[Direct answer]In the Beijing area, it's not impossible to address the issue of an excessively low penalty for breach of contract for second-hand houses. According to Article 585 of the Civil Code of the People's Republic of China, if the agreed penalty is lower than the actual losses caused, the party may request the people's court or arbitration institution to increase it; Article 584 stipulates that the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that could be obtained after the performance of the contract. Therefore, if the seller breaches the contract and causes losses such as the price difference of the house after the increase in price, the intermediary fee, and the interest on the loan, which are obviously higher than the agreed penalty, the buyer may claim for an increase in the penalty in the lawsuit and provide evidence of the actual losses. It is recommended to promptly send a written notice of default and apply for property preservation, and file a lawsuit within the three-year statute of limitations. For specific solutions, please refer to the relevant provisions.Legal services for real estate transactions and construction projects.

I. Problem Background and Typical Scenarios

In second-hand housing transactions, the penalty clauses are often written too casually: some stipulate one percent of the total house price, while others directly set a fixed amount of 20,000 to 50,000 yuan. When house prices fluctuate significantly, such agreements are far lower than the actual losses caused to buyers by sellers' breach of contract. Typical scenarios include: sellers refusing to transfer ownership or demanding a price increase when they see house prices rising; cases of double sales of the same house resulting in failed delivery; sellers reneging on the deal after collecting deposits and down payments; and buyers being unable to recover the intermediary fees, appraisal fees, loan interest, and taxes they have already paid. When the volume and prices of second-hand housing in Beijing fluctuate, such disputes increase significantly. For cases where buyers breach the contract but the penalty is still too low, the approach to handling them is consistent. For issues involving the validity of contract terms and evidence-gathering arrangements, reference can be made to relevant provisions.Business and contract dispute resolution services for enterprisesOutput: Clarify the basis of the right to request compensation.

II. Key points of dispute

The controversy focuses on four aspects. First, whether the penalty for breach of contract is lower than the actual losses, and how to define the scope of losses. The housing price difference is a typical loss of potential benefits. Second, the allocation of the burden of proof. The party claiming to increase the penalty for breach of contract needs to prove the amount of losses. Common practices include submitting recent transaction data of the same house type in the same community or applying for judicial appraisal. Third, the choice of right of claim. According to Article 588 of the Civil Code of the People's Republic of China, if both the penalty for breach of contract and the deposit are stipulated, the party in breach of contract can only choose one to claim, and cannot use them concurrently; at the same time, claiming to continue performance and the penalty for breach of contract must also comply with the contract stipulations and legal provisions. Fourth, whether it is possible to prioritize demanding continued performance. If the house has not yet been legally acquired by others, demanding transfer of ownership and assuming the liability for breach of contract beyond the time limit is often more conducive to achieving the purpose of the contract than simply demanding the penalty for breach of contract.

III. Professional analysis by Henglue Lawyers

In a housing sales contract dispute handled by Henglue Law Firm, on May 29, 2008, Xu Xia and Liu Han signed a "Agreement", in which Liu Han sold the house at No. 406 in Chaoyang District, Beijing to Xu Xia for 400,000 yuan, and agreed that after the property ownership certificate was issued, they must cooperate with the transfer of ownership. On October 23, 2008, Xu Xia and Liu Han and his wife, Zhao Qing, signed another agreement, which was notarized by a Beijing notary office. Xu Xia paid the full purchase price and moved into the house in 2008. In 2021, the real estate ownership certificate was issued and registered under Liu Han's name. However, the two parties have not negotiated the transfer of ownership since then. Xu Xia sued to request assistance with the transfer of ownership and the payment of a breach of contract penalty of 80,000 yuan. Liu Han entrusted Henglue Law Firm to defend the case, arguing that the two parties had agreed to assist with the transfer of ownership from the beginning, and had already handed over the original property ownership certificate to Xu Xia after the certificate was issued. The WeChat chat records could not show that Liu Han refused to transfer ownership, so there was no breach of contract and he should not bear the breach of contract penalty. The court held that the "Agreement" in the case was legal and effective. Xu Xia's request for assistance with the transfer of ownership was agreed to by Liu Han and Zhao Qing, so the court ordered Liu Han and Zhao Qing to assist with the transfer of ownership within seven days. As for the breach of contract penalty, the agreement did not specify a clear time for the transfer of ownership, and the two parties did not explicitly refuse to handle the transfer. Therefore, Xu Xia's claim for breach of contract liability was unfounded and was not supported. This case was handled by Beijing Henglue Law Firm.Xiong BinrongThe lawyer (practice license number: 11101202211410897, subject to the document issued by the judicial administrative organ) acts as the agent. This case illustrates from a reverse perspective that the establishment and adjustment of the penalty for breach of contract are based on the facts of breach of contract and actual losses: if the breach of contract does not occur, there will be no penalty for breach of contract; and when the agreed penalty is too low and the losses are confirmed, the party fulfilling the contract should actively request an increase in the penalty.

IV. Practical suggestions and legal basis

The legal basis is Article 577 of the Civil Code of the People's Republic of China (effective January 1, 2021) on breach of contract liability, Article 584 on the scope of compensation for losses including the benefits that could be obtained after the performance of the contract, Article 585 on the request to increase the breach of contract penalty if it is lower than the losses, Article 588 on the choice between the breach of contract penalty and the deposit, as well as the provisions on the adjustment of the breach of contract penalty in the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over the Sale of Commercial Housing Contracts (amended on December 29, 2020 and effective January 1, 2021). Practical suggestions: 1. When signing the contract, specify the breach of contract penalty as a certain percentage of the total house price and clarify the method of calculating losses to avoid only writing a fixed amount; 2. Immediately send a written notice to the other party and keep a record if you find them in breach of contract; 3. Apply for pre-litigation or in-litigation property preservation in time to prevent the house from being sold or mortgaged to others; 4. Claim both continued performance and an increase in the breach of contract penalty when suing; 5. You can stipulate in advance in the contract the burden of expenses for realizing the creditor's rights. For the recovery of funds, you can combine the above suggestions with relevant provisions of the Civil Code and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over the Sale of Commercial Housing Contracts to ensure the effectiveness of your legal rights and interests.Creditor-debtor relations and enforcement case servicesPlan and prepare for preservation and execution in advance.

