Article 21: Where the term of the lease expires before the implementation of the Civil Code, and the parties claim to apply the provisions of paragraph 2 of Article 734 of the Civil Code, the people's court will not support it; Where the term of the lease expires after the implementation of the Civil Code, and the parties claim to apply the provisions of paragraph 2 of Article 734 of the Civil Code, the people's court shall support it in accordance with law.
【Purpose of the Article】
This article is about the application of the right of first refusal.
[Interpretation of Provisions]
The right of first refusal of a tenant is a new regime in the Civil Code. The so-called right of first refusal refers to the right of the lessee to lease the original leased property under the same conditions under the same conditions at the expiration of the lease term in the legal relationship of lease. This system is not provided for in the Contract Law, but it is clearly stated in article 734, paragraph 2, of the Civil Code that the tenant of the house has the right of first refusal.
The main value of the system of preferential lease is threefold: first, it is to ensure that people's use relationship with the property remains stable, so as to promote the realization of long-term stable possession and use of the leased property to the greatest extent; The second is to protect the lessee as a vulnerable group, prevent the lessor's arbitrary change of the lease relationship from affecting the lessee's life and operation, and strengthen the rights of the lessee; The third is to reduce transaction costs and reduce disputes caused by changes in leasing relationships, so as to maintain the stable development of social economy. For the understanding of this article, the following issues need to be noted:
1. How to understand the nature of the right of first refusal
The nature of the right of first refusal has been controversial in both academic and practical circles. Straightening out this issue would help to understand the issues in this article as they relate to the application of articulation.
As mentioned above, when the Contract Law was enacted, the preferential right of tenants was not stipulated, and only some local regulations provided for this issue. For example, Article 44 of the Regulations of Shanghai Municipality on Housing Lease stipulates that "if the house continues to be leased after the expiration of the lease, the tenant shall enjoy the right of priority under the same conditions." Article 45 of the Regulations on the Administration of Urban Housing in the Xiamen Special Economic Zone stipulates that: "If the lessor is willing to continue to rent the house upon the expiration of the lease term, the original lessee shall have the right of priority under the same conditions; If the lease is not renewed, the rented house shall be returned. Article 38 of the Regulations on the Administration of Housing Leasing in Zhejiang Province (no longer valid) stipulates that "upon the expiration of the lease, the lessee shall return the house to the lessor on time." If the lessor continues to lease the house, the lessee has the right of priority under the same conditions. Article 36 of the Wuhan Municipal Regulations on the Administration of Real Estate, Article 38 of the Guizhou Provincial Regulations on the Administration of Urban Real Estate Development and Operation (no longer lapsed), and Article 26 of the Shenzhen Special Economic Zone Housing Lease Regulations (no longer valid) all have similar provisions.
As for how to determine the right of first refusal stipulated in local regulations, the academic community generally believes that the right of first refusal is the basic legal system in the lease contract, and according to the provisions of the Legislation Law of the mainland, it belongs to the content that should be prescribed by law, so even if the local regulations stipulate the right of first refusal, as long as it is not stipulated in the Contract Law, the right of first refusal is not a legal right to be protected.
Can the parties' right of first refusal as stipulated in the lease contract be protected? From the perspective of judicial practice, respecting the autonomy of the parties should be recognized and protected by the law. At the same time, however, there is more controversy over the nature of the right to first refusal. Among them, the main viewpoints include the right to request, the right to form or the right to form with cessation conditions, and the right in rem. Although the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Cases Involving Disputes over Urban Housing Lease Contracts (Fa Shi [2009] No. 11) does not address this issue, it defines the right of first refusal of a lessee with the same nature as the right of first refusal. Article 21 of the Interpretation provides for the protection and exercise of the lessee's right of first refusal, and from the relevant provisions, some scholars believe that the interpretation tends to hold that this right is a right to request compulsory contracting, rather than a right of formation or a right in rem. From the point of view of this interpretation, it is presumed that the right of first refusal should be more of a claim for compulsory contracting. However, if this right is found to be a compulsory contract, from the perspective of the way in which the right is exercised, the exercise of the right can only be realized by the lessee making a request to contract (even if the offer is legally presumed that the lessor should undertake in accordance with the law), which is obviously detrimental to the protection of the lessee.
