Viewpoint... Commercial real estate leasing legal risks and recommendations.

If the leased house is an illegal building, according to Article 2 and Article 3 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Disputes over Urban House Lease Contracts, if the construction project planning permit is not obtained or is not constructed in accordance with the provisions of the construction project planning permit; or if the leased house is a temporary building that is not approved or constructed in accordance with the approved content, the house lease contract is invalid, the lessor may be found to be primarily at fault or equally at fault and therefore liable for damages.

Reference Case 1, Guangdong Provincial High Court 2020 Yue Min Zhong No. 2217

The Court held that "... from the lease contract and supplementary agreement, the leased property is a house, because the house involved in the case did not obtain the construction project planning permission, so the lease contract is invalid contract".

Whether the rental housing has been processed real estate certificate, is not the only criterion to judge whether the housing lease contract is valid. Under the "presale mortgage" purchase mode, if the lessor has obtained the occupation and use right when renting the house, the house lease contract can be considered valid.

Reference Case 2, (2020) Xiang 01 Min Zhong No. 10100

On the issue of the validity of the contract, the court held that according to the provisions of Article 2 of the interpretation of the Supreme People's Court on Several Issues concerning the specific application of law in the trial of urban housing lease contract disputes, the lease contract concluded between the lessor and the lessee for the house built without obtaining the construction project planning permit or in accordance with the provisions of the construction project planning permit is invalid. However, if a construction project planning permit is obtained before the end of the debate in the court of first instance or the construction is approved by the competent department, the people's court shall determine it as valid. The factory buildings, warehouses and office buildings involved in the case have not obtained the construction project planning license, and the "lease contract" signed by both parties is an invalid agreement because it violates the mandatory provisions of the law. The court of first instance, in accordance with the principle of fairness, has not wrongly upheld the degree of fault of both parties in accordance with their respective proportions of 50%.

Regarding the steel structure expansion loss of 68400 yuan claimed by the appellant, the court held that both parties were at fault because the contract involved in the case was invalid. The first instance determined that the steel structure expansion loss of 34200 yuan was not improper according to the degree of fault of both parties and the proportion of 50%, and the court maintained it.

Reference Case 3, Supreme People's Court (2022) Supreme Famin Shen No. 302

After hearing the case, the Supreme People's court held that: "under the circumstances that the relevant facts have been confirmed in the effective judgment of another case, the original judgment comprehensively considers the current" presale + mortgage "mode in China's real estate field. It takes a long time for the buyer to become the owner of the house in the legal sense through the registration procedures of house transfer, If the buyer is not allowed to lease the house during this period, it is not conducive to the use of social resources, but also contrary to the basic principles of the market economy that encourages transactions. It is finally determined that the" House Lease Contract "belongs to the true meaning of Liu Xiaobing and Wang Yuanjie, and it does not violate the mandatory provisions of laws and regulations, and is legal and effective. The contract is not improper"; "Combining the original intention and fairness principle of'buying and selling without breaking the lease, it is confirmed that Hengshun Company has transferred the possession and use right of the house involved in the case to Liu Xiaobing, and Liu Xiaobing's lease behavior is essentially to transfer the possession and use right of the house obtained from Hengshun Company to Wang Yuanjie. The lease relationship occurred during the period when Liu Xiaobing legally owned the use right of the house involved in the case, and the lease relationship does not violate laws and regulations, it is not improper that a legally established lease right should not be denied or affected by facts such as subsequent changes in property rights or termination of contracts."

Recommendations:The lessee will lease the house after obtaining the construction project planning permit; if the corresponding procedures cannot be completed before the lease, it is recommended to clearly stipulate in the lease contract or lease announcement that the lessee has already known that the leased house has not obtained the real estate certificate and the construction planning permit, The lessee shall not claim that the contract is invalid and propose to terminate the contract on the grounds that the leased house has not obtained the real estate certificate or the construction planning permit. The lessee may not claim damages from the lessor on the grounds that the lease contract for the house has not obtained planning permission is invalid and there is a loss of performance.

