Research On Various Issues On Pre-sale System Of Real Estate

Pre-sale of real estate means the developer pre-sells the real estate under construction to buyers, buyers pay an amount of deposit or purchase price, and the delivery of the real estate is to be made on an agreed future date. Because pre-sale of real estate is a common practice in real estate transaction and China's present applicable laws and regulations are incomplete and most of them are stipulated in principle, it becomes necessary to make research on it.Both seller and buyer may initially execute an order sheet, and this order sheet is an independent contract stipulating that both parties are responsible to carry out further negotiation to enter into a formal purchase contract. Different from the pre-sale contract, this order sheet is an offer in legal sense. Generally speaking, the deposit agreed upon in the order sheet is a breach of contract damage. In the event one party fails to further negotiate for the execution of the pre-sale contract, the penalty of deposit shall apply. The effectiveness of the order sheet is not affected by the fact that the certificate for pre-sale has not been issued. It will go into effect upon the developer attains the construction certificate. In case either party breaches the order sheet, the remedies of damage will apply, and actual performance shall apply when it is possible and does not go against the agreements.The current procedure of filing the pre-sale contract with governmental agencies is in nature a method for the government to examine the pre-sale qualification. It is the contract that is filed. The filing itself should not challenge third parties' property right and should not constitute a necessary factor to make the pre-contract effective. To prevent developers from infringing pre-buyers' expectation right, China should set up a pre-registration system, securing the property right against challenges from third parties.Mortgage loan for pre-sale real estate mean that the buyer makes the down payment and the bank pays the rest price with the mortgage of the pre-sale real estate as a guarantee for the buyer to clear the debt (loan). Mortgage loan for the pre-sale real estate is differentfrom the general mortgage of real estate regarding the subject, the parties, the bearing of risks, the specified application of main debt and mortgage phases. Since it involves no transference of the property title, it is different from common mortgage. Our filing system has defects, and it conflicts with the mortgage of the work under construction, the mortgage of the land use right and the priority of compensation for construction cost. Meanwhile, the filing system meets with some problems with developers' guarantee and the liability of loan payment after revoke of mortgage. Therefore, the author suggests that our country make and implement sufficient laws and regulations, set up unitary filing bureaus, establish pre-filing system and the filing system for the priority of compensation for construction cost, and improve the mortgage loan system for the work under construction and the mortgage loan system for the land use right.