After the adoption of the Civil Code, the legislature considers the nature of the statutory preferential lease right stipulated in paragraph 2 of Article 734 of the Civil Code to be a right of formation, specifically, we tend to believe that, from the perspective of better protecting the rights of the lessee, in order to achieve this legislative purpose and legislative value, it is appropriate to define this right as a conditional right of formation, that is, when the conditions prescribed by law are fulfilled, the unilateral expression of the lessee's intention to conclude the contract can establish a lease contract relationship between the lessor and the lessee.
Therefore, the exercise of the right of first refusal is carried out by the unilateral expression of the intention of the lessee, and as long as the conditions for exercising the right of first refusal are met in accordance with Article 734 of the Civil Code, it is sufficient to form a new lease contract relationship without the expression of intent of the lessor. At the same time, when the lease term expires and the lessor is willing to continue to lease the premises, it shall notify the lessee of this information in an appropriate manner and give the lessee a reasonable time to make a decision.
2. The type of lease contract to which paragraph 2 of Article 734 of the Civil Code applies
From the perspective of the subject matter of the lease, there are many types of lease contracts, including real estate lease contracts such as houses, as well as movable property lease contracts such as equipment. The provisions of Chapter 14 of the Contract Part of the Civil Code on "Lease Contracts" are the provisions of all lease contracts, as long as the lease contract complies with the circumstances of Article 703 of the Civil Code. Does the lease contract provided for in paragraph 2 of Article 734 of the Civil Code, which regulates the right of first refusal, include all lease contracts provided for in that chapter? In other words, are all tenants in a lease contract governed by this chapter entitled to the right of first refusal under article 734, paragraph 2, of the Civil Code?
The answer is no. According to the provisions of paragraph 2 of Article 734 of the Civil Code, "upon the expiration of the lease term, the tenant of the house shall have the right to give priority to the lease under the same conditions". According to the interpretation of the provisions of this paragraph, only the "tenant of the house" has the right of priority in accordance with the provisions of this paragraph, that is, only the lease contract of the house provides for the right of priority in accordance with the law, and the provisions of this paragraph do not apply to other lease contracts.
As for the understanding of "housing", it can be judged in accordance with the provisions of Article 1 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Cases Involving Disputes over Urban Housing Lease Contracts (amended in 2020), which holds that "the term "urban housing" in this interpretation refers to the housing in the urban or town planning area. Cases of disputes over housing lease contracts in township and village planning areas may be handled with reference to this interpretation. However, where the law provides otherwise, those provisions shall apply. This Interpretation does not apply to disputes arising from parties leasing public housing, low-rent housing, or affordable housing in accordance with national welfare policies."
3. The issue of the application of the right of first refusal
There have always been two different understandings on the cohesive application of the right of first refusal: one opinion holds that the lease contract is a continuing contract, and the contract was established before the implementation of the Civil Code, and the laws and judicial interpretations at that time did not stipulate the tenant's right of first refusal. Another opinion is that the Civil Code is binding on all legal facts after its implementation, and the lessee should be given the right of priority in the lease contract where the lease term lasts until after the implementation of the Civil Code.
The second opinion is adopted in this provision. The reason is that, on the one hand, the Civil Code is binding on the legal facts that occur after the implementation of the Civil Code, whether they occur entirely after the implementation of the Civil Code or some legal facts that continue after the implementation of the Civil Code, which is the natural interpretation of the temporal effect of the law. For a lease contract where the lease period lasts until after the implementation of the Civil Code, granting the lessee the right of first refusal does not undermine the reasonable expectations of the parties. On the other hand, the right of preferential lease is the preferential lease of the lessee under the same conditions, which does not prejudice the rights and interests of the lessor, and is conducive to the lessee's long-term lease for production, life and operation.
Therefore, there are four types of disputes involving the preferential lease right of the tenant of the housing lease contract, marked by the expiration of the housing lease contract:
First, if the housing lease contract is established and takes effect after the implementation of the Civil Code, the provisions of paragraph 2 of Article 734 of the Civil Code shall be applied to civil cases involving the right of preferential tenancy, that is, the tenant of the house shall enjoy the right of preferential tenancy regardless of whether the parties have agreed on the right of preferential lease in the lease contract.
