Property Law and Its Influence on Construction Industry

Houses are built on land, not castles in the air. Therefore, if the purchaser wants to obtain the full ownership of the house, he must also obtain the flawless land use right. In this sense, although the buyer signed the house sales contract and paid the house price, the land involved in the house has been mortgaged with the land use right, so it is impossible to apply for the real estate ownership certificate, that is, according to Article 9 of the Property Law, the establishment of the real estate property right must be registered according to law, and it will not take effect without registration, so the buyer cannot legally obtain the ownership of the house.

From the point of view of the mortgagee (mostly a bank), although he obtained the mortgage of land use right according to law, it could not be realized. Because the buildings on the land are not mortgaged together. Banks can't just auction land use rights, and the ownership of houses still belongs to buyers. However, if the land use right and the above-ground buildings are auctioned, it will undoubtedly damage the legitimate rights and interests of all buyers.

There is a balance of interests here. If we focus on protecting the interests of banks, it will undoubtedly have a great social impact and affect social stability, because there are many buyers, which is not conducive to the construction of a harmonious society in China. However, if we focus on protecting the interests of buyers, it will cost banks tens of millions or even hundreds of millions of yuan. This huge risk will make banks afraid to lend to developers easily, which will not only endanger the national financial security, but also inevitably lead to chaos in the real estate market.

Although the provision on bona fide acquisition system in Article 106 of Property Law extends the scope of bona fide acquisition to real estate, it is difficult for buyers to advocate bona fide acquisition because the pre-sale permit basically states that "the land use right of this project has been mortgaged". What needs to be clear is that it is not appropriate to let the purchaser bear the risk of not being able to apply for a permit just because there is such a seal on the pre-sale permit. Because in the practice of real estate development, many developers use the mortgaged land use right to raise development funds, and then use the house payment to repay the loan to cancel the mortgage before handling the real estate license. If the buyers don't accept it, they can only be homeless under the banner of law.

Related to this, Article 1 17 of the Property Law stipulates that the right to use residential construction land will be automatically renewed after the expiration of 70 years, but it is not clear how to renew it after the expiration and whether it is necessary to pay fees. If necessary, who is the eligible applicant when the ownership of the above-mentioned land use right is unclear? Who should bear the renewal fee? Bank or buyer?

2. Disputes over mortgage rights of projects under construction.

In reality, a large number of developers mortgage projects under construction to builders due to financial difficulties, requiring them to pay in advance. At this point, how to realize the mortgage right of the builders' projects under construction and the mortgage right of the banks' land use rights?

On this issue, some scholars believe that "when the mortgagor informs the mortgagee of the need for new houses and obtains the consent of the mortgagee, the effectiveness of the mortgage of the right to use the construction land is not the effectiveness of the new houses after its establishment. If the mortgagor fails to inform the mortgagee of the need to add new houses, the mortgage of the right to use the construction land and the effect of adding new houses after its establishment. " ②

The author thinks this view is debatable. If the mortgagor informs the mortgagee (still taking the bank as an example) of the fact that he will add new houses during the mortgage of the right to use the construction land, the bank should predict the risk of realizing the mortgage in the future. However, the subject matter of the mortgage does not involve the house to be built, so it can be concluded that the mortgage only involves the land use right.

In this case, problems related to the priority of bank land mortgage and mortgage right of projects under construction will follow. In the case that both the auctioneer and the buyer are the same person, can the two mortgaged properties be evaluated, auctioned and compensated separately? Mortgage of projects under construction is related to land use right. Then, when the proceeds from the auction of the project under construction are not enough to pay off the owed project funds, can the builder give priority to the remaining proceeds from the auction of land use rights after the bank gives priority to compensation? The author believes that separatism theory lacks maneuverability in practice.

In the latter case, the value risk of the mortgaged property should be borne by the bank. According to Article 193 of the Property Law, if the developer's behavior of building houses on mortgaged land really damages the value of the land use right and cannot restore its value, the bank has the right to ask the developer to provide a guarantee equivalent to reducing the value. At this time, the effect of applying mortgage to new houses is equivalent to providing corresponding guarantees, which seems to be in the same strain as the spirit of the Property Law.

