Generally speaking, after the mortgage right of immovable property is effectively established, the financial institution has the right of priority in receiving compensation for the immovable property. However, it is easy to overlook that this type of priority is only relative to ordinary claims and is not adversarial to all rights. In practice, when financial institutions carry out loan business, they often pay too much attention to whether they can complete the business and despise the verification of collateral, and do not have enough understanding of the potential rights burden or higher priority rights on the collateral, resulting in the difficulty of fully recovering the claim at the stage of debt collection. Financial institutions should pay attention to the verification of collateral. Combined with my own experience in asset disposal and the latest provisions of the Civil Code, the author summarizes the factors that may affect the validity, survival and realization of mortgage rights, as well as higher priority rights, as follows:
First, the basic situation of the collateral is verified
1. Whether there is a defect in the ownership of the collateral
Article 399 of the Civil Code provides: "The following property shall not be mortgaged: ... (iv) Property with unclear ownership, use or disputed rights..." In accordance with the foregoing, a mortgage established on immovable property whose ownership is unclear or disputed shall not have the effect of a security interest. Registration of immovable property rights is a requirement for establishment, and in the case of immovable property certificates, there is generally no ownership problem in immovable property. However, in recent years, with the introduction of purchase restriction policies in various places, there are more and more cases of buying houses under the name of borrowing. Buying a house under the name of a borrower or a house in an anonymous name can easily lead to disputes over the ownership of collateral, which will lead to litigation for confirmation of rights or enforcement of objection procedures.
Ownership disputes under the name of a house will often not affect the validity of the mortgage contract, but will have a certain adverse impact on the validity of the property right of the mortgage on the real estate and the progress of the implementation of the real estate:
On the impact of buying a house in a borrowed name on the validity of mortgage rights. If the nominal owner sets a mortgage for the financial institution without the consent of the real owner, it may constitute an unauthorized disposition. At this point, whether the mortgage right can be effectively established depends on whether the financial institution constitutes a bona fide acquisition. There are different views in the academic and practical circles on how to determine the bona fide acquisition of mortgages. It has been argued that from article 311[1] of the Civil Code, the bona fide acquisition of mortgage rights should refer to the relevant provisions on the application of bona fide acquisition of ownership, and should have three elements: bona fide, payment of a reasonable price, and completion of rights change. With regard to the foregoing view, the Supreme People's Court held that mortgage, as a kind of security, is a single act or an act of gratuitous compensation, and it is not necessary to pay reasonable consideration, as long as the creditor is in good faith at the time of signing the mortgage contract and has completed the registration of the mortgage on immovable property, it constitutes a bona fide acquisition, regardless of whether reasonable consideration has been paid[2].
About the impact of borrowing a house on the execution of collateral and the speed of payment. In judicial practice, there are endless cases in which the actual right holder raises objections to the enforcement of outsiders and enforcement objections against financial institutions on the grounds of "buying a house in a borrowed name". <中华人民共和国民事诉讼法>Articles 15 and 16 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Enforcement Procedures (2020 Amendment) stipulate that during the review of outsider objections and the trial of lawsuits against enforcement objections by outsiders, the court generally may not sanction the subject matter of enforcement. Therefore, in the case of buying a house in a borrowed name, once the real right holder raises an enforcement objection, it will undoubtedly lengthen the enforcement procedure and the payment collection cycle of the financial institution.
Therefore, when a financial institution accepts a mortgage on real estate, it shall conduct a strict examination of whether there are any defects in the ownership of the collateral, such as nominee holding.
Suggestions: First, financial institutions should check whether there is a loan sale, holding, co-ownership, etc. of the mortgage from the aspects of the original holding of the real estate property rights certificate, the holding of the sale and purchase contract, and the payment path of the purchase price, so as to fulfill the "good faith" and reduce the risk that the mortgage right is found not established due to the disposition of the mortgage right; second, if the financial institution knows the situation of the collateral holding on behalf of the mortgage when setting the mortgage, it should coordinate the real owner to sign and agree to the mortgage, agree to the mortgage registration and agree to the execution and other relevant documents. to mitigate the associated legal risks.
2. Whether there is any arrears in the mortgage land transfer fee
Paragraph 1 of Article 50 of the Interpretation of the Guarantee System of the Civil Code stipulates: "Where the mortgagor mortgages the building on the allocated construction land, and the parties claim that the mortgage contract is invalid or does not take effect on the grounds that the right to use the land for construction purposes cannot be mortgaged or has not gone through the approval procedures, the people's court will not support it." When the mortgage right is realized in accordance with law, the price proceeds from the auction or sale of the building shall be used on a priority basis for the payment of the transfer fee for the right to use the land for construction purposes. "According to the foregoing, if a mortgage is created on the basis of the right to use the allocated land or its above-ground buildings, the government land transfer fee shall take precedence over the repayment of the mortgagee.
In addition to the land transfer fee problem faced by the allocation of land, in practice, non-allocated mortgage land may also have unpaid land transfer fees. Regarding the priority of land transfer fees and mortgage rights that are not transferred to land, the current law does not stipulate it, and there is a dispute in judicial practice: one view is that the unpaid land transfer fee has priority over the repayment of mortgage claims, such as in the (2015) Chi Zhi Zi No. 12-5 case, the Inner Mongolia Chifeng Intermediate Court held that : "Land use rights, The reserve price of the third auction of unlicensed real estate and above-ground auxiliary facilities was 6854074.88 yuan, deducting the 1557842 yuan of the land transfer fee owed by the land use right, the execution fee was 53421 yuan, the appraisal fee was 38478 yuan, and the actual amount of debt repaid by Chifeng Yonghao SME Investment Co., Ltd. was 5204333.88 yuan. In the (2018) Yue 18 Min Zhong No. 2535 case, the Guangdong Qingyuan Intermediate Court held that"In this case, the Qingyuan Municipal Bureau of Natural Resources failed to provide evidence to prove that the land transfer fee it claimed had priority, and its claim that it should directly participate in the distribution in the enforcement procedure and give priority to compensation lacked basis." In addition, some courts have also chosen to explain the outstanding land transfer fees in the auction announcement and make it clear that the buyer shall bear the corresponding costs.