Temporary buildings approved by government departments and constructed in accordance with the approved content are legal buildings within the approved period, and the lessor may lease them according to law. The part that exceeds the approved use period of the temporary building is generally deemed invalid. If the building leased by the lessor exceeds the approved period, it is recommended that the lessor go through the formalities to extend the use period to the competent government department as soon as possible to avoid the lessee's claim dispute that the contract is partially invalid.

Article 3 of the "Urban and Rural Planning Law" "Construction activities in urban and town planning areas shall meet the planning requirements." Article 7 "Urban and rural planning approved in accordance with the law shall not be modified without legal procedures." Leased items leased by the lessor for illegal planning purposes may involve the risk of termination of the contract and the lessee's claim.

Reference Case 4, (2022) Wan 03 Min Zhong No. 2324

The Court believes that ...... both parties to the contract are at fault for the termination of the performance of the contract, whether they should bear the corresponding legal responsibility. Article 3 of the "the People's Republic of China Urban and Rural Planning Law" stipulates: "Cities and towns shall formulate urban plans and town plans in accordance with this Law. Construction activities within the planned areas of cities and towns shall meet the planning requirements." Article 7 stipulates: "Urban and rural planning approved in accordance with the law is the basis for urban and rural construction and planning management, and may not be modified without legal procedures." According to the above-mentioned legal provisions, the operation of the swimming fitness center involved in the case cannot violate the planned use. The use of the site agreed in the contract, whether it is a small parking lot or a warehouse, as a swimming and fitness center, violates the planned use, and the parties have not proved that the planning has been approved. Therefore, the purpose of the contract cannot be achieved due to the change of the planned use of the site involved in the case, and the parties may request the termination of the contract on this ground. According to Article 5 of the Cooperation Contract, the main obligation to handle fire inspection and acceptance is at Pufa Hotel. Due to the violation of the planned use of the site renovation involved in the case, it will inevitably lead to the failure of fire control and the inability of the swimming fitness center to operate. Pufa Hotel should bear the main responsibility. As an actual investor in the swimming and fitness center, Yang Zihan should fully understand the planned use of the small parking lot and warehouse involved in the case before investing in the construction. He should know that he cannot change the planned use of the building at will. He has not fulfilled the duty of prudence and has subjective fault. According to the degree of fault of both parties, the hospital decided that Pufa Hotel should bear 60% of the responsibility and Yang Zihan should bear 40% of the responsibility. According to the degree of fault between Yang Zihan and Pufa Hotel, the court of first instance decided that Yang Zihan should bear 70% of the responsibility and Pufa Hotel should bear 30% of the responsibility. The court corrected it.

Recommendations:The lessor shall lease out the house in strict accordance with the planned use of the house; if it is necessary to change the original planned use of the lease, it is recommended to clearly stipulate in the lease contract that the lessee is responsible for handling the relevant planning approval and construction procedures, and the lessee shall not claim compensation from the lessor for the reasons such as handling obstacles in the planning approval procedures.

Based on the special properties of commercial properties, the leasing parties often have a corresponding agreement on the opening rate and opening time of the mall. If the lessee fails to meet the opening rate requirements or fails to realize the brand entry agreed upon by both parties, the court may find that the lessor is in breach of contract and shall bear the liability for breach of contract in proportion.

Reference Case 5, (2021) Yu 05 Min Zhong 69

The Court believes that the focus of the dispute in this case is whether Pengheng Company has breached the contract in the process of performing the contract, and whether it should bear the corresponding liability for breach of contract. First of all, the supplementary agreement on the house lease contract signed by Pengheng Company and Mengya Company is the true intention of both parties, and both parties should perform according to the contract. The supplementary agreement clearly stipulates that when the mall opens, Pengheng Company shall ensure that the main merchants in the mall (Goodfield Fitness, Cross-border Cinema, Wanda Baby King, NIKE, Adidas Collection Store or other merchants of the same level) enter and open at the same time. The house leased by Pengheng Company is an integral part of Renyue Tiandi Shopping Center. The level and scale of merchants introduced by the shopping center will inevitably affect the level positioning and passenger flow of the entire shopping center. Therefore, the introduction and opening of merchants agreed in the supplementary agreement by both parties belong to the guarantee clause of the rental market environment and belong to Pengheng Company's main contractual obligations.