However, this practice is contrary to the legislative spirit embodied in Article 200 of the Property Law that "after the right to use construction land is mortgaged, the new buildings on the land are not mortgaged property". When the mortgage of construction land is established, the right to use the mortgaged construction land shall be evaluated and priced. Even if the developer didn't inform the bank of the fact that he would add new houses at the time of mortgage, if the validity of the land use right mortgage is extended and the new houses are added after its establishment, it means expanding the value of the mortgage. Moreover, the builder's right to know such a "notice" is in a weak position, so it is unfair for him to bear the burden of proof that the bank knows that a new house will be built, which undermines the balance of interests of both parties. If the developer's behavior of building a new house damages the value of the mortgaged land use right, the bank's behavior of asking the developer to assume supplementary responsibilities has been converted into creditor's rights, and its effect should be lower than the mortgage right enjoyed by the builder on the house according to the principle of property right priority.

Of course, as far as the priority right of construction project price enjoyed by builders is concerned, although there are still disputes between the priority right of construction project price and the priority right of bank mortgage, most scholars and judicial practice have generally agreed that the priority right of construction project price is preferred. The author will discuss it in detail below, so I won't repeat it here.

The author believes that the above conflicts and frictions between banks and buyers, banks and builders in real estate practice should be solved by weighing the interests of both parties in line with the principle of fairness. It is suggested that the state should issue relevant laws and regulations to force developers to set up a unique sales account in the mortgage bank of land use rights and establish a repayment reserve system. According to a certain proportion, the bank has the right to limit the circulation of the reserve fund for house price repayment if the developer does not provide other guarantees.

Second, the ownership of the income right of the project under construction

The so-called income refers to the income generated by the expropriation of things, that is, fruits, including natural fruits (such as fruits and crops in farmland) and legal fruits (such as rent from renting houses). (3) The income of construction in progress mainly refers to the income generated by the advertisement of construction fence and protective net, which belongs to temporary real estate income and can be regarded as legal fruits.

Article 1 16 of the Property Law stipulates: "Legal fruits, if agreed by the parties, shall be obtained according to the agreement; If there is no agreement or the agreement is unclear, it shall be obtained in accordance with trading habits. " Although the law does not clearly stipulate the ownership of the beneficial right of construction projects, it can be inferred from the provisions of this article that the ownership of the beneficial right shall be subject to the agreement, and if there is no agreement, the trading habits shall prevail.

Without violating the mandatory provisions of the law, the law has no right to interfere with the autonomy of the builders and developers to freely agree on the ownership of the income rights of the projects under construction according to their own wishes. But what about "acquiring according to trading habits"?

The author believes that although the protection and management right of the building belongs to the builder before the completion and delivery, the ownership should belong to the developer. The construction fence and protective net are temporarily built on the land where the developer has obtained the land use right according to law, in order to build the main building such as houses, and the main building needs to be demolished after completion. It can be considered that fences and protective nets are subordinate to the main building. Then, it is appropriate to identify the usufructuary right as a developer when there is no clear agreement between the developer and the builder that the usufructuary right belongs to the builder. Of course, the developer's right to benefit from the project under construction should be based on the premise of not affecting the construction of the owner.

In fact, developers often sell houses during construction. If before the project is completed and delivered, the income right of advertisements such as construction enclosure belongs to the construction party, it will undoubtedly cause the construction party to use the resources of the developer to obtain benefits, damage the legitimate rights and interests of the developer and affect the developer's publicity of the whole property.

Three, the construction project price priority compensation dispute

With the promulgation of "Property Law", the question of whether builders have lien on contracted projects has aroused heated debate in the legal theory and construction industry. The law still limits the subject matter of lien to movable property, and does not include construction projects in the category of lien. Then, after the entry into force of the Property Law, what impact will it have on the priority of compensation for construction projects?

Article 286 of the Contract Law stipulates that if the employer fails to pay within the time limit, the builder may negotiate with the employer to discount the project, or apply to the court for auction of the project according to law. The construction project price shall be paid prior to the project discount or auction price. However, the law does not stipulate the specific operation and nature of the priority right of compensation for construction projects. Therefore, how to apply the priority right of compensation in practice and how to operate when it conflicts with the mortgage right are all urgent problems to be solved.

