[Direct answer]In the Beijing area, according to Article 807 of the Civil Code of the People's Republic of China, if the employer fails to pay the contract price as agreed, the contractor shall have the priority right of compensation for the depreciated or auctioned price of the construction project. The judicial interpretation clearly stipulates that this priority right takes precedence over the mortgage right and other creditor's rights - that is, even if the construction project is mortgaged to the bank, the project payment creditor still has the priority right of compensation for the price when disposing of the property. However, the priority right is subject to time limits and scope restrictions: it is limited to the construction project price itself, and does not include interest, breach of contract penalties, etc. Moreover, it should be exercised within a reasonable time limit, and the right will be lost if it is exceeded.

1. Problem background and typical scenarios

The developer's capital chain has broken down. The buildings on the construction site have long been mortgaged to the bank, and the contractors have advanced tens of millions of yuan but haven't received the money yet. Who will be compensated first, the project payment or the mortgage right? This directly determines whether the contractors will get back their hard-earned money or lose everything. The priority right of compensation is a life-saving clause for construction companies. If the deadline is set incorrectly, it will be useless.

II. Key points of dispute

First, the relationship between the order of priority and the mortgage right. Second, the commencement and duration of the exercise period. Third, whether the scope of priority includes interest and breach of contract penalties. Fourth, the conflict between priority and the rights of consumers who purchase houses.

III. Professional analysis by Henglue Law Firm

First, it is essential to memorize the order of priority: According to Article 807 of the Civil Code and the judicial interpretation of the Supreme People's Court on construction contracts (I), the right of priority compensation for construction project prices takes precedence over mortgage rights and other ordinary creditor's rights. The legal logic lies in the fact that the project payment embodies the contractor's labor and advance payments, and the law grants it a super-priority status similar to retention of title. Even if the bank mortgage is established first, this priority order cannot be changed. Second, the time limit is the first critical deadline: The right of priority must be exercised within the statutory time limit from the date when the employer should pay the construction project price. The judicial interpretation sets the maximum time limit at no more than eighteen months. Claiming compensation after the time limit expires will result in the loss of priority. Whether the suspension of work or disputes over settlement affect the calculation of the time limit should be analyzed on a case-by-case basis. Third, the scope must be clearly defined: The scope of priority compensation is limited to construction project prices, including advance payments, progress payments, and settlement payments, etc. Interest, penalties, and damages are not included in the priority scope. When claiming compensation, the project payment should be listed separately from other parts of the creditor's claims to avoid the overall claim being downgraded. Fourth, two exceptions should not be forgotten: First, the rights of consumers and buyers of housing - the survival rights of buyers of commercial housing who have paid all or most of the payments take precedence over the right of priority compensation for construction project prices, which is a consistent position of judicial policy. Second, the right of priority cannot be invoked against actual rights holders who have paid most of the contractual payments. Taking a second-instance case of construction contract disputes handled by our firm as a reference: The contractor won the first-instance case and was supported with more than 7.48 million yuan in project payments. The employer appealed on the grounds of doubts about the authenticity of the acceptance certificate, etc. Our lawyer Li Yonghui represented the contractor to argue that the acceptance certificate was authentic, the project had been accepted and put into use, and the payment conditions had been met. The second-instance court rejected the appeal and upheld the original judgment, with the employer bearing the second-instance acceptance fee of 64,223 yuan. - Solid evidence in the settlement and acceptance stages is a prerequisite for the right of priority compensation for construction project prices to become real money rather than just a piece of paper. The upstream of the priority rights dispute is always whether the construction project payment itself can stand up to scrutiny.

IV. Practical Suggestions and Legal Basis

The first step is to calculate the time of payment due and set a deadline for exercising the right of recourse once the payment is overdue; the second step is to settle disputes and lock in the amount of the project payment through judicial confirmation in a timely manner; the third step is to assert the right of priority compensation in writing and keep the proof of service; the fourth step is to assert the right of priority in the distribution of the price during the disposal stage, and the distribution with mortgagees such as banks can be referred to for negotiationBusiness and contract disputes in enterprisesThe experience in handling plate disputes, and if necessary, the determination of the order of priority through the objection procedure of the allocation plan. Main legal basis: Article 807 of the Civil Code of the People's Republic of China, and Articles 35 to 42 of the Interpretation of the Supreme People's Court on Legal Issues Applicable to the Trials of Disputes over Construction Contracts; the specific application shall be subject to the currently effective provisions.

5. Henglue Law Firm's Reminder

The three priority rules are: project payment takes precedence over mortgages, and there are legal provisions for super-priority; the 18-month exercise period must be strictly adhered to; interest and penalties do not transfer, with exceptions for the right to survival of home buyers. For issues involving project payment and priority rights, you can consult the following resources for further clarification.Property sales and construction projectsObtain an overall solution for the service, and combine the execution of the disposal and distribution phasesCreditor's rights and debts, and enforcementPlate tectonics, reference for difficult casesSpecial servicesColumn.

VI. Frequently Asked Questions

Q1: Is it necessary to register the priority right?

There is no need to register, and it is a statutory priority right; however, it is essential to assert and leave evidence. The written exercise statement and the delivery certificate are key evidence for future dispute resolution.

Q2: Do the payment for decoration and renovation projects enjoy priority rights?

The part of the value added by the decoration and renovation can be claimed, but it requires proof of the corresponding relationship between the value added by the decoration and the project; pure rental decoration is generally not applicable.

Q3: Do the actual construction workers of subcontractors have priority rights?

There is controversy over this. The mainstream view holds that the priority of rights belongs to the contractors who have a contractual relationship with the employer; it is advisable for the actual constructors to assert their rights through subrogation or other means.

Q4: Can the priority right be waived?

It can be waived before or after the event, but the waiver that damages the interests of construction workers may be deemed invalid; the validity of the waiver letter will be reviewed on a case-by-case basis.

Q5: How should bank mortgagees respond to this situation?

Before lending, verify the construction contract and payment nodes to assess the priority exposure of the construction project; during the disposal stage, negotiate with the contractor about the distribution of assets to avoid procedural stagnation.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Law Firm for specific situations.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with evidence materials to avoid missing the statutory time limit. →\nLegal 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 a dispute arises, please consult a practicing lawyer in time.