Inquiries shall be made into the status of the property rights when an enterprise purchases a property
Inquiries shall be made into the status of the property rights when an enterprise purchases a property
[Basic facts]
On December 26, 2017, Company A and Company B signed a Commodity House Purchase and Sales Contract, by which the two parties agreed that Company A purchases at the price of 2,826,315 yuan from Company B the subject property of 89.76 square meters in floor area. Upon signing the contract, Company A paid over to Company B the purchase price as agreed in the contract, and Company B delivered the subject property to Company A.
Before Company A purchased from Company B the subject property, Company B had, to borrow money from a bank, already mortgaged the property to the bank and had the mortgage registered. Later, as Company B failed to pay back the bank borrowings as scheduled, the bank brought the case to the arbitration commission, which returned the decision that the bank enjoys the priority of compensation over the subject property. After the arbitration award came into force, the bank applied to the peoples court for the enforcement on the subject property.
Company A, on the grounds that it is the actual right holder of the subject property, made an objection to the people’s court against the enforcement, and, after the objection was rejected, lodged a suit of objection against enforcement by a person outside the case.
[Rationale of the people’s court]
As Company B had mortgaged the subject property to the bank before Company A purchased the subject property, and the banks priority of compensation over the subject property has been affirmed by an arbitration award, so the question in this case for the court to analyze is whether Company A which enjoys civil rights and interests over the subject property can assert its rights and interests against the banks mortgage.
According to the Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Enforcement Objection and Review Cases by the People’s Courts, Articles 27 & 29, only consumers who have purchased the properties can assert their rights and interests against mortgages.
In this case, Company A is not a consumer who has purchased the property, therefore, the civil rights and interests it enjoys over the subject property do not deprive the court of the enforcement.
[Tips on legal risks]
When purchasing a property, an enterprise should probe into the status of the property rights, to ascertain whether the property has been mortgaged by the owner or seized by the court. When making such inquires, it should not only consult the information query system but also verify the original files.