In view of the above problems, the Reply of the Supreme People's Court on the Priority of Compensation for Construction Projects (hereinafter referred to as the Reply) issued on June 27, 2002 clearly stipulates: "When people's courts try real estate disputes and handle enforcement cases, they shall, according to the provisions of Article 286 of the Contract Law, determine that the priority of compensation for construction contractors is superior to creditor's rights such as mortgages." The introduction of this judicial interpretation has temporarily ended the debate on which comes first, the priority of compensation and the security interest.

With the promulgation of the Property Law, the academic discussion on the legal nature of the builder's priority right of compensation has come back. Many scholars believe that Article 179 of the Property Law stipulates that "in order to guarantee the performance of debts, if the debtor or a third party does not transfer the possession of the property and mortgages the property to the creditor, if the debtor fails to perform the due debts or realize the mortgage according to the agreement of the parties, the creditor has the right to receive priority compensation for the property", and Article 195 stipulates that "if the debtor fails to perform the due debts or realizes the mortgage according to the agreement of the parties, If the agreement harms the interests of other creditors, other creditors may request the people's court to cancel the agreement within one year from the date when they know or should know the reasons for cancellation ",which only stipulates that the mortgage takes precedence over the general creditor's rights, and does not clearly stipulate whether the mortgage takes precedence over the construction project funds. Therefore, the discussion on the nature of the priority right of compensation for construction projects and the priority with mortgage has been put on the agenda.

The author believes that the first problem is the basis for solving the second problem. Because our country adopts the principle that property right is superior to creditor's rights, the nature of mortgage right is security property right, which determines the nature of the priority right of construction project price and solves the priority problem of mortgage right.

1, the nature orientation of the priority right of compensation for construction project price

Judging from its legal characteristics, this priority is a legal mortgage. First of all, this right has priority, that is, in the legal relationship system of construction projects, this right takes precedence over other rights without priority. As long as the developer fails to pay the project price as agreed, the developer has the right to exercise this right after being urged; Secondly, this right is subordinate and inseparable. It is not an independent civil right. Its emergence and existence is based on the creditor's rights of construction project price, which is related to all the subject matter and is not affected by the possession and transfer of the subject matter and the partial repayment of the creditor's rights of construction project price. These characteristics accord with the essential characteristics of mortgage.

In addition, this right is statutory, and its establishment is directly and clearly stipulated by law, without the consent of the parties, registration conditions and publicity, which is different from other mortgages. The author thinks that although both Property Law and Guarantee Law emphasize that registration is an effective requirement of real estate mortgage, it should not be applied to legal mortgage. Whether the establishment of legal mortgage requires registration shall be clearly stipulated by law. The relevant laws of our country have no provisions on whether the priority right of compensation for construction projects needs to be registered, and failure to register should also be regarded as effective. Therefore, we can't simply deny the mortgage nature of the priority of the construction project price without registration and publicity. It is appropriate to attribute it to a special legal mortgage.

Judging from the legislative process of contract law, the priority right of compensation for construction project price should be legal mortgage. Professor Liang Huixing, a famous jurist who participated in the drafting of the Contract Law, believes that to judge whether Article 286 of the Contract Law belongs to priority or legal mortgage, we must examine the legislative background and process of this article. From the legislative process, we can see that Article 286 of the Contract Law, from design, drafting, discussion, revision, deliberation to formal adoption, always refers to legal mortgage, and no one has ever put forward priority. ④

2. The concurrence of the priority right of compensation for construction projects and mortgage rights.

In China's real estate development, there are a large number of financing phenomena in which developers mortgage projects under construction to banks as repayment guarantees in order to raise loans for continued construction projects. As mentioned above, positioning the priority of compensation for construction projects as legal mortgage will lead to the concurrence of two kinds of security interests and bank mortgage.

The construction project price is not an ordinary creditor's right, and its right is based on the materialization of the value of the builder's labor, management, prepaid building materials and the labor wages and remuneration invested by construction workers, so that the building can exist and increase in value. Developers do not pay the price, they do not enjoy full ownership of construction projects. The mortgage or other general mortgage enjoyed by banks is based on the existence of buildings. Therefore, the builder should have the priority to get the project price mainly based on labor remuneration from the building, which is also in line with the principle of fairness in civil law. Therefore, the priority of the construction project price is not only prior to other creditor's rights, but also prior to mortgage. ⑤

In addition, although the reply is a judicial interpretation in nature, and its effectiveness level is lower than that of the Property Law as a law, this judicial interpretation should still be applied on the premise that the law does not clearly stipulate the priority of compensation for the construction project price and the right to realize the mortgage right, that is, the priority of compensation for the project price.