Second, if the housing lease contract is established and takes effect before the implementation of the Civil Code, but the agreed lease contract is terminated after the implementation of the Civil Code, in accordance with the provisions of the latter part of this article, the provisions of paragraph 2 of Article 734 of the Civil Code shall also apply to civil cases involving the right of preferential tenancy, that is, the tenant of the house shall enjoy the right of preferential tenancy, regardless of whether the parties have agreed on the right of preferential lease in the lease contract.
Third, if the housing lease contract is established and takes effect before the implementation of the Civil Code, and the agreed lease contract should have been terminated after the implementation of the Civil Code, but the parties have already terminated the contract by agreement before the implementation of the Civil Code, and the parties file a lawsuit with the people's court after the Civil Code takes effect, and the lessee claims that it should enjoy the right of priority in accordance with the provisions of paragraph 2 of Article 734 of the Civil Code, the people's court shall not support it.
Fourth, if the housing lease contract is established and takes effect before the implementation of the Civil Code, and the agreed lease contract is also terminated before the implementation of the Civil Code, and the lessee claims to enjoy the right of first refusal, the people's court shall examine the relevant provisions of the housing lease contract to see whether the right of first refusal is stipulated in the contract, and if so, the people's court shall support the right of first refusal in accordance with the relevant provisions of the housing lease contract (instead of the provisions of Article 734, Paragraph 2 of the Civil Code); If not, the claim of its right of first refusal is not supported.
4. Differences in the remedies for the right of first refusal
When the people's court applies this article in the trial of a lease contract case, there should be differences in the remedies for infringing on the tenant's right of priority lease.
First, if the housing lease contract was established and took effect before the implementation of the Civil Code, and the expiration of the lease period was also before the implementation of the Civil Code (i.e., the first half of this article), the people's court will not support the claim of the parties to enjoy the right of priority in accordance with the provisions of paragraph 2 of Article 734 of the Civil Code. Note, however, that this does not mean that the parties do not enjoy the right of first refusal, but that they cannot enjoy it in accordance with the provisions of Article 734, paragraph 2 of the Civil Code. Whether the lessee enjoys the right of priority shall be judged in accordance with the provisions of the housing lease contract signed by the parties.
(1) If the lessor and the lessee do not agree on the right of priority in the housing lease contract, the people's court shall not support the lessee's claim for the right of first refusal.
(2) If the contract stipulates the right of first refusal, the people's court shall support the claim of the right of first refusal in accordance with the contract. If the lessor fails to perform the relevant agreement and infringes upon the lessee's right of first refusal, how should the people's court remedy?
If the parties have agreed on the right of first refusal in the contract, the people's court should protect the agreed right of first refusal. However, based on the relativity of the contract, the agreement on the lessee's right of priority is only binding on the parties to the contract, and such an agreement is not effective against third parties.
The law and judicial interpretations do not stipulate how to remedy the infringement of the right of first refusal. In judicial practice, the people's court generally refers to Article 21 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Cases Involving Disputes over Urban Housing Lease Contracts (Fa Shi [2009] No. 11) to determine the relief method for the tenant's right of first refusal. This article stipulates: "If the lessor sells the leased premises without notifying the lessee within a reasonable period of time or there are other circumstances that infringe on the lessee's right of first refusal, and the lessee requests the lessor to bear the liability for compensation, the people's court shall support it." However, the people's court shall not support the request to confirm the invalidity of the housing sales contract signed between the lessor and a third party. [4] According to this article, the right of first refusal is a specific right prescribed by law, and when this right is infringed, the right to claim damages is one of the rights enjoyed by the lessee, and according to the principle of disposition of rights, the lessee may claim compensation for damages alone, in which case, the lessee's disposition of the claim should be respected and the claim should be supported. Therefore, if the lessor infringes upon the lessee's right of first refusal, and the lessee requests the lessor to bear the liability for compensation, the people's court should support it. At the same time, if the lessee requests confirmation that the housing sales contract signed between the lessor and the third party is invalid, the people's court shall not support it, holding that the validity of the contract signed between the lessor and the third party shall be judged in accordance with the provisions of the Contract Law on the validity of the contract, and shall be deemed valid if the contract is not invalid.
With reference to the above provisions, if the lessor and the lessee have agreed on a "preferential lease" clause in the housing lease contract, but the lessor violates the provisions of the clause and fails to support the lessee's preferential lease right, and allows a third party to lease the premises after the expiration of the original lease contract, the lessee requires the lessor to bear the liability for breach of contract and claim damages for its losses, the people's court shall uphold it. However, if the lessee claims that the Housing Lease Contract signed between the lessor and a third party is invalid, the people's court will not support it.
