If the developer delivers the house in violation of the agreement, it shall still bear the liability for breach of contract for defective delivery

Introduction: If the developer delivers the house late, he shall bear the liability for breach of contract in accordance with the provisions of the house sale contract. In practice, many developers force the delivery of houses that do not meet the delivery conditions to the buyer in order not to bear or bear less the liability for breach of contract for late delivery. In this case, the buyer can refuse to accept the house and require the developer to bear the liability for breach of contract for late delivery until the house fully meets the conditions for delivery.

I. Brief introduction of the case

On May 14, 2014, Mr. Xiao and Huangshi Sanjiang Real Estate Development Co., Ltd. (hereinafter referred to as "Sanjiang Company") signed the "Huangshi Commercial Housing Sale and Purchase Contract" (hereinafter referred to as the "Contract") to purchase a set of houses in the Sanjiang Gonghecheng Community developed by Sanjiang Company, and the contract stipulated that Sanjiang Company should deliver the houses that meet the delivery conditions to Mr. Xiao, the buyer, before October 30, 2015. However, due to Sanjiang Company's own reasons, it was not until October 12, 2017 that Sanjiang Company temporarily delivered the house key to Mr. Xiao, and the fire protection and greening projects in the community where the house is located have not yet passed the acceptance and do not meet the delivery conditions agreed in the contract for the sale and purchase of commercial housing between the two parties. In November 2019, Mr. Xiao and 40 other people filed a lawsuit with the Huangshi Port District People's Court in Huangshi City, demanding that the developer Sanjiang Company pay liquidated damages for late delivery of houses and liquidated damages for defective deliveries.

II. Adjudication

After trial, the court held that Mr. Xiao had paid the full purchase price in accordance with the contract, and Sanjiang Company should deliver the house that met the delivery conditions to Mr. Xiao according to the time agreed in the contract. However, Sanjiang Company did not deliver the house keys to Mr. Xiao until October 12, 2017, which has constituted late delivery of the house and shall bear the liability for breach of contract in accordance with the contract between the two parties. In addition, although Sanjiang Company delivered the house key to Mr. Xiao on October 12, 2017, because the project of the house involved in the case has not yet passed the fire control and greening acceptance, and the house involved in the transfer and occupation does not meet the agreed delivery conditions for completing the special acceptance of fire control and the completion of the landscaping project according to the design requirements, the delivery of the house by Sanjiang Company to Mr. Xiao on October 12, 2017 does not meet the delivery conditions agreed in the contract, it is a defective performance, and it should bear the liability for breach of contract for defective performance. However, there is no agreement in the contract signed by the two parties for the liability for breach of contract for the performance of the defect. According to the provisions of the third paragraph of Article 43 of the Regulations on the Administration of Property Services and Management of Hubei Province, if the construction unit delivers the newly built property that does not meet the delivery conditions to the buyer, it shall bear the corresponding responsibility and bear the upfront property service costs.

The court finally ordered Sanjiang Company to pay Mr. Xiao rmb79,244.46 in liquidated damages for late delivery and liquidated damages during the performance of defects within 10 days after the judgment took effect (calculated according to the standard of Mr. Xiao's monthly housing property fee from October 13, 2017 to the date when the house involved in the case met the delivery conditions agreed in the contract).

The same claims of the other thirty-nine home buyers were upheld by the court's decision.

III. Legal Commentary

If the developer delivers the house within the time limit, it shall bear the liability for breach of contract in accordance with the provisions of the house sale contract. In practice, many developers force the delivery of houses that do not meet the delivery conditions to the buyer in order not to bear or bear less the liability for breach of contract for late delivery. In this case, the buyer can refuse to accept the house and require the developer to bear the liability for breach of contract for late delivery until the house fully meets the conditions for delivery. If the buyer is forced to accept the house, it does not mean that the buyer approves of the developer's delivery behavior, and for the developer's defective delivery, the buyer can still claim the liability for breach of contract for the defective delivery to the developer until the house fully meets the delivery conditions. It is recommended that when signing the contract for the sale and purchase of the house, the buyer should clearly stipulate the standard of liquidated damages for defective delivery. If there is no agreement, the court will calculate the liquidated damages according to the standard of the property fee in accordance with the third paragraph of Article 43 of the Regulations on the Administration of Property Services and Management of Hubei Province.

Chen Huan

June 30, 2021

About author:Mr. Chen Huan, Partner of Beijing Yingke (Wuhan) Law Firm, Deputy Director of the Real Estate Legal Affairs Department of Beijing Yingke (Wuhan) Law Firm, Deputy Director of the Youth Working Committee of Beijing Yingke (Wuhan) Law Firm, Member of the Real Estate Professional Committee of Wuhan Lawyers Association, Member of Public Legal Service Working Committee of Wuhan Lawyers Association, Mediator of Wuhan Intermediate People's Court, Specially Invited Lawyer of Wuhan Municipal People's Congress Standing Committee.