As of April 29, 2019, when Renyue Tiandi Shopping Center opened, Pengheng Company did not guarantee Goodfili Fitness, Wanda Baby King, NIKE,Adidas Collection Store or other businesses of the same level to enter and open at the same time according to the contract. Although Pengheng Company provided evidence to prove that it introduced Mengshi Fitness, Adventure Sunshine Park, rookie and Tebu kids stores, however, both Goodfili Fitness and Wanda Baby Wang agreed in the contract belong to chain organizations that enjoy a certain popularity nationwide. rookie and Tebu kids also do not belong to the same level as NIKE and ADIDAS in brand popularity and brand positioning. Pengheng Company claims that it has signed a contract with Goodfili Fitness and Wanda Baby King. Goodfili Fitness and Wanda Baby King have nothing to do with it, the supplementary agreement between Pengheng Company and Mengya Company stipulates that Pengheng Company shall ensure the introduction of the above-mentioned merchants and start business at the same time. Even if Pengheng Company signs a contract with the above-mentioned merchants, it does not conform to the contract agreement between the two parties if it does not start business at the same time. Therefore, the evidence shown by Pengheng Company is not sufficient to prove that it has fulfilled its investment invitation obligations according to the contract agreement, because Pengheng Company did not fulfill its contractual obligations, constitutes a breach of contract. Although the housing lease contract and supplementary agreement involved in the case did not stipulate the legal consequences of Pengheng Company's violation of the above agreement, as a guarantee clause of the rental market environment, Pengheng Company's failure to fulfill the corresponding contractual obligations can be regarded as Pengheng Company's delivery of the leased site to Mengya Company does not conform to the purpose agreed in the contract. The evidence of Pengheng Company's use of the site involved in the case does not serve as a contractual obligation for Mengya Company to agree to waive Pengheng's market environment guarantee clause.

Because the site delivered by Pengheng Company to Mengya Company does not conform to the purpose agreed in the contract, Mengya Company has the right to exercise the right of simultaneous performance of the defense to suspend the payment of the corresponding rent to Pengheng Company. After receiving the rectification notification letter from Mengya Company, Pengheng Company not only failed to perform the corresponding obligations according to the contract, but also sent a notification letter to Mengya Company to terminate the contract. As a result, Pengheng Company shall bear the responsibility for the cancellation of the lease contract. According to this, the first instance supports the reasonable loss arising from the termination of the contract by Mengya Company. Pengheng Company believes that it does not constitute a breach of contract and should not be liable for compensation. The court does not support the appeal reason.

Recommendations:It is recommended that the opening rate be agreed as the overall opening rate of the rental project, not limited to a certain floor or area, and try not to specify the entry of a certain brand in the contract, and the lessor can add multiple types of brands.

4, lease defects do not disclose the risk of notification.

The lessor's lease to the lessee of a house that has not passed the fire acceptance or completion acceptance does not necessarily result in the invalidity of the lease contract. Article 13 of the "Fire Protection Law" stipulates that "construction projects that must implement the fire protection acceptance system shall not be put into use without acceptance." Article 61 of the "Construction Law" A construction project may be delivered for use only after it has been completed and passed the acceptance check; if it has not been accepted or fails to pass the acceptance check, it is prohibited to put it into use. The above-mentioned provisions are mandatory provisions on the conditions of use of the leased property, if the lessor does not disclose the status quo of the leased property has not passed the fire acceptance and completion acceptance, the lessee may request the termination of the contract and require the lessor to compensate for the loss of decoration on the grounds that the leased property is not eligible and the purpose of the lease contract cannot be realized.

Legal basis:Article 724 of the the People's Republic of China Civil Code stipulates that "if the leased property violates the mandatory provisions of laws and administrative regulations on the applicable conditions, and the leased property cannot be used, the lessee may terminate the contract."

