Perspective | A New Execution Model for Real Estate "Transfer with Seal"
Published:
2025-01-02
During the execution process, the auction and sale procedures for seized properties are often uncertain, making it difficult to achieve the execution objectives. To optimize the disposal process, the Lixia District People's Court in Jinan has innovatively proposed new business methods for real estate, including "transfer with seizure" and "financing with seizure."
During the execution process, the auction and sale procedures for seized property are highly uncertain and often fail to achieve the execution objectives. To optimize the disposal process, the People's Court of Lixia District in Jinan has innovatively proposed new business methods for real estate "transfer with seal" and "financing with seal."
1. What is "transfer with seal"?
"Transfer with seal" refers to a new execution model where, with the participation of a notary institution, the debtor sells the seized property on their own without going through the court's judicial auction process, allowing for the online signing and filing of sales contracts and the transfer registration of real estate under seizure, ultimately achieving debt repayment through the proceeds from the sale of the property.
The specific process for transfer with seal is: 1. Introduce a notary institution for mediation. After the debtor and the creditor reach an agreement on self-disposing of the property to repay the debt, the People's Court issues a legal document agreeing to the debtor's self-disposal; 2. Both parties sign a sales contract, and the buyer pays the price to the notary institution.DepositAccount; 3. The housing and urban-rural development department and the real estate registration department handle the online signing and filing of the sales contract and the real estate registration procedures based on the legal document for self-disposal issued by the People's Court and the notary institution's deposit certificate; finally, the notary institution pays the price, issues a debt repayment certificate, and the People's Court lifts the seizure of the real estate.
2. Business background of the transfer with seal model
On March 3, 2023, the Ministry of Natural Resources and the China Banking and Insurance Regulatory Commission jointly issued a notice on coordinating the facilitation of real estate "transfer with seal" services for the convenience of the public and businesses, clarifying the operability of real estate "transfer with seal" in practice and providing a new path for real estate execution transfers. With the further advancement of execution work, to further save judicial procedure efficiency and activate real estate market resources, many local people's courts have introduced notary agencies in real estate execution work, tentatively implementing the new model of "transfer with seal." For real estate that has not yet been unsealed by the court, with the agreement of both parties, the sealing court issues a legal document agreeing to the transfer registration of real estate with seal, and the real estate registration center handles the transfer registration business for both parties based on the court's issued legal document for "transfer with seal."
On October 29, 2024, the Supreme People's Court issued a notice on further standardizing online judicial auction work, which states in Article 7 that after a second judicial auction fails, if the executed person claims self-disposal, it may be permitted after examination by the execution court. This article formally stipulates the legality and applicability of the "transfer with seal" behavior in legal form.
After the transfer with seal, the Jinan court has again innovatively proposed a seal financing system, allowing buyers who do not have the ability to make a one-time payment to carry out mortgage financing and pre-registration of mortgages with seal, and deposit the financing amount to achieve debt repayment.
3. Limitations of transfer with seal
1. Transfer with seal generally applies to situations where the creditor is the first sealed right holder and the only right holder. If the property to be transferred has a mortgage or multiple rounds of seizure, the property disposal process needs to consider the rights of other creditors.Right to compensation, the application of the transfer with seal procedure will face many obstacles. Therefore, in practice, it is generally prioritized to apply the transfer with seal route when the debtor has only one or a few debts to be repaid in this case, and the property to be transferred has only one round of seizure. For properties with mortgages or multiple seizures, whether the transfer with seal system can be applied needs to be considered based on the actual situation.
2. The prerequisite for achieving transfer with seal is having suitable buyers. Many properties in practice meet the conditions for transfer with seal, but due to the lack of suitable buyers, they are difficult to liquidate. Due to reasons such as lack of transparency in transaction information, an inactive housing market, and buyers lacking confidence, many buyers remain in a wait-and-see state for a long time. Debtors also need to explore potential buyers themselves or communicate with creditors to see if there are interested buyers, thus achieving the sale of the property.
3. Transfer with seal is currently mostly applicable during the execution stage. According to Article 7 of the notice issued by the Supreme People's Court on further standardizing online judicial auction work, after a second judicial auction fails, if the executed person claims self-disposal, it may be permitted after examination by the execution court. This legal provision establishes the legitimacy of promoting transfer with seal after a failed second auction, providing legal guidance for the advancement of the procedure. However, to improve the convenience and efficiency of the disposal process, the procedural stages applicable for transfer with seal are far more than just after a failed second auction. As the willingness of the executed person to repay increases, the transfer with seal model will gradually advance to the litigation stage and even pre-litigation stage. The procedural risks brought by the advance of the transfer with seal procedure also await further legal supplementation and improvement.
