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How to Divide a House Jointly Purchased by Two Lovers?
[2020-08-21]

   Court: They Should Enjoy Their Ownership According to Agreements, Investment Ratio and Shares

Recently, Hongkou District People¡¯s Court of Shanghai (hereinafter the ¡°Court¡±) heard in public an ownership dispute, in which the plaintiff Ms. Wang and the defendant Mr. Zhang disagreed on the ownership of the apartment they bought together, and ordered that they each enjoy a 50% share of the property.

[Case Review]

Ms. Wang and Mr. Zhang met in 2015. After more than a year, they decided to get married and buy an apartment in preparation for the marriage. In order to enjoy the preferential tax policy for first time homebuyers , they decided to buy an apartment worth RMB 6 million in the name of Mr. Zhang, and entered a written agreement privately, agreeing that the house is co-owned by them with a 50% share of the property for each party. Before and after the conclusion of the agreement, Ms. Wang and her family transferred half of the down payment of the apartment to the former landlord¡¯s and Mr. Zhang¡¯s accounts by several times. In the meantime, from June 2016 when the loan repayment begun to December 2018, Ms. Wang¡¯s mother also remitted money to Mr. Zhang on schedule, the amount of which was half of the monthly repayment.

They thought they would get married. However, they ended up breaking up soon after they bought the apartment. After the breakup, the two families once considered selling the marital home. While Ms. Wang kept repaying the loans, Mr. Zhang defaulted on the loans and even rent the house and collected rent arbitrarily from January 2019. Learning about this, Ms. Wang's family stopped transferring money to Mr. Zhang for paying the loans, and sued to the court, requesting to confirm her 50% share in the jointly purchased house and expressed the willingness to make up for the loans after January 2019 and continue to repay the loans according to the agreed share of property rights.
Mr. Zhang denied the claims. Mr. Zhang argued that the apartment was purchased by himself alone and that he signed the loan contract with the bank in his own name. According to law, property rights changes require the registration of property rights. The previously signed Agreement can only produce the effect of internal debts and cannot produce the effect of external property rights change. During the purchase and maintenance of the apartment, the amount paid by Ms. Wang¡¯s family accounted for only about 30% of the house price, far less than 50%. Moreover, he also spent money to decorate the house. Therefore, Ms. Wang's claim for 50% of the property based on the Agreement lacked legal basis. The dispute between them was only over the debts, and Ms. Wang was not entitled to the ownership of the property.

[Case Study]

The key to the case is whether Ms. Wang can confirm her 50% share in the house according to the agreement signed by them. Since there are still mortgage loans on the house that have not been paid off, the court added the bank as a third party participating in the litigation in accordance with the law. The bank stated that if they reconfirm the property rights during the fulfillment of the loan contract, they should first pay up the loans and cancel the mortgage registration before going through change formalities.

Through public hearing, the Court held that the agreement signed between Ms. Wang and Mr. Zhang was an expression of the true intention of the parties and was not contrary to law, thus being upheld by the Court. Although the apartment at issue was registered under the name of Mr. Zhang, it should be jointly owned by Ms. Wang and Mr. Zhang, and each party has a 50% share of the property according to the agreement. As Ms. Wang agreed to repay the loan together with Mr. Zhang as per the 50% share, the Court affirmed it and ordered that the future repayments would be borne by both parties half and half. According to the principle of mortgage first, the parties may handle change formalities after settling the principal and interest of the bank loans to discharge the mortgage. Accordingly, Mr. Zhang should cooperate with Ms. Wang in handling the formalities for property right change registration within ten days from the discharge of the mortgage.
The Court reminds people in love that they should be cautious in real estate purchase, as disputes may arise over property division if they don¡¯t get married in the end. Whether the property is registered under the name of either or both parties, they had better make specific agreements on the investment ratio, property share and payment, etc. to serve as the basis in case of any dispute in the future. During the whole purchase process, the payment vouchers and receipts of down payment, loans or other house payments should be kept for future verification.

[Relevant Laws]

Contract Law of the People's Republic of China

Article 60 The parties shall fulfill their obligations as contracted.
The parties shall observe the principle of good faith and fulfill the obligations of notification, assistance and confidentiality in accordance with the nature and aims of the contract and trade practices.

Property Law of the People's Republic of China

Article 94 A several co-owner of a commonly owned real property or movable property shall enjoy the ownership of the real property or movable property according to his shares.

 

 

(Written by Xie Yanwen and Jiang Yemeng, Hongkou Distric People¡¯s Court of Shanghai)

 

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The English version of this article, which is translated from the Chinese version by CTPC, is for reference only and shall be subject to the corresponding contents on the Chinese webpage.
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