Reference Case 6, Supreme People's Court (2018) Supreme Law Minshen No. 871 Ruling

This court believes that according to the third provision of Article 8 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Urban Housing Lease Contract Disputes, it can be seen that the leased house violates the mandatory provisions of laws and administrative regulations on the conditions for the use of the house. If the leased house cannot be used, the lessee may request to terminate the contract. The judicial interpretation establishes the basic principle of determining the validity of urban housing lease contracts and limits the scope of invalid contracts. The fire acceptance stipulated in the the People's Republic of China Fire Protection Law belongs to the provisions of the conditions for the use of the house. Therefore, even if there is a company's alleged case involving the second workshop without fire acceptance, it does not necessarily lead to the invalidity of the lease contract. Judging from the actual situation of this case, after the signing of the "Plant Lease Contract" involved in the case, China Railway Company delivered the subject matter of the contract to a company in accordance with the contract, and a company also actually used the plant and other facilities of China Railway Company, and both parties are in accordance with the contract. perform. The "Plant Lease Contract" is the true intention of both parties, the content does not violate the mandatory provisions of laws and administrative regulations, and there is no invalidity of the contract as stipulated in Article 52 of the the People's Republic of China Contract Law. A company that the original judgment did not adopt its defense of the validity of the lease contract in the case can not be established.

Reference Case 7, Supreme People's Court (2021) Supreme Law Minshen No. 4912

The Court considers that… according to the provisions of Article 61 of the Construction Law and Article 13 of the Fire Protection Law, construction projects that have not completed the completion acceptance and fire protection acceptance cannot be delivered for use, which does not affect the conclusion of the lease contract for the relevant construction projects by the parties concerned and the validity of the contract. According to the facts that have been ascertained, a house lease contract relationship has been established between the Land Reclamation Company and Wang Zitian, and the content of the contract to be performed shall be subject to the "Lease Contract" signed by Ai Hong and the Land Reclamation Company and the supplementary agreement. Paragraph 2 of Article 3 of the contract stipulates: "The land reclamation company will deliver the leased property to Party B for use as it is..." It shall be deemed that the parties to the contract have known and recognized the state of the leased property at that time, including the physical condition and the examination and approval and acceptance. Wang Zitian, as the lessee, has a duty of prudent care in this regard. Therefore, Wang Zitian advocates that the delay in completion acceptance and fire acceptance of the leased property affects its normal use of the leased property and does not have a contractual basis.

Recommendations:The author believes that when leasing a construction in progress without a real estate certificate, the lessor should clearly stipulate in the lease contract that the delivery method of the leased property is the current situation, make it clear that the lessee already knows the current situation of the leased property without a real estate certificate, knows the various approvals, acceptance and use of the leased property, and guarantees that it will not request termination or claim compensation on the grounds of the current situation of the leased property.

Commercial real estate lease contracts usually agree that the lessor has the right to cut off water and power when the lessee fails to pay rent or other breach of contract. In practice, in general, if the lessor is based on the lessee's delay in paying rent to take intermittent water and power outages, the people's court tends to determine that it belongs to the lessor to exercise the right of defense of the contract.

If the lessor takes measures to cut off water and electricity for the purpose of contract termination, the court will generally examine whether the lessee's breach of contract will result in the failure of the purpose of the contract. If the lessee is in minor breach of contract and the lessor takes measures to stop water and power for a long time on the grounds that the contract has the right to stop water and power, the lessor's behavior may be considered an abuse of rights. The Civil Code provides for the lessor's obligation to ensure that the lease is suitable for rent, and the lessor may face the problem of compensation for breach of contract against the lessee.

In addition, after the lessor exercises the right of reminder through water and power outages in accordance with the contract, if the lease contract is not terminated for a long time, and the lessee is unable to operate and use the house due to water and power outages, the lessor shall bear the expanded part of the loss if it does not actively exercise its rights.