Therefore, whether it is for allocated land or non-allocated land, financial institutions should strictly verify whether there is any land transfer fee that is not paid or may need to be paid in the future.
Suggestions: First, when financial institutions accept the allocation of land use rights and mortgages for buildings above ground, it is recommended that they first coordinate with the debtor to apply for the conversion of the allocated land into non-allocated land and pay the land transfer fee, if this cannot be realized, they should also communicate with the administrative department in advance on the specific amount of the transfer fee for the right to use the land for construction purposes, so as to anticipate and appropriately increase the mortgage rate; second, when accepting the mortgage on real estate, the financial institution should pass the contract for the transfer of the right to use the land for state-owned construction. Verification of the voucher for payment of the transfer fee and verification with the land administrative department to verify whether there is any arrears in the payment of the land transfer fee for the real estate to be mortgaged, and if so, it should be properly resolved before the mortgage is set.
3. Whether there is a risk of idleness of the mortgaged land
In order to avoid the waste of land resources, mainland law clearly stipulates the penalties for idle land, and the contract for the transfer of the right to use state-owned construction land generally stipulates the development cycle of the land transferred.
Judging from the current legal provisions, mortgage rights cannot be used against the government to reclaim idle land. Paragraph 2 of Article 14 of the Measures for the Disposal of Idle Land stipulates: "Where construction and development have not been started for two years, the competent municipal and county land and resources departments shall, in accordance with the provisions of Article 37 of the Land Administration Law of the People's Republic of China and Article 26 of the Urban Real Estate Management Law of the People's Republic of China, report to the people's government with the right to approve and issue a "Decision on Recovering the Right to Use State-owned Construction Land" to the holder of the right to use state-owned construction land, and recover the right to use state-owned construction land without compensation." Where idle land has a mortgage right, a copy shall be sent to the mortgagee of the relevant land at the same time. The State Land Administration pointed out in its reply to the Shanghai Municipal Bureau of Land Administration's "Interpretation of the Request for The Relevant Content of Article 17 of the Interim Regulations of the People's Republic of China on the Assignment and Transfer of State-owned Land Use Rights in Cities and Towns": "The right of mortgage is attached to the right of land use. When the land use right, which is the main right, is extinguished by the administrative organ in accordance with Article 17 of the Interim Regulations of the People's Republic of China on the Assignment and Transfer of State-owned Land Use Rights in Cities and Towns, the mortgage right created on the land use right is extinguished. ”
Once the mortgaged land satisfies the condition of "unstructed development for two years", the government can initiate the procedure of reclaiming the idle land, and the mortgagee has no effective remedy under the current legal system. In addition, can the seizure effectively prevent the government from recovering idle land? The law does not clearly stipulate that there are some disputes in judicial practice[3], but the Supreme People's Court seems to be inclined to believe that the seizure does not affect the government's recovery of idle land. In the (2015) Xing Ti Zi No. 27 case, the Supreme People's Court held that "the seizure of land is a preservation measure made by the judicial organ to ensure the enforcement of the case, and the decision to receive land is an administrative decision made by the administrative organ on the basis of the corresponding facts and laws, which are respectively the use of judicial power and administrative power, and the exercise of the two powers should cooperate with and respect each other." Judicial power cannot interfere with the exercise of administrative power, and in this case, judicial preservation measures do not affect the legality of the Decision on Land Acquisition itself. Therefore, Jixian Livestock Production Company's claim that the land involved in the case could not be recovered because the land involved in the case was seized by the people's court, and lacked corresponding legal basis, and this court did not support it. ”
In addition, from the perspective of existing judicial practice, even if the government fails to perform the notification obligation to the mortgagee in accordance with the provisions of the Measures for the Disposal of Idle Land on the formulation of the idle land disposal plan[4] and the decision made to recover the land involved in the case, such illegal acts will not necessarily lead to the invalidity of the administrative act of recovering the idle land. On the above issues, there are two controversial views in judicial practice: some courts have held that the decision made by the government to acquire land without notifying the mortgagee infringes on the legitimate rights and interests of the mortgagee and should be revoked. For example, in the (2013) QiongHuan Xing Zhong Zi Case No. 4, the Hainan Higher People's Court held that: "According to the second paragraph of Article 13 of the Measures for the Disposal of Idle Land of the Ministry of Land, the Land Bureau shall notify the Hongcheng Lake Branch of the Agricultural Bank of China, the third person in the original trial, in writing, but the Land Bureau did not notify, so the Land Bureau made the decision no. 214 to receive land in violation of statutory procedures. The defense of the hongcheng lake branch of the agricultural bank of China and the Fuxingyuan company of the third party of the original trial is established and should be supported... The court of first instance's judgment to revoke the land acquisition decision No. 214 in accordance with the provisions of Article 54 (2) (3) of the original Administrative Procedure Law also complied with the provisions of Article 70 (3) of the Administrative Procedure Law of the People's Republic of China, and was not improper. "Some courts also held that the mortgagee was not the counterparty to the penalty, and the failure to inform the mortgagee was a procedural defect, which did not affect the correctness of the result of the recovery decision. For example, in (2019) Qiongxing Zhong No. 253, the Hainan Higher People's Court held that: "Before the Danzhou Municipal Government made the Decision on The No. 16 No. 16 Free Land Acquisition, it wrote to the Zhengzhou Branch of China Minsheng Bank that the land involved in the case had been identified as idle land, and did not inform the idle land disposal plan in writing, inform it of its right to a hearing, and did not simultaneously send a copy to the relevant land mortgagee after the Decision on No. 16 Free Land Acquisition, the facts are clear; but the mortgagee is not the counterparty to the punishment. The defect in the procedure does not affect the correctness of the decision on the 16th gratuitous land acquisition. ”
In addition, with regard to the conditions for "recovering the right to use state-owned construction land without compensation", some local governments have expanded it through local administrative documents, and financial institutions should pay attention to it when conducting business. In addition to the Measures for the Disposal of Idle Land and the provisions on local idle land, the contract for the transfer of the right to use state-owned construction land will generally also stipulate the development progress of the construction land and the liability for breach of contract to be borne by the owner of the right to use the land if it fails to develop according to the agreement, and financial institutions should also pay attention to the relevant agreements.