5. Henglu Law Firm's Advice

The penalty for breach of contract is not a fixed number written down: if it is too low, you can request an increase; if it is too high, it may be appropriately reduced. The key lies in evidence. Without proof of losses, it's difficult to obtain support for a request for an increase; with sufficient evidence of price differences and expenses, the court may adjust the amount based on the actual losses. For second-hand housing transactions, which involve large amounts and long cycles, it is recommended that a professional lawyer review the penalty and deposit clauses at the signing stage to preemptively mitigate risks. If the other party has clearly breached the contract, you should take action as soon as possible and apply for preservation measures. Delaying action will only lead to increased losses. If you are unsure about the combination of claims or the statute of limitations, you can seek professional help to clarify these issues.Special services and other case-related servicesMake an appointment with a lawyer for an assessment.

VI. Frequently Asked Questions

Q1: The agreed-upon penalty for breaching the contract of a second-hand house is too low. Can the court support my claim to increase it when I sue the other party?

The determination of whether the request can be supported depends on the actual losses. According to Article 585 of the Civil Code, if the agreed penalty for breach of contract is lower than the actual losses caused, the party may request the people's court or arbitration institution to increase it, and the increased amount shall be based on the actual losses; Article 584 stipulates that the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that could be obtained after the performance of the contract. Therefore, only when it can be proven that the losses such as the price difference of the house, the agency fee, and the loan interest significantly exceed the agreed penalty for breach of contract, can the request for an increase be supported. The court will not automatically increase the penalty just because the housing prices have risen. Evidence is needed to support the claim, and the party making the claim has the burden of proof in this regard.

Q2: If you claim that the breach of contract penalty is too low, what evidence do you need to prepare?

There are three categories of evidence. First, contract and breach of contract evidence: sales contracts, supplementary agreements, deposit and payment receipts, online signing records, reminder letters, and communication records of the other party's refusal to perform. Second, loss evidence: recent transaction data of the same apartment type in the same community, appraisal reports, agency fee invoices, tax and loan interest receipts, used to prove that the actual loss is higher than the agreed breach of contract penalty. Third, performance evidence: payment receipts, vacated housing records, or materials related to assisting with loan processing. Additionally, attention should be paid to the issue of right of choice. According to Article 588 of the Civil Code, if both a breach of contract penalty and a deposit are agreed upon, the party in breach of the contract may choose one to claim, but not use both at the same time. Before suing, the party in breach of the contract should compare the amounts of the two and choose the more favorable one.

Q3: For disputes over the penalty for breaching a contract for a second-hand house, what are the approximate costs of litigation fees and attorney's fees?

The litigation fees shall be paid in accordance with the "Measures for the Payment of Litigation Fees" in stages based on the amount of the litigation request, and shall be borne by the losing party. If the plaintiff simultaneously claims for assistance in transferring ownership and breach of contract penalties, the fees shall generally be calculated separately according to the corresponding subject matter amount. Lawyer's fees are charged on a per-case basis or as a percentage of the subject matter amount, subject to the terms of the power of attorney. There is no uniform standard. For properties with high values, it is recommended to first assess the litigation benefits and the risk of price fluctuations, and then decide whether to claim for continued performance, request an increase in the breach of contract penalties, or rescind the contract to claim the price difference. For subsequent repayments, it is possible to combine them with the above-mentioned considerations.Creditor-debtor relations and enforcement case servicesDesign the preservation and execution plans in advance and keep the cost within a reasonable range.

Q4: How long does it usually take from filing a lawsuit to receiving the money in a dispute over the breach of contract for second-hand houses?

The first-instance ordinary procedure shall be concluded within six months, and the simplified procedure shall be concluded within three months; if it involves the evaluation of the housing price difference, public notice service, or the other party's appeal, the period will be extended accordingly. The second-instance procedure generally takes three months. After the judgment takes effect, if the other party refuses to perform the obligation, it is necessary to apply for compulsory enforcement. The actual recovery time depends on the other party's financial status and the progress of enforcement. It is recommended to apply for property preservation at the same time when suing, such as seizing the house or freezing the account, which can not only prevent the sale of the same house to two different buyers, but also improve the efficiency of mediation and recovery of funds. Overall, for cases with little dispute, it usually takes several months from filing the lawsuit to recovering the funds; for complex cases, it may take more than a year, so it is necessary to have a clear expectation of the timeframe.

Q5: If the seller breaches the contract and the penalty for breach of contract is too low, what should I do specifically?

It is recommended to proceed in four steps. First, immediately send a written reminder and demand continued performance, fixing the facts and time points of the breach of contract to avoid the other party's delay. Second, check the penalty clause and deposit clause in the contract, and choose a more favorable basis of claim in accordance with Article 588 of the Civil Code. Third, simultaneously preserve evidence, including payment receipts, online signing information, transaction data in the same community, and intermediary fee invoices, to prepare for claiming the penalty. Fourth, sue as soon as possible. You can simultaneously claim continued performance of the transfer and an increase in the penalty, or rescind the contract and claim the housing price difference. For large amounts, it is recommended to entrust a professional lawyer to evaluate the combination of claims and the timing of preservation.

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 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·Attorney Xiong Binrong·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on 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. In case of disputes, please consult a practicing lawyer in time.