Housing Renting——Suffer a Major Loss Due to Carelessness
On June 26, 2017, Shanghai Z Industrial Co., LTD. (hereinafter referred to as Z company, the lessee) and Shanghai Y Aluminum Co., LTD. (hereinafter referred to as Y company, the lessor) signed thePlant Leasing Agreement,in whichthe lease would last for 15 years until March 1, 2033，and allowed Z company to sublease or attract investment. During this period, Z company invested a large amount of money for the renovation of the factory building, and successfully introduced foreign investment. As the lessor did not disclose the situation that the factory building had been already mortgaged to Yongkang City Branch of Bank of China Co., LTD when the lease contract was signed，the whole lease item was announced as an auction by a relevant court after the lessor Y company did not repay the debt owed to the bank in time.After the auction, the new owner, Shanghai XBusiness Service Center, asked Z company to move out, which may cause economic losses of tens of millions Yuan to Z company.
According to Article 190 of the Property Law of the People’s Republic of China, as a general rule, the sale does not break the lease, and the right to lease is protected with priority; However, Article 190 provides an exception to the preferential protection of “no break of lease with bargain” in the case of “mortgage before lease”.
Therefore, when you or your kith and kin rent a house, it is important to understand the law and whether the house has been mortgaged or not, which will help you to avoid losses.
Of course, when confronted with the above passive dilemma, Z company can still have a remedy, which is to exercise the lessee’s preemptive right. According to the Property Law of the People’s Republic of Chinaand other relevant laws, the right of preemption is not excluded by mortgage before lease, nor is it excluded by judicial auction rules, but only needs to meet special exercise procedures in judicial auction.
A note about handling the cases by Qian Peixin, Shanghai Branch of Beijing Huicheng Law Firm