Recently, Yang Hangsheng and Peng Qi, senior partners of Beijing King&Capital Law Firm, represented a series of cases of housing lease contract disputes and obtained the final judgement in one of the intermediate courts in Beijing respectively. With 22.85 million RMB being claimed, the client only had to pay 0.92 million RMB to the other party of the two cases after offsetting the amount of the judgement, avoiding a loss of nearly 22 million RMB.
Case Background
In early 2022, a company leased more than 13,000 square metres of houses and courtyards in the Beijing urban area from a central enterprise (the property owner), with a lease term of 15 years and a cumulative rent of hundreds of millions of RMB, and the lease agreement stipulated that the lessee could sublease the houses in question to an affiliated company after the approval of the central enterprise In May 2022, a company leased the houses in question to an affiliated company, i.e., a sublessee; and in August of the same year, the sublessee, again through the bidding process, subleased the houses to the final lessee In May 2022, a company leased the house to a related company, the sub-tenant; in August of the same year, the sub-tenant subleased the house to the final tenant through bidding procedures.
In the performance of the lease contract of the house in question, the epidemic factor was superimposed on the operational difficulties, and the conflicts between the parties intensified and went to the court.2022 From the end of the year, the case of the lease contract of the house between a certain central enterprise and a certain company went through the first trial (the present and counterclaim) and the second trial, and the court ultimately ruled the lease contract to be cancelled on the ground that a certain company sublet the house without consent of a certain central enterprise, and that the construction of the house was illegal by a certain company and its affiliates; the case of the lease contract of the house between a certain company and a certain sublessee went through the first trial, and then the second trial. The lease contract between a company and a sub-tenant went through the first (principal and counterclaim) and second instance, and the court held that the previous lease contract had been cancelled, and that the lease contract in question could not be fulfilled in fact and should be terminated according to the law, and that matters of breach of contract liability should be resolved separately.
In November 2023, a central enterprise and a sub-tenant filed another lawsuit against a company, claiming huge amount of liquidated damages, security deposit, rent return, housing occupation fee, etc., and a company became the ‘defaulting party’ of the two cases, and faced the unfavourable situation of ‘being attacked by enemies from the back’. The company became a ‘defaulting party’ in two cases, facing an unfavourable situation. Obviously, the case agent faced the constraints of the effective judgement, and the client had entrusted three law firms to represent the client in the previous case, which led to inconsistency in thinking. In this context, the team of Yang Hangsheng of King&Capital accepted the entrustment of a company, and endeavoured to look for a breakthrough in the case.
Attacking and defending strategy in the process of handling the case
Before the King&Capital team accepted the commission of a company, the effective judgement had confirmed the cancellation/termination of the housing lease contract of the two cases. After accepting the commission, the team studied the case materials and analysed the cases in depth, and concluded that the main focus of dispute in the two cases was the determination of fault and the assumption of liability for breach of contract in the case of termination of the contract, while the important legal facts affecting the determination of fault were whether the property owner, a central enterprise, agreed to sublet the lease, and the main body of responsibility for the construction of the illegal building. Accordingly, the team of lawyers formulated the following litigation strategy:
1. Attack: lock the key evidence of the case, proving that the property owner, a central enterprise, agreed to sublet.
Although a company had obtained the verbal consent to sublet from the project manager of a central enterprise, the trial court did not recognise that the central enterprise had agreed to sublet. After careful study of the case materials, the lawyer found key evidence in the evidence submitted by the other party in the previous case, that is, the sub-tenant in the final lessee of the office space leasing project bidding documents, had submitted ‘the property owner agreed to sublease information’, otherwise it could not be successful or invalid bidding. The ‘property owner's consent to sublease information’ could prove that a central enterprise was aware of and agreed to the two-level subleasing behaviour of a company leasing to a sublessee and a sublessee leasing to the final lessee, and that a central enterprise, the sublessee, the final lessee and the bidding agency should all hold the consent to sublease information.
