long time due to the unremoval of the mortgage, it constitutes a fundamental breach of contract by the seller; if the seller fabricates the fact that there is no mortgage to induce the signing of the contract, it may also constitute fraud. The buyer may request the rescission of the contract within the statute of revocation. In practice, it is necessary to fix the evidence of concealment in time (such as communication records and registration inquiry results showing that the mortgage was set before the signing of the contract), and send a letter to rescind the contract and apply for the preservation of the house and funds as soon as possible. Never continue to make payments and wait, so as to prevent the loss from expanding; if necessary, through legal means to protect their rights and interests.Legal services for real estate transactions and construction projectsThe team initiated legal action.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

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, so as to avoid missing the statutory time limit. →Legal services for real estate transactions·Attorney Li Yonghui·Beijing Henglu Law Firm