Second, after the implementation of the Civil Code, regardless of whether the previous housing lease contract provided for the right of first refusal, as long as the lease term of the house spans the time when the Civil Code came into force on January 1, 2021, the lessee of the lease contract can claim the right of first refusal.
If the lessor fails to notify the lessee in a reasonable way, or fails to give the lessee a reasonable period of time to decide whether to continue the lease, and directly signs a lease contract with a third party, infringing the lessee's right of first refusal, how should the lessee achieve the right of remedy?
This issue is not regulated in the Civil Code. However, as mentioned above, we can refer to the relevant provisions of the Civil Code on infringement of the lessee's right of first refusal. Paragraph 1 of Article 726 of the Civil Code stipulates the right of first refusal of the tenant of the house, which stipulates that "if the lessor sells the leased house, it shall notify the lessee within a reasonable period of time before the sale, and the lessee shall have the right of first refusal to purchase under the same conditions; However, this does not apply to the exercise of the right of first refusal by the co-owners of the house or the sale of the house by the lessor to a close relative. At the same time, Article 728 of the Civil Code stipulates the legal consequences of infringement of the tenant's right of first refusal, which stipulates: "If the lessor fails to notify the lessee or there are other circumstances that hinder the lessee's exercise of the right of first refusal, the lessee may request the lessor to bear the liability for compensation." However, the validity of the contract for the sale and purchase of the house concluded between the lessor and a third party shall not be affected. ”
The right of first refusal and the right of first refusal are rights granted by law in order to effectively protect the rights and interests of the lessee, and both are to maintain and stabilize the legal order of the use of leased property. However, there is a clear difference between the two, the former refers to the sales contract, while the latter refers to the lease contract; The realization of the rights of the former results in the acquisition of ownership of the house, while the latter only continues to lease the use of the house.
Therefore, when the people's court hears a case where the lease period spans the time when the Civil Code came into force (January 1, 2021), the case involves infringement of the right of first refusal, which makes the lessee lose the opportunity to lease the house on the same terms as a third party, and the lessor shall compensate the lessee for the losses caused thereby. Compensation for property damage is based on the principle of full compensation, and the scope of compensation includes both the reduction of the value of the property caused by the tort and the loss of available benefits. However, if the lessee claims that the lease contract between the lessor and a third party is invalid on the grounds that its right of priority has been infringed, the people's court shall reject the litigation claim.
[Issues that should be paid attention to in trial practice]
According to the provisions of the Civil Code, the right of first refusal is a property right exclusive to the tenant of the housing lease contract, can this right be transferred?
The transfer of the right of first refusal is different from the subletting of the property. The so-called sublease of the house refers to the act of the tenant of the house renting out the house to others for use and obtaining income during the validity period of the housing lease contract. The transfer of the right of first refusal refers to the transfer of the right of first lease that the lessee enjoys in accordance with the law to the third party of the housing lease contract, and the third party and the lessor sign the house lease contract, and at the same time use the right of first refusal against other parties who are ready to lease under the same conditions.
It should be pointed out that although the right of priority is a right belonging to the lessee, the right belongs to the right enjoyed by the lessee in accordance with the law at the expiration of the lease contract, and does not have corresponding independence and cannot be transferred to a third party independently of the lease contract. After the expiration of the lease contract, if a third party claims that it requests to sign a housing lease contract with the lessor under the same conditions based on the preferential lease right transferred by the transferee, the people's court will not support it.
However, if the lessee agrees with a third party to transfer all its rights and obligations under the housing lease contract to a third party during the validity period of the housing lease contract, this is a "transfer of contractual rights and obligations", and after the expiration of the lease contract, does the third party enjoy the right of priority to lease? If the transfer of rights and obligations between the lessee and the third party complies with the above provisions, the lessee transfers the lease right to a third party, the lessee withdraws from the lease relationship, the lease relationship continues between the transferee and the lessor, the lessee no longer enjoys the rights of the lease contract, and the third party claims the right of priority after the expiration of the lease contract as the transferee of the housing lease contract, and the people's court shall support the claim of the right of priority after the expiration of the lease contract.