Based on the above, the risk of recovery of idle land is one of the risks in the mortgage of real estate, once the mortgaged land is recovered by the government on the grounds of idleness, the mortgage right of the financial institution will also be lost, so when the financial institution accepts the mortgage of real estate, it should carefully check whether there is a risk of idle recovery of the mortgaged land.
Suggestions: First, when accepting mortgages for real estate, financial institutions should check whether the mortgaged land constitutes idle land in accordance with the Measures for the Disposal of Idle Land, the provisions on local idle land, and the contract for the transfer of the right to use state-owned construction land; second, once the government determines that the mortgaged land constitutes idle land, the financial institution should actively participate in the formulation of the idle land disposal plan and strive for compensation from the government to the greatest extent to reduce losses.
2. More priority rights investigation
1. The right to expect property rights
As a statutory priority that takes precedence over the agreed mortgage right, the expectancy right of property rights arising from the sale of housing is often one of the problems faced by financial institutions in accepting mortgages for construction in progress, which directly affects the amount and speed of debt recovery of financial institutions. Judging from the current legal provisions, the right to expect property rights that affect the realization of mortgage rights by financial institutions can be mainly divided into the rights of consumers of commercial housing involving the basic right of survival and the rights of general buyers other than consumers of commercial housing. Article 29[5] of the Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Enforcement Objections and Reconsideration Cases by the People's Courts and Articles 125 [6] and 126 [7] of the Minutes of the Meeting stipulate the rights of consumers of commercial housing, and article 28 [8] of the Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Enforcement Objections and Reconsideration Cases by the People's Courts and Article 127 [9] of the Minutes of the Meeting stipulate the rights of general buyers of commercial housing.
According to the Opinion of the Supreme People's Court, the rights of consumers of commercial housing that involve the basic right to subsistence can be opposed to the right of mortgage if they meet the statutory conditions, regardless of whether the mortgage right and the right of consumers of commercial housing are established before and after [10] and whether the consumer of commercial housing knows that there is a mortgage right [11]. The specific conditions are: first, that a legal and valid written sale and purchase contract has been signed before the court seizes it; second, the house purchased is used for residence and there is no other house under the name of the buyer for residence; and third, the price paid exceeds 50% of the total price. There are many controversies in judicial practice as to the understanding of "houses used for residence and there are no other houses under the name of the buyer for residence", such as whether "no other houses" requires regional restrictions, whether there is a simple judgment based only on whether there is a house under the name, whether the above provisions are applicable to non-residential houses, whether the "name" should be understood broadly, whether it is limited to second-hand houses, whether the houses under the company's name can be subject to the above provisions, and so on. From the perspective of the Supreme People's Court's tendency, "no other houses" generally means that there are no other houses for living in the same districted city and county-level administrative district (excluding the "district" of the districted "city") as the house involved in the case; for the house under the name, it should be comprehensively judged in light of the actual situation, such as although there is already 1 house in the name of the consumer of commercial housing, the house purchased still meets the basic living needs in terms of area, and the house under the name of the buyer belongs to "holding on behalf of" and so on, which can generally be understood as no house Commercial and residential dual-use housing has residential attributes, the above provisions can be applied by reference, but shops and office buildings with investment attributes generally cannot apply the above provisions; "under the name" should be understood broadly, such as the buyer's spouse and minor children have a house under the name, it should generally be regarded as having a residential house under the name of the buyer; as to whether the rights of consumers of commercial housing can be applied to second-hand houses, there is a huge controversy in judicial practice, and the Supreme People's Court believes that second-hand houses cannot be applied, because the source of the right to expect property rights is " In the Reply of the Supreme People's Court on the Issue of the Priority Right to Reimbursement of the Construction Project Price, there is no construction problem in second-hand houses; the company generally does not apply this article, but if the company purchases to meet the company's internal personal residence, there is also a big controversy in practice, and there is no tendentious opinion. Regarding the proportion of the price paid, if the price paid by the consumer of commercial housing is close to 50%, and the remaining price has been paid to the applicant for enforcement in accordance with the contract or delivered for enforcement in accordance with the court's requirements, the above provisions may also apply. [12] Regarding whether the rights of consumers of commercial housing can be opposed to mortgage rights when a developer sells a house without obtaining a pre-sale permit for commercial housing, there are different opinions between different regions and different courts, and there is still no conclusion. [13]
The general buyer's right to commercial housing is the general buyer's right to expect property rights other than commercial housing consumers because of the purchase of housing, and unlike commercial housing consumers, the general buyer often has other houses that can be used for residence under his name, so the general buyer's right to expect property rights does not involve the right to subsistence. According to the relevant regulations, the general buyer other than the consumer of commercial housing may oppose the ordinary claim and exclude enforcement under the statutory conditions: first, the buyer has signed a legal and valid written sales contract before the court seals; second, he has legally possessed the real estate before the court seizes it; third, he has paid the full price, or has paid part of the price in accordance with the contract and delivered the remaining price to the people's court for execution; fourth, the buyer has not registered the transfer for his own reasons, generally speaking, As long as the buyer has submitted the transfer registration materials to the housing registration agency, or has made a request to the seller for transfer registration, it may be considered to meet this condition. However, there was a certain controversy in judicial practice in the past as to whether the rights of general buyers other than consumers of commercial housing could be opposed to mortgage rights, and the Supreme People's Court unified the adjudication standards on this issue in article 126 of the Minutes of the National Court Civil and Commercial Trial Work Conference, clarifying that the buyer of the general housing sale contract could not oppose the mortgage right. The Supreme People's Court reiterated its position in the recently revised (2021) SPC Minzai No. 189 case, in which the Supreme People's Court made it clear that "even if the buyer of immovable property meets the provisions of Article 28 of the Provisions on Enforcement Objections and Reconsiderations, it cannot oppose the mortgagee, but can only face ordinary creditors".
