Case Study: Confirmation of Contract Invalidity for Non-Villager Buying Rural Housing
Case Summary
This case involves a dispute regarding the confirmation of contract invalidity over a rural property. Shi (a non-villager) paid Zhang (a villager) to purchase "surplus" resettlement housing built on collective land, effectively using Zhang's name to buy the property. Years later, Zhang sued to declare the transaction invalid. The court ruled that although the parties signed a "Sales Agreement," the true legal relationship was a "name-borrowing" purchase. Since Shi was not a member of the collective economic organization, she was ineligible to acquire rights to housing on collective land. Thus, the contract violated mandatory legal provisions and was deemed invalid. Shi was ordered to return the house, with financial disputes to be settled separately,,.
Full Decision
(I) Confirmation of Contract Invalidity Dispute
Determination of Validity of Non-Collective Economic Organization Members Borrowing Names to Purchase Resettlement Housing Built for Old Village Reconstruction or New Rural Construction that Does Not Change Land Nature. — Zhang v. Shi, Case on Confirmation of Contract Invalidity
[Basic Case Information]
Judgment Reference: Beijing No. 1 Intermediate People's Court (2023) Jing 01 Min Zhong No. 6393 Civil Judgment. 1. Cause of Action: Confirmation of Contract Invalidity Dispute. 1. Parties:- Plaintiff (Appellee): Zhang. - Defendant (Appellant): Shi. [Basic Facts] Zhang and Shi Hua divorced on December 8, 2022.
Shi Hua and the Defendant, Shi, are biological sisters. Shi was originally a resident of Miyun District, Beijing, and is now a resident of Haidian District, Beijing. On August 16, 2002, the Villagers' Committee of a certain village in Changping District, Beijing, issued a "Letter to All Villagers," stating: For villagers purchasing housing, each person enjoys 60 square meters of housing area; only children and older unmarried only children enjoy an additional 20 square meters of purchasing area; if purchasing buildings beyond the prescribed square meters, providing there is surplus in the new village, the price is 2,000 RMB per square meter.
On December 3, 2002, the demolisher, a certain Company (Party A), signed a "Phase III Project Demolition Compensation Agreement" with Zhang (Party B), agreeing: Party B has 14 rooms of formal housing within the demolition range. . . both parties agree to implement monetary compensation.
Zhang subsequently selected Room 101 and Room 301; the purchase price was deducted from the demolition compensation. On December 31, 2004, Zhang issued a receipt to Shi, stating "Received 160,000 RMB for house payment from Shi.
" On January 13, 2005, the Village Committee issued a receipt stating: "Received purchase payment of 153,868 RMB from Zhang. " According to the village housing registration form, this payment corresponded to the purchase of Room 102 (noted as "purchase of surplus building").
On April 1, 2005, Zhang and Shi agreed that Zhang would sell Room 102 to Shi. Shi had already handed over the full house payment of 160,000 RMB to Zhang on December 31, 2004 (see receipt). Zhang was to assist Shi in handling transfer procedures when the house became eligible for transfer.
On April 23, 2009, Zhang, Shi Hua (sellers), and Shi (buyer) signed another "Agreement," agreeing that the couple Zhang and Shi Hua sold Room 102 to Shi and agreed to change the owner's name from Zhang to Shi. This agreement contained the words "Agreed, Li.
" Shi claimed this agreement was written according to the Village Committee's requirements when going to handle the name change, and Li was a staff member; however, Zhang denied going to the Village Committee with Shi to handle name change procedures.
Now, Zhang sues claiming the "Purchase Agreement" signed on April 1, 2005, is invalid and requests Shi to return Room 102. Zhang argues that Room 102 was built during the old village reconstruction, the property deed has not been processed, and only villagers have the right to purchase.
Shi argues that Room 102 was not housing obtained by Zhang through demolition but was surplus housing remaining after allocation to villagers, belonging to "Small Property Rights" housing, and purchasers are not limited to villagers.
[Case Focus] What kind of legal relationship was formed between Zhang and Shi, and the determination of the validity of the corresponding behavior. [Court Adjudication Synopsis] The Beijing Changping District People's Court held after trial: Parties may conclude contracts in written, oral, or other forms.
In this case, Zhang claimed he signed a purchase agreement with Shi, thus forming a housing sales contract relationship. However, based on the ascertained facts, Zhang received the purchase funds from Shi before going to the Village Committee to pay the purchase funds and select the disputed house.