3. Does the priority right of construction project funds extend to the public part of the community?

Article 73 of the Property Law stipulates: "The roads within the building division belong to the owner * * * and the owner * * *, except the roads belonging to the urban public * * *. The green space in the building division belongs to the owner, except the urban public green space or the express individual. Other public places, public facilities and property services within the building division belong to the owners. " Article 74 stipulates: "In building zoning, parking spaces and garages planned for parking cars should first meet the needs of owners. In the building division, the ownership of planned parking spaces and garages shall be agreed by the parties through sale, gift or lease. Parking spaces that occupy roads owned by the owner or other venues for parking cars belong to the owner. "

The above provisions of the Property Law clearly point out that under normal circumstances, roads, green spaces, public places and parking spaces in residential areas are owned by the owners. Then, when builders exercise the priority of compensation for construction projects, can they give priority to compensation for these public facilities?

The author believes that the facilities such as roads, green spaces, public places and property service rooms stipulated in Article 73 should not be included in the scope of exercising the priority right of compensation. First of all, the above-mentioned public facilities are owned by all owners, so according to Article 2 of the Reply, "After consumers pay all or most of the purchase price of commercial housing, the contractor's priority right to compensation for the project price of the commercial housing shall not be against the buyer", when the buyer pays all or most of the house price, he obtains the ownership of the house and enjoys the corresponding share of public facilities. If public facilities are included in the scope of realizing the priority of compensation, the legitimate rights and interests of these buyers will be damaged. Secondly, these public facilities are inseparable from the main building itself, and they are used together with the main building, and cannot be discounted or auctioned independently of the main building. Therefore, it is not suitable to be included in the scope of exercising the right of priority.

For the parking spaces stipulated in Article 74, the author thinks it is feasible to bring them into the scope of realizing rights. The Property Law only stipulates that parking spaces and garages should first meet the needs of owners, but does not stipulate that parking spaces and garages should be owned by owners. Therefore, if the developer and the owner agree to adopt the method of sale, the builder can exercise the priority right of compensation for the unsold parking spaces and garages, but the owner's priority right should be satisfied first, and the builder will pay the purchase price as the subrogation right of the parking spaces and garages. If the developer and the owner agree to adopt the method of addition, the builder can exercise the priority right of compensation for the unsold houses for the part that is not added. If the developer and the owner agree to adopt the lease method, the construction party may exercise the priority of compensation. However, according to the principle of "sale does not break the lease", the owner can continue to lease according to the conditions agreed with the developer, and the builder can get the priority compensation of auction money or rent.

4. The influence of advance notice registration system on payment priority of construction projects.

Article 20 of the Property Law stipulates: "When the parties sign an agreement on the sale of housing or other real estate rights, they may apply to the registration authority for advance notice registration in order to ensure the realization of future real rights. After the advance notice registration, if the right holder without advance notice registration agrees to dispose of the real estate, the real right effect will not occur. "

Advance notice registration has exclusive effect, and the obligee of advance notice registration can not only confront the real estate obligee and other property obligees, but also confront any third party. As long as there is no consent of the obligee of advance notice registration, the disposition of real right of real estate has no legal effect. This system undoubtedly strengthens the protection of property buyers and can effectively solve the problem that developers "sell one room and two houses" harm the interests of property buyers.

However, when the developer is in arrears with the construction project payment, and the construction party claims the priority of compensation for the project price, the legal effect of advance notice registration conflicts with the priority of compensation for the construction project price. According to the exclusive effect of advance notice registration, without the consent of the obligee of advance notice registration, others have no right to dispose of the registered subject matter of real right. At this time, whether the builder can auction the houses that have been registered in advance in order to realize the priority right of compensation for the project price, and how to solve the conflict of interests between the builder and the advance notice registrant is not clearly stipulated in the Property Law.