It is generally believed that the consumer rights of commercial housing involving the basic right to subsistence refer to the "ownership of commercial housing" that can exclude the mortgage right and enforcement, but if the real estate development enterprise has not built a house, whether the right to claim the return of the purchase price of the commercial housing consumer can be opposed to the mortgage right, there is also a great controversy in judicial practice: one view is that based on the basic logic of the relevant provisions, the unified and equal protection of the consumer who buys the house, the substantive fairness and the basic principle of the supremacy of the right to subsistence, Another view is that if the consumer of commercial housing chooses to terminate the contract, his right is transformed from the right to expect the property right into the claim to return the purchase price, and the property right has priority over the claim, at this time, the commercial housing consumer no longer enjoys the expected benefit of the specific house, and his right to return the purchase price is a general claim, and it is no longer preferential to the mortgage right as a property right. With regard to the above-mentioned issues, the Supreme People's Court pointed out in the Reply to the Reply of the Higher People's Court of Shandong Province on the Dispute over the Dispute over the Settlement of the Housing Sale and Purchase Contract of Jinan Caishi Mountain Villa ([2014] Zhi Ta Zi No. 23 and 24) that the right of priority compensation for construction projects cannot be opposed to the rights of the buyer, including both the right to claim the delivery of the house and the right to return the purchase price, and according to the spirit mentioned above, the mortgage right inferior to the priority right of the construction project does not seem to be able to oppose the right to claim the return of the purchase price of the commercial housing consumer. With regard to the aforementioned disputes, the Supreme People's Court <全国法院民商事审判工作会议纪要>also favored the first view in Understanding and Application[14], and it should be noted that the aforementioned view should be limited to "the house has not been built", if the consumer of commercial housing terminates the contract if the house has the conditions for delivery, the right to claim the return of the purchase price cannot be opposed to the mortgage right. For example, in the (2020) Zhejiang Minzhong Case No. 782, the Zhejiang Higher People's Court held that "the priority rights of consumers of commercial housing include the right to claim the delivery of the house and the right to return the purchase price when the delivery of the house cannot be delivered, which is a special protection for the specific property rights expected interests of the consumer of commercial housing." In this case, the house involved in the case had already met the delivery conditions when Zhao Luo requested the termination of the "Contract for the Sale and Purchase of Commercial Housing" concluded with Qianshun Company. Under such circumstances, the people's court confirmed the termination of the Contract for the Sale and Purchase of Commercial Housing in accordance with Zhao Liao's appeal, Zhao Luo no longer enjoyed the expected benefits for specific houses, and his claims against Qianshun Company could no longer enjoy the priority right to exclude the construction project price claims and mortgage rights for specific houses. ”
It should be noted that due to the existence of a variety of complicated factors in the bankruptcy proceedings, the criteria for determining the expectancy right of property rights by some administrators will be appropriately relaxed according to the specific circumstances of the bankruptcy case on the basis of the criteria set out above, such as relaxing the proportion of payment to 30% [15].
Suggestions for response: First, before accepting the mortgage for the project under construction, the financial institution should conduct a detailed verification of the sales of commercial housing, and after accepting the mortgage, it should strictly control the mortgagor's sale of the house through various means such as official seal control and online signature monitoring; second, if it is necessary to collect the payment from the project sales, it should strengthen the control of the purchase price collection.
2. Priority of the construction project price
Priority of construction project prices is often one of the problems faced by financial institutions in accepting mortgages for construction in progress, and as a statutory priority, the priority of construction project prices takes precedence over mortgage rights as agreed security interests.
Article 4 of the original Reply of the Supreme People's Court on the Issue of the Right of Priority in Reimbursement of the Construction Project Price stipulates: "The period for the construction contractor to exercise the right of priority is six months, calculated from the date of completion of the construction project or the date of completion agreed in the construction project contract." Article 41 of the Interpretation on Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Construction Project Contracts (I) (Fashi [2020] No. 25) stipulates: "The contractor shall exercise the right of priority in reimbursement of the construction project price within a reasonable period of time, but the maximum period shall not exceed 18 months, and the date on which the contractor shall pay the construction project price is calculated." "The biggest amendment to the priority of the construction project price in the Civil Code and related judicial practice is to adjust the exercise period from 6 months to 18 months.