After clarifying the logical relationship, the lawyer successively adopted the following litigation strategy: (1) filing counterclaims in both cases: by filing counterclaims, attacking as defending; (2) applying to the court to investigate and collect evidence: the lawyer first applied to the court to investigate and collect evidence from the final lessee and the bidding agent on the ground that it could not be collected due to objective reasons; (3) applying to investigate and collect evidence from the final lessee and its person-in-charge, bidding agent and its person-in-charge for illegal non-cooperation in providing evidence; and (4) applying to investigate the final lessee and its person-in-charge. The person in charge of illegal non-cooperation to provide evidence of legal responsibility: in many times to the final lessee, bidding agency to obtain evidence to no avail, to the court to apply for the two units and its responsible person of the responsibility of the offence; (4) apply for evidence to make an order: in the event of the final lessee and bidding agency does not provide key evidence, the attorney in charge of the evidence in the case of parties to the case of a central enterprise, the sublessees in the control of the grounds, in the two cases separately applied for writs of mandamus, applying for the court to order the other party to submit documents proving that the property owner had agreed to sublet the property.
In addition, this was supplemented by measures such as applying for a retrial of one of the effective judgements and applying for court enforcement on the basis of the effective judgement.
Through the above strategies, the attorney showed the judge that if the property owner's consent to sublet existed, the company did not breach the contract by subletting without authorisation; if not, the entire fault would be attributed to the sub-tenant. Although the court can not change the judgement has come into effect, but in this case should be dealt with according to law, balance of interests.
2. Defend: Capture the status quo of the existence of illegal structures and argue that the subject of responsibility is the sub-tenant.
Regarding the case involving multiple illegal structures, the lawyer defended from multiple levels and angles: (1) For the three demolished illegal structures, the lawyer argued that the existing evidence could not prove that the illegal structures were constructed by a certain company, and that after being ordered to rectify the situation by the street office, the structures were forcibly demolished on the next day. According to Article 6 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Cases of Urban Housing Lease Contract Disputes, such unauthorised building works were not the main reason for the termination of the lease contract between a central enterprise and a certain company; (2) for the other existing unauthorised building works, the argumentation was made from the following perspectives: firstly, there was a judgement in force in the previous case confirming that the unauthorised building works had been constructed by the sublessee; and secondly, after the termination of the lease contract between the two cases. Secondly, after the termination of the two leases, the illegal structure continued to exist during the period when a central enterprise established a new lease contract with the sublessee; thirdly, a company applied for court enforcement based on the previous effective judgement, requesting the sublessee to reinstate the house in question to its original state and return it to the company. Later, a central enterprise in the case issued documents agreeing to the current status quo of the house in question.
The lawyer indicated to the judge that a central enterprise recognised the existence of the illegal construction, and its reason of illegal construction by a company could not be established, and the full legal responsibility of the illegal construction should be borne by the sub-tenant.
In addition to the dispute over breach of contract liability, the two cases also involved issues such as rent reduction and waiver by the central enterprise during the epidemic, return of rent after the termination of the lease contract, house possession and use fee, and security deposit, etc., and the lawyers also made corresponding offensive and defensive strategies.
Afterword
King&Capital lawyers in the handling of this housing lease contract dispute series of cases, not isolated, single case, but from the overall consideration of the two cases, find the key evidence, interlocking and progressive, so that the judge on the case of factual determinations are more accurate, the balance of interests is more equitable, as far as possible, to reduce the judge of our client's case in the determination of the fault and the assumption of responsibility for the breach of contract, in order to achieve a better legal effect and social effect. The judgement of the second instance of the two cases came into effect.
After the judgement of the second instance of the two cases came into effect, the client fulfilled the content of the judgement as scheduled according to the requirements of the judgement.
Constrained by the established facts of the first two cases, the lawyer has tried his best to minimise the loss of a company and avoid the loss of nearly 22 million RMB in the two cases, but if a company and its agent had discovered and made use of the key evidence of ‘the property owner's consent to subletting’ in the first case, the case might have a chance to achieve better results, or even a subversive result. However, if a company and its agent had discovered and utilised the key evidence of ‘the owner's consent to subletting’ in the previous case, the case might have had a chance to achieve a better result, or even a subversive result!