The author believes that the solution to this contradiction can refer to the spirit of the Reply, that is, after the registered obligee has paid all or most of the money for the purchase of commercial housing, the builder shall not exercise the priority of compensation for the project price, nor shall he have the right to advocate the auction of the houses involved. On the contrary, if the right holder of advance notice registration fails to pay the price or only pays a small part of the price, the builder may claim the priority of compensation for the project price, and the right holder of advance notice registration enjoys the priority of purchase under the same conditions. This operation can balance the interests of the builder and the obligee of the advance notice registration, which is in line with the principle of fairness.

5. Talking about housing to pay for the project.

As mentioned above, in the process of construction, when the developer has difficulty in cash flow and is temporarily unable to pay the project payment, in order to facilitate the completion of sales and the withdrawal of funds, it is often proposed to use the completed houses to compensate the project payment. Builders are eager to get back the project money, and may ignore the related risks brought by this behavior.

First of all, it should be noted that because the commercial housing discounted by the developer to the builder belongs to faster, the contract signed by both parties is a pre-sale contract. Therefore, according to the relevant provisions of Chinese laws, developers are required to obtain the pre-sale permit of commercial housing when signing the contract. Otherwise, the contract may be invalid and it is difficult to realize its rights and interests. Secondly, after accepting the developer's mortgage payment proposal, it is necessary to sign a formal commercial housing sales contract with the developer in time, and go to the housing management department for advance notice registration in accordance with the provisions of Article 20 of the Property Law to avoid the risk of "one room and two sales" by the developer. Thirdly, it is necessary to examine whether there are defects in the ownership or land use right of the project under construction. For example, whether the land use right has been mortgaged to the bank to raise development funds, and whether the projects under construction have mortgage rights. If the above defects exist, the builder should foresee the risk that the ownership of the mortgaged house may not be realized.

At the same time, under normal circumstances, the builder agrees that the purpose of mortgage payment is not to obtain the ownership of the house, but to obtain the project payment by selling the house. Therefore, in reality, in order to avoid complicated transfer procedures and transaction taxes, the developer is often not required to transfer the property rights of the house, but directly entrusted to sign a commercial housing sales contract with the purchaser in the name of the developer, and then the developer will return the house payment received to the developer. However, according to the principle of "publicity of property rights" established in Article 6 of the Property Law, it is difficult for the law to protect the rights that have not been registered for publicity. Therefore, once the developer is dishonest and does not pay the sales money received to the builder, the builder will face legal risks in both money and money, and its legitimate rights and interests will be difficult to realize.

Here, the author emphasizes that the premise of the existence of the priority right of compensation for construction project price is that the developer has not paid the project money. Therefore, if the construction party and the developer reach an agreement to pay the house price, it is deemed that the two parties have reached a change agreement on the settlement of the project payment, that is, the two parties have re-agreed on the repayment method. At this time, it will be difficult for builders to claim the priority of compensation for construction projects.

6. Who will protect the legitimate rights and interests of material suppliers?

According to the provisions of Article 286 of the Contract Law, the main scope of the priority right of compensation for construction projects is limited to the contractor, that is, the builder. Therefore, when the developer is unable to repay the arrears of the construction project, even if there is a mortgage, the builder can get the priority of compensation. However, in the case that the contract stipulates that the developer shall bear the engineering materials, the developer often owes the building materials to the material supplier at the same time. At this time, how to protect the legitimate creditor's rights of material suppliers who do not enjoy the priority of compensation for construction projects?

In this regard, China's laws have no relevant provisions, and the Property Law has not involved this issue. From a practical point of view, the position of material suppliers is extremely embarrassing. It has almost no right to know whether the construction project is mortgaged, and the law does not stipulate that the developer has the obligation to inform the material supplier when the construction project is mortgaged. At the same time, the law does not give material suppliers the priority to get payment for construction projects. If the developer is insolvent, the material supplier will undoubtedly become the ultimate victim and often suffer heavy losses.

Here, the author puts forward that the relevant judicial interpretation should give the material supplier the right to know, that is, the developer should inform the material supplier about the mortgage of the land use right or the project under construction, so that it can have a certain choice whether to sign or continue to perform the contract.

Fourthly, the influence of neighboring rights on construction enterprises.

