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Editor: Donald C. Clarke
George Washington University Law School

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Tuesday, October 25, 2005

Supreme People's Court suggestions regarding standing of homeowner committees

Chinalawinfo.com, Peking University's legal information site, reported on Oct. 21st that Civil Chamber No. 1 of the Supreme People's Court had issued a "suggestion" (意见; normally translated as "opinion", but I think that's misleading) cutting back on the standing to sue of homeowner committees (业主委员会; also translatable as "proprietor committees") in residential developments. (Story here.)

There is considerable friction in China between real estate developers and those who buy from them. The magnificent swimming pool promised in the brochure may turn out to be an algae-infested wading pool, and broken elevators and collapsing ceilings may take a long time to fix. But the identification of the proper plaintiff for lawsuit purposes has proved difficult. Homeowner committees were for years shut out of courts on the grounds that they did not have standing under China's Civil Procedure Law. They do not have legal person status and are not the owners of the common areas; I am informed by a knowledgeable source that It is apparently often unclear who the owner of the common areas is. (Incidentally, when I say "owner" I mean the holder of the long-term land-use rights; the reversion in the case of urban land is of course held by the state.)

In 2002, however, a homeowner committee in Hefei appealed the denial of standing to the Hefei provincial court, which requested instructions from the Supreme People's Court. In March 2003, the SPC replied that homeowner committees did indeed have standing to sue.

Apparently, this opened the floodgates of litigation too wide for the comfort of the SPC. A recently published book, 中国民事审判前沿, carries a "suggestion" from Civil Chamber No. 1 of the SPC to the effect that standing should be limited to cases where suit is brought against the developer, authorized by a member vote, related to management of the property, and affecting the common interest of the whole body of homeowners.

This suggestion is interesting for its own sake, but it's also interesting from a procedural standpoint. According to the report, it has been informally circulated to lower courts and has now been published in a book. It was not issued, as SPC directives of this kind normally are, by the Adjudication Committee of the SPC, and it is not an official directive. Apparently courts are supposed to follow it pending the issuance of such an official directive in the matter. But if that's so, then what is the difference between an informal suggestion issued by a single chamber of the SPC and an official directive issued by the Adjudication Committee of the SPC?

CORRECTION 26 Oct. 2005: Simon Zhang has pointed out that this document is about conflicts between homeowners and management companies (those who maintain the complex after the residents have moved in), not developers (those who build the complex). I mistranslated "物业公司". Thus, homeowner associations will have standing to sue only management companies and not developers.

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Comments

Being a home owner myself, thanks for citing this article here. However I was surprised to see that the suggestion limited to cases where suit is brought against the "developer" (in your 4th paragraph).

I would think most disputes arise between homeowners and 物业管理公司 (real estate management company) rather than developer (开发商). After reading the original Chinese report, I found the suggestion is indeed talking about 物业公司.

I know that many real estate management companies are subsidiaries or continuing entities of the developer, after the project was completed, however it is not correct to use the English term "developer" for the Chinese term 物业公司. If I have any dispute with the developer, that would probably be focused on the quality of the construction. In real life, homeowners are dissatisfied with the services (security guard, cleaning services, lifts repairs, car parking services), which are provided by real estate management companies.

Posted by: Simon Xi Zhang | Oct 26, 2005 9:49:45 AM

Being a home owner myself, thanks for citing this article here. However I was surprised to see that the suggestion limited to cases where suit is brought against the "developer" (in your 4th paragraph).

I would think most disputes arise between homeowners and 物业管理公司 (real estate management company) rather than developer (开发商). After reading the original Chinese report, I found the suggestion is indeed talking about 物业公司.

I know that many real estate management companies are subsidiaries or continuing entities of the developer, after the project was completed, however it is not correct to use the English term "developer" for the Chinese term 物业公司. If I have any dispute with the developer, that would probably be focused on the quality of the construction. In real life, homeowners are dissatisfied with the services (security guard, cleaning services, lifts repairs, car parking services), which are provided by real estate management companies.

Posted by: Simon Xi Zhang | Oct 26, 2005 9:51:25 AM

Thanks to Simon for his correction. I have revised the text in the blog post. It's interesting, then, that suits against the developer by homeowner associations would not be allowed. Seems a bit unreasonable.

Posted by: Don Clarke | Oct 26, 2005 1:00:14 PM

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