The Court believes that... for December 10, 2015 to June 23, 2016 rent, property management fees, management fees. Because Xinwen Bank leased shops for lighting operations, the power outage will inevitably cause it to be unable to operate normally. At present, due to the reasons of Xinadu Company, the leased store Xinwen Bank Company cannot be used normally. Therefore, the hospital does not support Xinadu Company's request for housing rent, property management fees and operating management fees during this period.

The Court believes that ...... the original and the defendant have no dispute over the termination of the Lease Contract, but there is a dispute over the attribution of responsibility leading to the termination of the Contract. Judging from the facts ascertained in this case, on the one hand, the shop involved in the case was cut off from water and electricity due to the company's arrears of water and electricity charges, management fees and other expenses, which will inevitably have a certain impact on the plaintiff's use of the shop involved in the case for operation, but the evidence in this case It is not sufficient to prove that the above-mentioned water and power outage situation has reached the level that the plaintiff's contract purpose cannot be realized; on the other hand, the plaintiff's failure to pay rent from May 2020 has also aggravated the situation that the shops involved in the case are cut off from water and electricity. Besides, the plaintiff's move out of the shops involved in the case on May 15, 2020 is also an act of termination of performance. Based on the performance of the contract by both the plaintiff and the Youwei company, the court determines that the plaintiff and the Youwei company are each responsible for 50% of the termination of the contract according to the principle of the contract.

Recommendations:It is suggested that the relief method of water and electricity outage should be clearly agreed in the contract. Secondly, in the event of a breach of contract by the lessee, a written notice of correction or warning is required. Finally, after fulfilling the above procedures, non-continuous water and power outages that do not affect the normal operation of the store can be taken. In the event that the lessee does not pay rent for a long period of time, the lease contract with the lessee shall be terminated in a timely manner in accordance with the contract.

During the performance of a large-scale commercial real estate lease contract, the lessee may build a building without authorization. For buildings built or added by the lessee without authorization, the lessor often invokes the ''Supreme People's Court on the trial of urban housing lease contracts. Article 11 of the Interpretation of Several Issues Concerning the Specific Application of Laws in Dispute Cases "requires restoration to the original state or compensation for losses. However, the lessor often has the following two risks in such disputes: first, the lessor has no evidence to prove the original state of the lease, due to insufficient evidence to exclude obstruction or compensation claims can not be supported. Second, if the lessor has not raised any objection to the lessee's illegal construction behavior for a long time or has not reflected it to the relevant government departments, it may be deemed to have acquiesced in the construction and therefore, according to Article 12 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Disputes over Urban Housing Lease Contracts, the lessor shall bear part of the cost of the expansion.

For risk one:If the lessor rents the leased property with the property right certificate, generally speaking, the household floor plan and housing registration form attached to the property right certificate of the lessor, or the surveying and mapping report of the leased property obtained from the real estate registration department, the photos and videos of the leased property can indicate the original state of the leased property. If the leased property leased by the lessor is an unfinished property right certificate, there is no surveying and mapping report, household map and other documents, the lessor may face the risk of losing the case in the case of exclusion of obstruction and restitution.

For risk two:If the lessor does not raise any objection to the lessee's unauthorized construction of the building for a long time, it may be deemed as acquiescence. Therefore, the lessor may bear 50% of the cost of the expansion cost.