In judicial practice, the priority right of the construction project price has two main effects on the realization of the mortgage right of financial institutions: one is to file an enforcement objection and an enforcement objection lawsuit, apply to the court to suspend enforcement, affecting the progress of enforcement; second, apply for participation in the allocation. The Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Enforcement Objections and Reconsideration Cases by the People's Courts (2020 Amendment) stipulates that the applicant for enforcement enjoys the right of priority in reimbursement against the security interest of the outsider in accordance with the law, and the court does not support the objection to exclusion of enforcement raised by the outsider, so it is generally held that the construction project contractor cannot exercise the priority right in the form of an enforcement objection or an enforcement objection lawsuit. However, if the construction project contractor enjoys the right of priority and the specific amount of compensation cannot be determined, and the outsider files a separate lawsuit to claim the realization of the priority right of reimbursement of the construction project, the court may suspend the enforcement of the project under construction. The Jiangsu Higher People's Court stipulated in the "Guidelines for the Trial of Litigation Cases of Enforcement Objections": "The essence of the right of priority to be reimbursed for construction projects is to guarantee the realization of the claims of the construction project with the exchange value of the construction project, that is to say, the priority right to be reimbursed for construction projects is only a right of precedence, and cannot achieve the effect of obstructing enforcement." Therefore, when the people's court takes compulsory enforcement measures against a construction project, the outsider cannot file an enforcement objection claim to stop the enforcement on the grounds that he has the right of priority to be reimbursed for the construction project, but can only submit a claim of priority to the enforcement court during the enforcement procedure. If the enforcement court does not support its claim on the grounds that the outsider does not enjoy the right of priority to be reimbursed, since the right of priority repayment is a subordinate right of the main claim, it can only be exercised on the premise that the main claim is determined and the conditions for the right of priority to be reimbursed are met, so the outsider may separately file a lawsuit to claim the realization of the right of priority repayment of the construction project. Where an outsider raises a lawsuit, the enforcement court shall suspend enforcement. ”
Suggestions for response: First, if the construction project builder applies for suspension of enforcement, the financial institution may actively negotiate with the construction project builder and the court to strive to continue to promote the enforcement procedure by setting aside a certain amount of money, allocate other funds as soon as possible, and minimize losses. Second, for the review of the priority right of the construction project price, the financial institution may carry out the following aspects: 1) the subject of exercise of the right is limited to the construction contract of the construction project and the contractor of the decoration and decoration project, and other entities such as the project surveyor or designer do not enjoy the right of priority to be reimbursed; 2) the scope of the priority right of the construction project is limited to the construction project price, including the actual expenses of the contractor for the construction project, such as staff remuneration and material payment, but does not include the losses caused by the contractor's breach of contract. For example, the interest, liquidated damages, damages, etc. of the construction project price; 3) the exercise period shall be within 18 months, and the specific starting point is the "date of the project price payable" shall be determined according to the following rules: for the date of payment of the price payment, "there is an agreed sub-agreement", and if there is no agreement or the agreement is unclear and the agreement cannot be settled by agreement, it should be combined with "if the parties have no agreement on the payment time or the agreement is unclear, the following time shall be deemed to be the payable time: (1) if the construction project has actually been delivered, it is the date of delivery; (2) if the construction project is not delivered, (3) If the construction project has not been delivered and the project price has not been settled, the date on which the parties sue shall be the date on which the project payment is payable.
3. Right of Abode
The right of abode system is a new system added to the Civil Code. The right of residence refers to the right to possess and use the housing and ancillary facilities of others for the purpose of residence[16]. Article 366 of the Civil Code stipulates: "The holder of the right of residence has the right to enjoy the usufructuary right to possess and use the residence of others in accordance with the contract, so as to meet the needs of living and living." "With the establishment of the residency system, the coexistence of residency and mortgage rights on the same immovable property will occur frequently, and financial institutions will often face the relevant problems of how to resolve the aforementioned conflicts.
The provisions of the Civil Code on the right of abode system are extremely general, and other current laws and judicial interpretations do not make any provisions on how to resolve the conflict between the right of residence and the right of mortgage, and there is a great controversy in the academic and practical circles. Some scholars argue that the priority of mortgage and residency should be determined according to the time of registration. Professor Wang Liming believes that once the right of residence is registered, it has the effect of being effective against a third party. [17] Professor Gao Shengping also believes that the priority should be determined by the registration time of mortgage rights and residency in accordance with the principle of "publicity time first, rights first". [18] Associate Professor Wang Yang of Tsinghua University believes that when the right of residence and the right of mortgage are established on the house at the same time, the conflict of rights is resolved according to the order of registration, and the right holder of the post-subordination right should bear its own risk because it can know the existence of the pre-subordination right by querying the register, so if the right of residence is established after the mortgage right is realized, the right of residence is removed, and conversely, the right of residence continues to be valid for the new owner during the period of existence. [19]
We believe that as a property right that also needs to be registered and publicized, it is reasonable to determine the priority of mortgage rights and residence rights in the order of registration, but based on the basic legislative purpose of the right of residence to "live and live", the right of residence often involves the basic right of survival of the holder of the right of residence, and it seems that it is not in line with the Supreme People's Court's concept of handling similar issues if the priority is still determined according to the above rules. In recent years, the concept of adjudication of the supremacy of the right to subsistence has been deepening, and the Supreme People's Court has made it clear in Article 126 of the Minutes of the National Court Civil and Commercial Trial Work Conference that the rights of consumers of commercial housing needed for survival take precedence over the mortgage rights of mortgagors. Therefore, we tend to believe that for the general right of residence, the order of registration can determine the priority of the mortgage and the right of residence, but for the special right of residence involving the right of subsistence, even if the right of residence is registered later, according to the basic principle of the supremacy of the right to subsistence, the right of residence should also have priority over the right of mortgage.
