[Direct answer]Yes. If the employer fails to pay the contract price as agreed, the contractor may urge the employer to pay within a reasonable period of time. If the employer fails to pay within the time limit, the contractor may agree with the employer to discount the project, or request the people's court to auction the project according to law, and the contractor shall be given priority to be compensated for the price of the construction project according to the discounted or auctioned price of the project. This is the statutory priority right granted by law to the contractor, which takes precedence over the mortgage right and other ordinary creditor's rights.

1. Problem background and typical scenarios

Arrears in project payments are a persistent problem in the construction industry, often occurring in scenarios such as developers' funding shortages, unfinished projects, and delayed acceptance and settlement. Contractors advance funds to start construction, but fail to receive payments after completion. Although they hold legal claims on the project, their cash flow is disrupted. Many contractors only know to sue for payment, but are unaware that their priority claims can allow their debts to be repaid before those of the mortgage banks, thereby losing this leverage opportunity unnecessarily.

II. Key points of contention

First, the exercise period. The priority right should be exercised within a reasonable period. According to current rules, the maximum period is eighteen months from the date when the employer should pay the construction project price. If the period exceeds this limit, the priority status will be lost and the creditor will become an ordinary creditor. Second, the scope of priority. It is limited to the construction project price itself. Interest, liquidated damages, and losses caused by the employer's breach of contract do not belong to the scope of priority compensation. Third, the scope of the subject matter. In principle, it applies to the part of the project constructed by the contractor, and under certain conditions, it can also apply to the decoration project. Fourth, the restriction of counterattacks. It cannot be used against consumers of commercial housing who have paid most of the payment, which is a tilted protection for buyers.

III. Professional analysis by Henglue Lawyers

From the perspective of judicial practice, contractors often lose cases not because of the priority right itself, but because of disputes over the starting point of the time limit and the scope of the priority right. How to determine the date of payment is often linked to the delivery of settlement documents and the payment deadlines stipulated in the contract. Disputes over the completion settlement will directly affect the starting point. In terms of scope, if the contractor includes the breach of contract penalty and interest in the priority right claim, the court will directly split them. In addition, the waiver of the priority right must be made with a clear expression of intent. Vague statements in the bid-winning contract or commitment letter do not necessarily constitute a waiver. When claiming, the contractor should arrange the project's depreciation or auction procedures in conjunction with the settlement litigation.Construction project disputesAndContract disputeThe evidence system of the two cases is highly overlapping and can be organized together.

IV. Practical suggestions and legal basis

According to Article 807 of the Civil Code of the People's Republic of China (adopted on May 28, 2020 and implemented on January 1, 2021) and Articles 35 to 42 of the Interpretation of the Supreme People's Court on Legal Issues Concerning the Trial of Disputes over Construction Contracts (No. 25 of 2020, implemented on January 1, 2021), the priority right shall be calculated from the date on which the payment is due and shall not exceed eighteen months. The methods of exercising the priority right include agreeing on a discounted price and requesting the court to auction the project. Suggestions: First, make the settlement documents as formal as possible and obtain receipts to lock in the starting point; Second, send written reminders near the payment deadline to form evidence for claims; Third, explicitly claim the priority right to compensation in the litigation request. If it is omitted in the enforcement stage, it will be very disadvantageous to claim it later; Fourth, simultaneously check whether there are any attachments or mortgage priority orders on the construction project, and evaluate the actual compensation space; If necessary, apply for preservation measures against the project itself in the litigation to create conditions for subsequent discounted price or auction procedures.

5. Henglue Law Firm's Reminder

The right of priority compensation is a right with a validity period. The longer it is delayed, the closer it is to expiring. For contractors who are already financially strapped, acting early means locking in the priority compensation order early; for settlement disputes in a stalemate, it may be considered to sue for priority rights on the undisputed parts first. When it comes to the seizure, auction, and negotiation of the distribution plan of the project,Creditor's rights and debts, and enforcementExperience is very important.Beijing Henglue Law FirmIt is recommended to conduct a feasibility assessment of compensation before initiating legal action. Three points should also be noted: Firstly, if the project has actually been put into use but the completion acceptance has not been carried out, it does not affect the claim for the price and priority rights, but the time of actual use should be fixed; Secondly, after the general contractor subcontracts the project, the subcontractors generally do not enjoy priority rights, and the settlement arrangements with the general contractor should be designed separately; Thirdly, if the employer enters bankruptcy proceedings, the priority rights can still be exercised in the bankruptcy proceedings, but it is necessary to timely declare the priority nature to the administrator and explain it to avoid being treated as an ordinary creditor.

VI. Frequently Asked Questions

Q1: Is there a high chance of winning if one asserts the right to priority compensation?

Within the 18-month time limit and if it relates to the main body of the project cost, the chances of success are higher; however, it will be difficult to obtain support for parts that exceed the time limit or expand the project scope.

Q2: What evidence do I need to prepare?

The construction contract, supplementary agreement, visa and settlement documents, payment reminder letters and delivery receipts, completion and acceptance materials, and advance payment and payment vouchers.

Q3: What are the approximate costs of attorney fees and litigation fees?

The litigation fees shall be calculated and charged in segments according to the subject matter of the dispute. The litigation fees shall be prepaid based on the amount claimed by the plaintiff. The proportion of the litigation fees to be borne by the losing party after the plaintiff wins the case shall be determined by the court. The appraisal fees shall be calculated based on the actual expenses incurred.

Q4: How long does the process take?

It usually takes about six months to resolve settlement disputes in the first instance, and the process will take longer if appraisal is involved. The subsequent enforcement will depend on the progress of asset disposal.

Q5: What should I do first?

First, check whether the priority period is about to expire, then fix the settlement and evidence of notice, and file a lawsuit to assert the priority right as soon as possible.

The above Q&A is mainly based on the judicial practice in the Beijing area. There may be differences in the interpretation of the law in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

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 creditor-debtor disputes·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.