The focus of the examination of this case is whether the applicant in the original judgment has factual and legal basis for compensating the respondent according to 50% of the assessed value involved in the case, that is, 2551285 yuan. Article 1 of the "Military Real Estate Lease Contract" involved in the case clearly stipulates that "the purpose of the lease is inventory, food processing, hotels, etc.", which should be regarded as the applicant's consent to the respondent to add buildings. On May 24, 2017, the applicant informed the respondent that all the leased property should be vacated within 90 days, which is an act of implementing the notice of the Central Military Commission of the Communist Party of China on the complete cessation of paid service activities of the army and the armed police forces (Junfa [2016] No. 58), which is not a breach of contract. The original trial was in accordance with the "Guiding Opinions on Further Promoting the Complete Cessation of Military Paid Services" issued by the General Office of the Central Committee of the Communist Party of China, the General Office of the State Council, and the General Office of the Central Military Commission in June 2018. For projects that can be terminated, the contract agreement shall be terminated in advance. If compensation is really needed, economic compensation shall be given in accordance with national laws, combined with the contract agreement between the two parties and the fact that the respondent has added some buildings and hardened the road surface during the lease period, it is determined that the applicant should give reasonable compensation to the respondent for the economic losses caused by the inability of the respondent to continue to use the leased property involved, and it is not improper to determine the compensation amount according to 50% of the assessed value. According to the application of the respondent, the court of first instance entrusted Linyi Jinqiao Tongda Asset Appraisal Office to make Linjin Pingbao Zi (2019) No. 015 appraisal report with July 27, 2018 as the base date of appraisal. Although the applicant raised some objections to the appraisal report, he did not submit valid evidence to overturn it or apply for re-appraisal, so it was not improper to accept the appraisal report involved in the case in the original trial.

Recommendations:For long-term commercial real estate lease contracts, if some of the leased property belongs to unlicensed houses, it is recommended that the lessor entrust a surveying and mapping agency to issue a surveying and mapping report and a layout of the leased property before leasing, and the lessee will sign and confirm the original condition of the leased property, so as to avoid the situation that the original condition of the leased property cannot be proved. In addition, for the lessee's illegal construction behavior, the lessor should promptly notify the lessee, stop the illegal construction and notify the lessee to bear the construction costs of the illegal construction, after the termination of the lease contract may not require discount compensation,

At the same time, the lessee is required to sign and confirm.

The lessor may allow additional buildings during a long-term commercial property lease based on the lessee's lease use. If the lease contract does not provide for the sharing of the construction cost of the new building, according to Article 12 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Disputes over Urban Housing Lease Contracts, if the legal construction procedures are handled, the cost of the expansion shall be borne by the lessor. If the legal construction procedures are not completed, the cost of the expansion shall be borne by both parties. The addition of a building is different from the act of decoration and decoration. According to the lease rules, the decoration and decoration agreed by the lessor can be demolished by the lessee after the expiration of the lease contract, while the lessor does not need to compensate for the decoration attached to the building that cannot be demolished.

Reference Case 11, Dezhou Intermediate People's Court Second Instance (2020) Lu 14 Min Zhong No. 2532

The court's effective judgment held that the question of whether the houses built by Xintai Company on the leased land in question should be compensated. The Land Lease Agreement in this case was signed on the basis of the implementation of the policy of attracting investment and developing the local economy by the government of Hao Wangzhuang Town. From the content of the agreement, the government of Hao Wangzhuang town requires Xintai company to invest and build a factory on the leased land. Therefore, the houses and other structures built by Xintai company are not illegal buildings, and the construction of houses and other structures is approved by the government of Hao Wangzhuang town. Article 223 of the the People's Republic of China Contract Law stipulates: "The lessee may, with the consent of the lessor, make improvements or additions to the leased property. If the lessee makes improvements or additions to the leased property without the consent of the lessor, the lessor may require the lessee to restore the leased property to its original condition or compensate for the losses." According to the above-mentioned legal provisions, after the termination of the lease contract between the two parties, the government of Hao Wangzhuang Town, as the lessor, requested Xintai Company to demolish the buildings on the ground and restore the land to its original state, which is not in line with the principle of fairness. Moreover, in the civil mediation document (2009) Wu Shang Chu Zi No. 315, Xintai Company shall repay the lease fee of Hao Wangzhuang Town Government, which is secured by the factory building owned by Xintai Company, and the proceeds from the factory building to be processed shall be preferentially used to repay the above-mentioned amount, which further proves that both parties to the lease fee involved agree to use the factory building and other structures built by Xintai Company as the mortgage guarantee for realizing the creditor's rights. The current Hao Wangzhuang town government requires the termination of the lease agreement between the two parties and the demolition of the above-ground buildings, but in the case of the Hao Wangzhuang town government requiring Xintai Company to invest in the construction of the plant, if the plant and other structures are demolished, it is bound to cause huge losses to Xintai Company. Although Xintai Company did not file a counterclaim in the first instance, the court of first instance ruled that it was not improper for the government of Hao Wangzhuang Town to compensate Xintai Company based on the assessed value, based on the consideration of minimizing the losses of the parties and maximizing the value of the buildings on the leased land.

