Housing Demolition and Relocation Contract Dispute Cases

Basic Facts of the Case:

Plaintiff Qiu claims: He owns a residential unit—apartment 202, Unit 1, No. 315, Xincun, Xiba Road—measuring 92 square meters in area. In September 2009, the plaintiff and the defendant signed the “House Demolition Compensation Agreement” for the Xiba Road Construction Project in Xishan District, stipulating that the compensation rate per square meter for the house would be RMB 5,131, with a total housing value compensation of RMB 472,052. To ensure fairness and consistency in compensation before and after, Article 9 of the agreement provides: “If, during the implementation of this Xiba Road Construction Project in Xishan District, the prices of houses on the same floor in the same building change, the new compensation rate shall apply.” By the end of 2009, only a few households had signed the agreement for Units 315 and 319; the vast majority of residents jointly refused to sign, thus halting the relocation process. It was not until July 2013 that the defendant resumed the relocation efforts targeting residents of Units 315 and 319 in Xincun, Xiba Road, and adjusted the compensation rates for these two buildings. Specifically, the compensation rate per square meter for units on the same floor as the plaintiff’s Unit 315 was adjusted to RMB 11,063, representing an increase of RMB 5,932 per square meter. According to the agreement, the defendant should also compensate the plaintiff for the difference totaling RMB 545,744. After unsuccessful negotiations, the plaintiff brought the case to court, requesting the court to rule as follows: 1. The defendant fulfill its obligations under the “House Demolition Compensation Agreement” and pay the plaintiff the difference in housing compensation amounting to RMB 545,744; 2. The defendant pay interest losses of RMB 60,134 arising from the delayed payment of the compensation difference due to its breach of contract; 3. The defendant bear the litigation costs.

The defendant argues that the land acquisition, demolition, and relocation project for the Xiba Road road reconstruction and expansion was carried out by the defendant under a mandate and agency arrangement, with the third party authorizing the defendant to act on its behalf. The funds for demolition, resettlement, and compensation came from state-owned assets rather than from the defendant’s own property. The unit price for the plaintiff’s housing compensation was determined after a market valuation conducted by an appraisal agency commissioned by the government, and was subsequently confirmed by the plaintiff himself. After the plaintiff and defendant signed the demolition compensation agreement, which was reviewed and stamped by the third party, and then preliminarily audited by the government’s auditing bureau, only then could the compensation funds be transferred to the defendant’s dedicated account for this project. The third party had no authority or legal basis to arbitrarily use state funds to provide the plaintiff with excessive compensation. As the principal, the defendant is not the one who bears the legal consequences arising from the entrusted affairs; therefore, the defendant cannot exceed the principal’s instructions and provide the plaintiff with excessive compensation.

The third-party street office stated: This case is a contractual dispute between the plaintiff and the defendant. The third party is not a proper party and should not participate in the litigation of this case.

Key point of contention:

1. Is this case an administrative lawsuit or a civil lawsuit?

2. In this case, is the defendant or a third party the entity bearing the obligation?

Referee's Viewpoint ：

The court of first instance held that the plaintiff and the defendant had entered into a “House Demolition Compensation Agreement” due to the need for the renovation and expansion project of Xiba Road in Xishan District, Kunming City. The contractual purpose of this agreement is of public interest and not driven by private gain; moreover, the conclusion of the agreement was characterized by a certain degree of government leadership. After the agreement was concluded, it was required to undergo a review procedure conducted by the relevant government authorities, and could only be implemented upon approval of such review. Throughout both the conclusion and performance of the “House Demolition Compensation Agreement,” the parties’ freedom of choice and autonomy of intent were not evident. Therefore, this case does not fall within the scope of civil litigation accepted by the People’s Courts, and the plaintiff’s lawsuit does not meet the statutory conditions for filing a suit. Accordingly, the court ruled: Dismiss the plaintiff Qiu’s lawsuit.

After reviewing the case, the second-instance court upheld the ruling of the first instance.

Case Analysis:

1. Is this case a civil lawsuit or an administrative lawsuit?

According to Article 4 of the "Regulations on the Administration of Urban Housing Demolition," "The term 'demolisher' as used in these Regulations refers to the entity that has obtained a housing demolition permit." Article 10 stipulates: "The demolisher may carry out the demolition itself or entrust a qualified entity to do so. The housing demolition administrative department may not act as a demolisher, nor may it accept any demolition mandates." As can be seen from these provisions of the "Demolition Regulations," the demolisher—defined as the civil entity obtaining the housing demolition permit—is the entity that has received such a permit. Enterprises (including demolition companies) are all eligible to serve as demolishers; the regulations do not designate government departments as the primary demolishing entities.

The “Regulations on the Expropriation and Compensation of Houses on State-Owned Land,” which came into effect in 2011, stipulates that the municipal and county-level people’s governments are the primary entities responsible for house expropriation and compensation, clearly defining expropriation and compensation as government actions. Article 11 of the “Interpretation by the Supreme People’s Court on Several Issues Concerning the Application of the Administrative Litigation Law of the People’s Republic of China,” issued in 2015, further provides that if citizens, legal persons, or other organizations file an administrative lawsuit concerning compensation agreements for the expropriation or requisition of land, houses, and other properties, the people’s courts shall accept such cases in accordance with the law.

As can be seen, prior to the promulgation of the “Regulations on the Expropriation and Compensation of Houses on State-Owned Land,” there was considerable controversy in practice regarding whether disputes arising from the performance of demolition agreements should be classified as civil or administrative litigation. However, after the “Regulations on the Expropriation and Compensation of Houses on State-Owned Land” took effect, any disputes that arise during the performance of expropriation and compensation agreements signed thereafter must be brought before the People’s Court as administrative litigation.

2. Is the defendant or a third party the entity bearing the obligation?

According to the “Regulations on Monthly Compensation for Housing Demolition on State-Owned Land,” this case involves an administrative legal relationship, and it is clear that the party bearing the obligation should be a third party.

We believe that the “Regulations on Urban Housing Demolition Management,” which were in effect at the time of the demolition, should be applied to this case. According to the “Regulations on Urban Housing Demolition Management,” the defendant, a certain housing demolition company in Kunming City, is the demolisher that has obtained the demolition permit and also serves as the party signing the “Housing Demolition Compensation Agreement.” Therefore, we hold that the entity bearing the obligations should be the aforementioned housing demolition company in Kunming City.