His purchase time was later than the time Shi paid him. This circumstance is inconsistent with housing sales transaction habits. The two parties did not have a true intent of housing sales; thus, the court did not adopt Zhang's claim that it was a housing sales contract relationship.
Shi claimed she entrusted Zhang to purchase the disputed house, forming an entrustment contract relationship. However, Zhang purchased the house from the Village Committee in his own name. Shi drafted and signed the purchase agreement with Zhang after learning Zhang paid in his own name; the agreement also did not state an entrustment relationship.
Therefore, an entrustment contract relationship was not formed. Synthesizing all facts, Shi borrowed Zhang's name to purchase the disputed house, and the parties actually formed a borrowing name to buy a house (nominee purchase) contract relationship.
The disputed house has not undergone planning and construction approval and has not undergone property right registration. The land where the house is located belongs to village collective-owned land. Non-members of this collective economic organization have no right to acquire or disguisedly acquire the usage rights of this collective land.
Shi is not a member of this collective economic organization and does not possess purchasing qualifications. Therefore, the name-borrowing housing purchase contract relationship between the parties is invalid due to violation of mandatory provisions of laws and regulations.
After a civil legal act is invalid, revoked, or determined to have no effect, the property acquired by the actor due to that act shall be returned; if it cannot be returned or is unnecessary to return, it shall be compensated at a discounted price.
The party at fault shall compensate the other party for losses incurred; if both parties are at fault, they shall bear corresponding liabilities respectively. The disputed house is currently actually controlled by Shi and should be returned to Zhang.
As Shi did not file a counterclaim in this case, the return of house funds and the issue of fault between the parties can be resolved in a separate case. The Beijing Changping District People's Court, in accordance with Articles 153 and 157 of the "Civil Code of the People's Republic of China" and Article 67 of the "Civil Procedure Law of the People's Republic of China," ruled as follows:
The borrowing name housing purchase contract relationship established between Zhang and Shi regarding Room 102 involved in the case in Changping District, Beijing, is invalid;1. Shi shall return the house involved in the case, Room 102 in Changping District, Beijing, to Zhang within thirty days after this judgment takes effect;1.
Dismiss Zhang's other litigation requests. Shi refused to accept the judgment and filed an appeal. The Beijing No. 1 Intermediate People's Court held after trial: Regarding the determination that the parties established a borrowing name housing purchase contract relationship, it agreed with the judgment opinion of the first-instance court.
In accordance with Article 177, Paragraph 1, Item 1 of the "Civil Procedure Law of the People's Republic of China," it ruled as follows: Dismiss the appeal and sustain the original judgment.
Key Legal Points
Nature of Relationship: Even if parties sign a "Sales Agreement," courts look at the timing of funds and actions. If Party B pays Party A before Party A buys the house from the developer/village, and Party A buys it in their own name, the relationship is legally defined as a "Borrowing Name" (Nominee) Purchase, not a simple resale.
Collective Land Restrictions: Housing built on rural collective land (often related to village reconstruction) is generally restricted to members of that specific collective economic organization.
Invalidity due to Ineligibility: A contract allowing a non-villager to purchase housing on collective land (even through a nominee) attempts to bypass mandatory land administration laws. Such contracts are void ab initio (Confirmation of Contract Invalidity).
Consequences of Invalidity: When a contract is declared invalid, the property must be returned to the original legal owner (the villager). The non-villager cannot keep the house, even if they paid for it. Financial losses and returns of purchase money must be settled, often in a separate lawsuit based on fault.
Frequently Asked Questions
Can a city resident buy a house in a rural village in China?
Generally, no. Housing on collective land is restricted to members of that village collective. Contracts attempting to sell such housing to outsiders (including "Small Property Rights" housing) are often subject to confirmation of contract invalidity by courts,.
What happens if I use a villager's name to buy the house?
This is called a "Name-Borrowing" purchase. If the underlying land is collective, this arrangement is illegal. If the villager sues to take the house back, the court will likely declare the contract invalid and order you to return the house.
Do I get my money back if the contract is invalid?
Yes, under the Civil Code, if a contract is invalid, property acquired should be returned, and the party at fault should compensate for losses. However, you may need to file a separate lawsuit to recover the money and claim damages.