On the issue of the appraised value of the leased land involved. The government of Hao Wangzhuang Town signed a lease agreement with Xintai Company in order to attract investment and develop the local economy. The agreement stipulates that Xintai Company will invest 10 million yuan to build a factory, and the useful life of the leased land shall not be less than ten years. When the town government of Hao Wangzhuang leased the land involved and the plant built by Xintai Company to Longying Company, the lease term agreed by both parties was 30 years. Through the above two lease agreements, it can be proved that the use period of the houses and other structures built by Xintai Company is not just for ten years. The appraisal agency made a value assessment based on the current situation of the house and structures, and the court of first instance used the appraisal report to determine that the value of the house and structures built by Xintai was in compliance with the law.

Recommendations:If the lessor agrees to the lessee's expansion of the building, it is recommended to specify in the lease contract or expansion documents the depreciation period of the lessee's expansion of the building or the compensation rules for the new building in the case of the expiration of the lease contract and the termination of the lease contract due to the lessee's breach of contract, and at the same time specify whether to compensate or the calculation formula of compensation, so as to avoid disputes due to unclear contract.

Large commercial real estate leasing projects involve the lessee's entry and renovation, opening on time, paying rent on time, receiving and using the leased property as contracted, and the lease term is long. The continued performance of the lease contract depends on the mutual trust of the parties to the contract and is a case in which the subject matter of the execution of the obligation under the Civil Code is not suitable for enforcement; therefore, if the lessee decides not to continue the performance of the lease contract, the lease contract may be terminated on the grounds that the subject matter is not suitable for enforcement.

Reference Case 12, the People's Republic of China Supreme People's Court (2016) Supreme Law Civil Judgment No. 743.

The content that Great World Industrial Group Company requests Xinhua Department Store to continue to perform includes general and continuous behaviors such as Xinhua Department Store should continue to accept houses, enter the site for decoration, and start-up operations. For these behaviors, it is obviously difficult to enforce performance, so it constitutes the "Contract Law" Article 110 Paragraph 2 stipulates that "the subject matter of the debt is not suitable for compulsory performance. Moreover, the lease contract is a continuing contract, and the performance of these obligations has a considerable degree of personal compatibility, relying on a relationship of trust between the parties. In this case, there has been a dispute between Xinhua Department Store and Great World Industrial Group on whether they meet the housing acceptance conditions since 2013. The lawsuit was filed in 2014. It can be seen that the trust basis between the two parties has been lost, and the case involves The unfulfilled period of the contract is still more than 10 years, and it cannot be fulfilled in a short time, when Xinhua Department Store is unwilling to continue to perform the contract or has indicated by its own behavior that it will no longer continue to perform the contract, the basis for continuing to perform the contract obviously no longer exists. In this case, the first instance judgment ordered the continued performance of the contract involved in the case, which is obviously an error of applicable law. Therefore, the court corrected this and did not support the request of the Great World Industrial Group Company to continue to perform the contract.

Recommendations:For the performance of a large commercial real estate lease contract, if the lessee clearly does not continue to perform the lease contract, the question of whether the contract should be terminated. At present, there are different views in judicial practice, some of which are that the circumstances in which the subject matter of the debt is not suitable for enforcement are limited to contracts with closely related personal attributes, such as actor performance contracts, technology development contracts, etc., and lease contracts should not be applied.

In view of the current controversial situation, it is recommended that the lessor expressly agree in the lease contract that the lessee will have to pay a high amount of liquidated damages if the lessee does not continue to perform the lease contract. In addition, the lessor should pay attention to the fact that if the lessee has clearly written that it will no longer perform, the lessor may promptly appeal to the court to continue to perform the contract, so as to avoid the loss of rent during the period when the lease is vacant due to long-term non-performance.