Adjacency refers to the rights and obligations of two or more real estate owners, usufructuary rights holders or users who are adjacent according to law in terms of water use, drainage, transportation, ventilation and lighting. The rights of one party are called "neighboring rights". The Property Law specifically stipulates how to deal with the neighboring relationship with the contents of Chapter VII, among which the following three points will have a great impact on the related issues of construction projects:

1, ventilation, lighting and sunlight

Article 89 of the Property Law stipulates: "The construction of buildings shall not violate the relevant national engineering construction standards, and shall not interfere with the ventilation, lighting and sunshine of adjacent buildings." With the acceleration of urbanization, land resources are increasingly scarce, urban environment is increasingly dense, and land use is highly three-dimensional. There are more and more disputes about ventilation, lighting and sunshine between adjacent buildings. China has also issued national standards such as "Code for Planning and Design of Urban Residential Areas" to regulate the spacing and lighting of buildings, and take this as a standard to judge whether it exceeds the tolerance limit of ordinary people and hinders neighboring rights.

Although the owner, as the constructor of the construction project, has no direct legal interest in whether the building will affect the ventilation, lighting and sunshine of the adjacent owners, once a lawsuit is triggered, it may cause legal consequences such as stopping construction and restoring to the original state, which will affect the interests of the owner.

2. immeasurable things have been violated

The so-called immeasurable infringement is a concept in German and Swiss civil laws, which refers to the interference, nuisance or damage caused by noise, smoke, vibration, smell, dust and radioactivity invading adjacent areas, and belongs to a type of adjacent relationship in property law in nature. ⑥

Article 90 of China's Property Law also stipulates: "Property owners shall not abandon solid waste in violation of state regulations and discharge harmful substances such as air pollutants, water pollutants, noise, light and electromagnetic wave radiation."

Problems such as pollutants and noise discharged from construction have long plagued construction workers. Before the promulgation of Property Law, construction pollution mainly relied on administrative mediation, fines and other administrative means to mediate. Changjiang Daily once published an article entitled

The article "The first case of noise pollution in Wuhan was settled, and residents' rights and interests were compensated for two years" reported that during the construction of the commercial housing project in the former site of Jianghan University, 70 residents from 26 households around experienced two years of rights protection from June 2004 to June 2006, and finally got compensation.

In view of the increasing trend of such cases, the property law has explicit restrictions. It can be predicted that more owners will take legal measures to protect their legitimate rights and interests in view of building environmental pollution and noise pollution. Therefore, builders should strictly abide by the relevant regulations of our country and take active and effective preventive and cleaning measures to avoid such disputes.

3. Adjacent insurance rights

The so-called neighboring right refers to "the neighboring right holder has the obligation to prevent the neighboring right from being damaged because of the danger of using land, digging buildings or dumping buildings, and the other party has the right to ask the other party to prevent damage." ⑦

Article 9 1 of the Property Law stipulates the relationship between adjacent risks, that is, "the owner of a real estate shall not dig a hole to borrow soil, build a building, lay pipelines, install equipment and other acts that endanger the safety of adjacent real estate."

In the process of construction, construction enterprises will inevitably have an impact on adjacent real estate due to construction, foundation excavation, construction, wire and cable laying, water supply and drainage, natural gas pipeline and equipment installation. At this time, the builder should try his best to avoid and reduce the adverse impact on the adjacent owners of the real estate, and take necessary measures to prevent the occurrence of damage or danger of damage.

Of course, the property law, as a law to safeguard the basic economic system of the country, does not refine the specific subject of neighboring rights and damages, but only defines it as the owner of real estate in general. The author thinks that if the adjacent obligee causes damage to the interests of the project under construction or the construction party, it is more appropriate for the construction party to request to remove the obstacles and claim compensation for the losses because it may involve problems such as construction period and project quality. The main body responsible for the damage of neighboring rights should be determined among developers, constructors and design units according to the principle of fault.

conclusion

Property Law is a milestone in the process of rule of law in China. Although there is no special chapter in this law to express the problems related to construction projects, it embodies the provisions in this respect in many subtle provisions. The Property Law focuses on related issues at the macro-system level, so the practical problems involved in construction projects cannot be solved one by one, and need to be clarified through the introduction of relevant judicial interpretations. Nevertheless, the Property Law, as a basic law, is still of guiding significance for correctly handling problems related to construction projects.