What is the guarantee of house repurchase?

In my opinion, this so-called "repurchase guarantee" has at least no legal basis.

Let's start with the guarantee. The Guarantee Law of People's Republic of China (PRC) only stipulates five forms of guarantee: guarantee, mortgage, pledge, lien and deposit, and there is no so-called "repurchase". Therefore, "repurchase guarantee" is not a legal concept at all.

We can barely understand this "repurchase guarantee" as the guarantee of the developer. Even so, it is against the law.

The Measures for the Administration of Personal Housing Loans of the People's Bank of China stipulates that the borrower (that is, the small owner) must use the house he has purchased for his own use as the loan collateral, and must use the full value of the house as the loan collateral, and go through the mortgage registration procedures.

Article 23 stipulates: "If the borrower cannot provide the mortgaged (pledged) property in full, a third party recognized by the lender shall provide joint and several liability guarantee".

Visible, only in the case of small owners can't provide collateral in full, only need the guarantee of a third party. Bank mortgage loans mostly lend at 70% of the house value, requiring small owners to mortgage loans with all the house value. Therefore, there is basically no possibility of insufficient collateral value.

To be on the safe side, some banks require more guarantees. The Measures for the Administration of Personal Housing Loans of the People's Bank of China stipulates that this kind of guarantee must be joint and several liability guarantee, not "repurchase guarantee", so this kind of "repurchase guarantee" is against the law.

In fact, "repurchase guarantee" is not feasible in practice.

Article 28 of China's "Guarantee Law" stipulates: "If the same creditor's right is guaranteed by two things, the guarantor shall bear the guarantee responsibility for the creditor's right other than the guarantee of things". In the process of mortgage loan, housing mortgage is the guarantee of things, but generally speaking, the value of mortgaged houses often exceeds the loan amount. In other words, the creditor's rights other than property guarantee are zero. So, what's the use of asking developers or others to guarantee?

What's more, what developers provide is "repurchase guarantee" rather than "joint liability", which is even more meaningless. Because this is only a commitment of developers to buy back property units from banks under certain conditions. From the legal point of view, this actually means that when the small business owner can't repay the debt, the bank, as the mortgagee, has the right to exercise the mortgage right, sell and auction the collateral and get compensation from it, and the developer is willing to buy the collateral at this time. This commitment is not legally binding. Although developers have made such a promise, the existing laws do not require developers to do so.

Therefore, if small owners are really unable to repay their loans, banks can sue small owners in court to protect their rights and interests. If there are other guarantors (including developers) who are jointly and severally liable for the guarantee, banks can sue the guarantors at the same time, but they can't sue the developers who provide the so-called "repurchase guarantee" at the same time, and they can't ask the developers to repay the debts that the small owners are unable to repay.

Moreover, the legal relationship of this "repurchase guarantee" is rather vague. Developers sell their houses to small owners, not banks. Although banks provide a large number of mortgage loans, the parties to the purchase contract are still developers and small owners, and banks are not one of the parties in the housing sales relationship. Even if developers want to buy back houses, they can only buy back from small owners, not from banks.

Under special circumstances, the bank may require the developer to provide a certain percentage of guarantee (such as 10% of the house price), but it is definitely not a repurchase guarantee.

To sum up, I think the so-called "repurchase guarantee" is a special case of imperfect laws in China's real estate industry. In practice, there is no harm to developers. If the lending bank insists, it doesn't matter much if it is written in the agreement. But for banks, "repurchase guarantee" should be said to be meaningless and a guarantee.