Once the court determines that the right of residence has priority over the right of mortgage, it may have two adverse effects on the financial institution: one is that the enforcement of the mortgaged property by the financial institution may be excluded, especially for the right of residence for a longer period of time; the second is that the mortgaged property can only be auctioned with the right of residence attached to the status quo, and the value of the mortgaged property and the auction price will be pulled down.
The establishment of the right of residence involves the priority of the mortgage right of the financial institution. From the perspective of the method of establishment, the right of residence can be divided into the right of residence established by contract, the right of residence established by will, and the right of residence established in the form of a court judgment. Article 368 of the Civil Code stipulates: "The right of residence is established free of charge, unless otherwise agreed by the parties. Where the right of residence is established, an application for registration of the right of residence shall be made to the registration organ. The right of abode is created at the time of registration. "The right of abode established by a contract shall be registered as the entry into force, but there is some controversy in the academic community as to whether the right of residence established by a will and the right of residence established in the form of a court judgment need to be registered and the specific requirements for entry into force. Article 229 of the Civil Code stipulates that where a property right is established as a result of a legal document of a people's court, the property right shall take effect when the legal document takes effect; article 230 stipulates that where a property right is acquired by inheritance, it shall take effect from the beginning of the inheritance. The author believes that the right of residence established by will and the right of residence established in the form of a court judgment do not apply the rules of effective registration, but should apply the above-mentioned legal provisions. The legislature seems to hold the above view, and the Interpretation of the Property Rights Of the Civil Code of the Civil Code of the People's Republic of China, edited by Huang Wei, director of the Civil Law Office of the Legislative Affairs Commission of the National People's Congress, points out that the right of residence established in different ways of establishment has different times for the establishment of the right of residence [20]. Therefore, for the examination of the right of residence established by will and the right of residence established in the form of a court judgment, financial institutions should pay attention to the time of their establishment.
Since the right of residence system belongs to the new system of the Civil Code, and the Civil Code itself is only provided for with 6 articles, there are still a large number of controversial issues in the system, such as whether the subject of the right to residence is limited to natural persons, whether the object of setting is limited to residence, the upper limit of the right period, the restriction on the establishment of gratuitous rights, etc., which are of great significance to financial institutions to defend. In addition, the current registration rules have not resolved the details of the registration of the right of residence, especially whether the mortgaged house can establish the right of residence, and whether the registration of the right of residence requires the consent of the mortgagee. The Shanghai Municipal Administration of Housing Security and Housing and the Shanghai Municipal Administration of Planning and Land Resources have issued corresponding regulations. Article 11.1.4 of the Shanghai Municipal Technical Provisions on Real Estate Registration (trial implementation) stipulates: "For real estate that has established a mortgage right before January 1, 2021, if the applicant applies for the registration of the right of residence during the mortgage period, the applicant must also submit written materials agreed by the mortgagee." However, this article does not stipulate whether the consent of the mortgagee is required for the establishment of a right of residence on real estate with a mortgage after January 1, 2021. We will also continue to pay attention to the above issues.
Recommendations for response: First, before receiving the mortgage, the financial institution should check the right of residence that may be set by registration, will and court judgment; second, after the mortgage is established, it should carefully decide whether to agree to the registration of the right of residence.
4. Tenancy Rights
In past judicial practice, the right of lease was often the biggest obstacle for financial institutions to exercise their mortgage rights. In order to avoid the risk of enforcing the mortgaged property, some dishonest debtors maliciously set long-term leases and collect rent in advance before setting mortgage rights for financial institutions, which seriously affects the recovery of creditors' rights of financial institutions.
Article 190 of the original Property Law stipulates that if the mortgaged property has been leased before the conclusion of the mortgage contract, the original lease relationship shall not be affected by the mortgage right. Article 405 of the Civil Code stipulates that if the mortgaged property has been leased and transferred to possession before the mortgage right is established, the original lease relationship shall not be affected by the mortgage right. In the process of compiling the Civil Code, it has been suggested that the priority of mortgage rights and lease rights is determined only by the time of conclusion of the mortgage contract and the lease contract, which is likely to breed moral hazard, and some parties may infringe on the interests of the other party by fictitious legal relationships or reverse signing contracts. [21] Therefore, the Civil Code amends "before the conclusion of the mortgage contract" to "before the mortgage right is established, the mortgaged property has been leased and transferred to possession". Article 31 of the Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Enforcement Objections and Reconsideration Cases by the People's Courts stipulates: "Where the lessee requests to prevent the transfer of possession of the executed immovable property to the transferee during the lease period, and has signed a legal and valid written lease contract before the people's court seals and takes possession of the real estate, the people's court shall support it." Where the lessee maliciously colludes with the person subject to enforcement to lease the executed real estate at an obviously unreasonable low price or to falsify evidence of rent payment, the people's court will not support his request to prevent the transfer of possession. "Judging from the above provisions, if the lease relationship has been effectively established before the registration of the mortgage right and the lessee has actually occupied the house, the mortgage right shall not be opposed to the lease right. The court's review of the above issues will focus on the authenticity of the lease contract, the time node of the signing of the lease contract, whether the outsider occupies the house involved in the case and the time point of registration of the mortgage right.
As for the impact of the lease right on the realization of the mortgage right, from the perspective of the treatment of existing judicial practice: if the lease is rented before mortgage, the court will usually take the lease auction,[22] and if the mortgage is leased, the court will generally remove the lease right and conduct the auction,[23] even if it is not, it is generally considered that the lease contract is not binding on the buyer.[24] Rent auctions often adversely affect the auction and transaction price of collateral, and financial institutions should pay attention to them.
Response suggestion: When financial institutions accept real estate mortgages, they should verify all the rental conditions of the mortgaged properties, and try to coordinate the mortgagors to communicate and remove the lease contracts with a longer term.
5. Tax priority
From the time of occurrence of tax debts, real estate taxes can be mainly divided into two categories: one is the historical tax arrears and tax arrears before the mortgage right is set; the other is the relevant taxes and fees at the time of disposal and realization, including the value-added tax, urban maintenance and construction tax, education fee surcharge, local education fee surcharge, land value-added tax, stamp duty, personal (enterprise) income tax, etc. that the buyer needs to pay the taxes and fees generated by the transfer, including stamp duty, deed tax, etc. [25] Taxes and fees incurred at the disposal of assets in bankruptcy proceedings include turnover tax and income tax including value-added tax, land value-added tax, deed tax, business tax, urban maintenance and construction tax, etc.
Historical tax arrears prior to the creation of mortgages take precedence over mortgages. Paragraph 1 of Article 45 of the Law on the Administration of Collection and Collection (2015 Amendment) stipulates: "The tax authorities collect taxes, and the tax takes precedence over unsecured claims, except as otherwise provided by law; if the taxpayer owes tax before the taxpayer sets a mortgage or pledge on his property or the taxpayer's property is retained, the tax shall be executed before the mortgage, pledge or lien." ”
In judicial practice, late payment of taxes and taxes generally cannot be given priority over mortgage rights. As to whether the tax late payment fee falls within the scope of priority, the views of the administrative organs and the judicial organs are not consistent. The State Administration of Taxation pointed out in the Reply on the Issue of Tax Priority including Late Fees that the tax priority provided for in Article 45 of the Tax Collection and Administration Law includes taxes and their late fees when it is implemented. The Supreme People's Court clarified in the Reply on the Question of Whether the Tax Authorities Should Accept a Lawsuit for Confirmation of Claims Arising from Late Payment of Taxes Owed by a Bankrupt Enterprise that, in accordance with the relevant provisions of the Enterprise Bankruptcy Law and the Tax Collection and Administration Law, the late payment of taxes arising from the tax arrears of the bankrupt enterprise before the bankruptcy case is accepted is an ordinary bankruptcy claim. Judging from the current judicial practice, most courts refer to the approval of the Supreme People's Court, but some courts include late fees in the scope of tax priority.
Regarding the priority of the relevant taxes and fees and mortgage rights that should be borne by the mortgagor in the disposal and realization, although the current law does not stipulate it, because the mainland tax collection and management implements the "first tax and then certificate" model of paying the tax first and then applying for the property rights certificate based on deed tax management, only by holding the tax payment certificate of the tax authority can the property rights change registration procedures be carried out, so as to force the realization of the priority right of tax arrears through the process of handling the real estate certificate. [26] Therefore, in the enforcement proceedings, the court usually deducts the taxes to be paid by the seller in the auction proceeds, and in the bankruptcy proceedings, the administrator generally pays the taxes paid after the transfer as bankruptcy expenses. The Minutes of the Meeting on Establishing a Mechanism for The Coordination of The Collection and Payment of Taxes and Fees between the Civil Enforcement of the People's Courts and the Local Taxation Department jointly issued by the Higher People's Court of Zhejiang Province and the Local Taxation Bureau of Zhejiang Province stipulates that the taxes and fees paid by the seller shall be paid by the court to the tax department in the amount of property disposal. The Jiangsu Provincial Local Taxation Bureau clarified in the "Reply on Business Tax Issues Concerning the Disposal of The Assets of Bankrupt Enterprises" (Su Di Shui Letter [2017] No. 340) that "according to the current tax policy, the transfer of intangible assets or the sale of real estate during the bankruptcy liquidation period of enterprises shall pay business tax in accordance with the law." This tax is the tax generated by the transfer of intangible assets or the sale of immovable property by the insolvent enterprise in the course of bankruptcy, which is different from the tax arrears formed by the insolvent enterprise before entering the bankruptcy debt repayment procedure, and should be treated as bankruptcy expenses incurred during the bankruptcy liquidation. In addition, some judges also held that the tax generated by the change of price is essentially a change of price fee, and the change of price cannot be completed without paying the tax, and the preferential deduction of the change of price tax does not harm the legitimate rights and interests of the applicant for enforcement. [27]
In addition, the new provisions on the transfer of collateral in the Civil Code, from the perspective of tax sharing, some views believe that the transfer of collateral may have a substantial impact on the amount of transfer tax. We [28] also agree with the above view that if the mortgagor owes unpaid tax, there is a possibility that the relevant taxes and fees will be deducted by the court from the auction fee for the execution of the collateral, and the financial institution should make a full estimate and judgment on the tax implications of the mortgagor's transfer of the collateral.
Suggestions: First, before setting the mortgage, the financial institution should verify the mortgagor's tax arrears by requiring the mortgagor to take the initiative to explain and actively investigate the public announcement of the mortgagor's tax arrears[29]; second, before setting the mortgage, the financial institution should fully estimate the value-added tax, urban maintenance and construction tax, education fee surcharge, local education fee surcharge, land value-added tax, stamp duty, and individual (enterprise) income tax to be paid for the disposal of the collateral in the future. Hire a professional accountant to measure the amount of future tax burden and increase the mortgage rate; third, during the mortgage period, when the mortgagor transfers the collateral, the financial institution should supervise the mortgagor to solve the problem of tax arrears first.
6. Criminal recovery of stolen goods
Due to the large demand for financing, real estate enterprises often borrow from various entities. In recent years, the rate of criminal involvement in the collection of financial claims has increased year by year, and criminal-related issues have increasingly become one of the most common problems in financial institutions. In view of the mainland's tradition of heavy sentences and light sentences, the strong position of criminal organs, and the lack of provisions for coordinating civil enforcement and criminal seizures, criminal seizures have increasingly become the biggest obstacle to civil enforcement and the collection of financial claims.
On the procedural impact of criminal seizures on the collection of financial claims. Article 3 of the Provisions on the Application of Sealing and Freezing Measures by Public Security Organs in Handling Criminal Cases stipulates the handling of criminal seizures by public security organs during the investigation and prosecution stage, and article 3 of it stipulates: "Assets involved in a case that are sealed or frozen must not be disposed of before the conclusion of the litigation procedures, except where they should be returned to the victims in accordance with law or are found to be truly unrelated to the case." Except as otherwise provided by laws and relevant provisions. Article 48 stipulates: "Where assets involved in a case that need to be sealed or frozen, or that have been sealed or frozen, involve special circumstances such as mortgage, pledge or civil enforcement in seizure or civil litigation, the public security organs shall resolve it through consultation with the relevant state organs on the basis of the ownership status and disputed issues of the sealed or frozen property." Where consultation fails, each of them shall report to the organ at the level above for a settlement through consultation. The departments and units assisting in enforcement shall be handled in accordance with the written opinions reached by the relevant dispute organs after reaching consensus through consultation. "After the criminal case enters the stage of the procuratorate's review and prosecution, the current law has no provisions on how to deal with the issue of criminal seizure." In addition, most of the provisions of the above-mentioned "Relevant Provisions on the Application of Sealing and Freezing Measures by Public Security Organs in Handling Criminal Cases" are extremely general and not strongly operable. Therefore, in judicial practice, once the collateral exists prior to criminal seizure, it is often difficult to promote the civil enforcement procedure before the criminal case is concluded, and even if the civil seizure is first, the criminal judicial organ has the right to request the suspension of the enforcement of the criminal property in the civil case. For example, in the (2019) Yue Zhifu No. 664 case, the Guangdong Higher People's Court held that: "In view of the fact that the transfer of shares involved in the Zhuhai Tiankuo Enterprise Transfer Case involved the stock proceeds and the pledge of shares to Huaxin Trust Company, which involved the payment and disposal of illegally absorbed funds, it is a continuation of the crime of illegally absorbing deposits from the public, and whether the property of Zhuhai Tiankuo Enterprise can be disposed of uniformly should also be determined according to the investigation of the criminal judgment case, so the Zhuhai Intermediate Court used (2019) Yue 04 Zhi 297 Bis to execute the ruling and suspend the enforcement of Zhuhai Tiankuo Enterprise." ...... There is nothing wrong with that. ”
According to the relevant laws and regulations, in criminal cases, the court shall recover the stolen money and its proceeds, and the property and its proceeds formed by the person subject to the judgment to invest the stolen money and stolen property or buy a property [30]. Regarding the priority of criminal recovery and mortgage rights, article 13 of the Several Provisions of the Supreme People's Court on the Partial Enforcement of Property in Criminal Judgments stipulates: "Where the person subject to enforcement bears both criminal and civil liability during enforcement, and his property is insufficient to pay, it shall be carried out in the following order: (1) medical expenses in compensation for personal injury; (2) reimbursement of the victim's losses; (3) other civil debts; (4) fines; and (5) confiscation of property." Where a creditor enjoys the right of priority in receiving compensation for the subject matter of enforcement in accordance with law, and its claim for priority in reimbursement, the people's court shall support the medical expenses provided for in item (1) of the preceding paragraph after it has been reimbursed. "It should be noted, however, that the rule is applied on the premise that the lawful property of the person subject to enforcement is not sufficient to bear the full obligation to pay. If the above conditions are not met, the criminal organ shall, in general, in accordance with the provisions of article 64 of the Criminal Code, be recovered by the criminal organ or ordered to return the compensation, and the part other than the restitution shall be handed over to the State Treasury [31]. At this time, even if the collateral is not the illegal income of the person subject to enforcement, the mortgagee cannot claim priority compensation. In practice, because the jurisdiction of criminal cases and civil cases is not the same, "insufficient property to pay" is often difficult for the criminal trial court to judge alone, resulting in the application of article 13 of the Several Provisions of the Supreme People's Court on the Partial Enforcement of Criminal Judgments Involving Property, and most criminal trial courts often do not examine whether it meets the "insufficient property to pay" and directly apply article 64 of the Criminal Law to deal with it. In the (2019) SPC Case No. 118, the Supreme People's Court held that the enforcement of land use rights and attachments on the ground as illegal gains required the overall handling of criminal cases and the consultation of the criminal trial court, and the court of first instance decided that the priority of construction projects was given priority over criminal compensation in accordance with article 13 of the Several Provisions of the Supreme People's Court on the Enforcement of Property-Related Parts of Criminal Judgments, which was a serious error.
Suggestions: First, when accepting mortgages on immovable property, financial institutions should conduct a comprehensive verification of the mortgagor's potential criminal involvement, the source of funds originally invested in the collateral, and other potential criminal risks; second, regarding procedural responses, such as the criminal seizure of the collateral, it is recommended that financial institutions regard civil cases and collateral as irrelevant to criminal cases (non-criminal proceeds or their fruits, tools used to commit criminal acts, and other property that can prove whether the criminal acts have occurred and the seriousness of the crimes). Third, with regard to the response to the priority of rights, it is recommended that financial institutions have the right of priority to be reimbursed for the collateral from the perspective of guiding the application of the relevant provisions of article 13 of the Several Provisions of the Supreme People's Court on the Partial Enforcement of Property involving Criminal Judgments from the perspective of the provisions of article 13 of the Several Provisions of the Supreme People's Court on the Partial Enforcement of Property involving Criminal Judgments.