4. New developments in transfer with seal—"seal financing"
With the continuous advancement of the transfer with seal procedure, the People's Court has further proposed the "seal financing" system to improve the efficiency of property transfers. According to Article 399 of the Civil Code of the People's Republic of China, property that has been legally seized cannot be mortgaged. However, the "seal financing" system breaks through this legal provision. Its innovation lies in allowing debtors to conduct mortgage financing for properties awaiting transfer, which buyers may find difficult to pay in full, with the participation of a notary institution. Debtors and buyers can obtain housing loans through mortgage financing, while the real estate registration department handles the pre-registration of mortgages. Once the financial institution issues a loan to the debtor's deposit account and completes the debt repayment and unsealing procedures, the pre-registration of the mortgage is converted into formal mortgage registration. This channel not only fulfills the debtor's repayment responsibility but also reduces the buyer's pressure in purchasing a house, significantly lowering the entry threshold for buyers of auctioned properties.
The seal financing system is still under further experimentation. With the improvement of the judicial system and the gradual increase of successful cases, the transfer with seal and seal financing systems will be increasingly widely applied in litigation and execution procedures.
5. Successful cases of transfer with seal
Case 1:In the case of the applicant for enforcement, a certain bank's Jinan branch versus the respondent Su in a financial loan contract dispute, the applicant requests the respondent to repay the loan principal of 700,000 yuan and interest, and demands priority compensation from the auction or sale proceeds of the respondent's mortgaged property. The respondent hopes to fulfill the debt by self-disposing of the seized real estate and submitted a self-disposal application to the Jinan Steel City People's Court. After obtaining the applicant's consent, the Steel City Court involved a notary agency in mediation, leading to a settlement agreement among the applicant, respondent, and the buyer of the real estate. After the buyer deposited the purchase price into the notary's account, the Steel City Court issued a legal document allowing self-disposal and delivered it to the real estate registration department. After successfully completing the transfer, the notary agency paid the deposited house price to the applicant. Upon receiving the applicant's application for debt repayment completion, the Steel City Court submitted the legal document for unsealing the involved property online through the "point-to-point" control system. Thus, the case was successfully executed.
Case 2:The buyer Qi purchased the respondent's auctioned property for a total price of 1.3 million yuan and agreed with the respondent through a contract that Qi would first pay a down payment of 360,000 yuan for the property to repay the existing mortgage debts before the auction. Since the property had two mortgages, both parties agreed that the down payment could only be used to repay the two mortgagees to facilitate the transfer process after the mortgages were lifted. However, after receiving the down payment from Qi, the respondent violated the contract by misappropriating the 360,000 yuan for other uses, resulting in the contract being unfulfilled.
After hearing the case, the Jinan Lixia District People's Court ruled that the respondent should return the down payment. After the case entered the enforcement procedure, the people's court discovered that, in addition to the aforementioned two mortgagees, there were other courts'pending seizures.After preliminary calculations, it was found that the total debt of the respondent had exceeded the value of the property, and the disposal of the house could not cover all debts. If traditional auction methods were used, the gap would be even larger. After communication, the respondent applied to the court for self-disposal to repay more debts. To resolve the issues between the debtor and the buyer, the Jinan Lixia Court contacted the creditors one by one, informing them in detail about the work idea of applying "transfer with seal" for this case, and jointly carried out mediation work involving all parties with the notary office. Ultimately, under the court's coordination, both mortgagees agreed to prioritize repaying more than 100,000 yuan from the house sale proceeds to the pending seizure creditors. The pending seizure creditors received money that they would not have been able to obtain according to the traditional auction distribution order and also agreed that the respondent could self-dispose of the property. All parties jointly signed the mediation agreement, and ultimately Qi used the sealedmortgage loan on the property.After the house was transferred to his name, the deposited funds were distributed according to the mediation agreement.
Conclusion
"Transfer with seal" and "financing with seal" are innovative and multi-faceted mechanisms to explore and resolve disputes, effectively alleviating conflicts and maximizing the interests of all parties, providing effective support for social and economic development.
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Zhongcheng Qingtai Jinan Region
Address: Floor 55-57, Jinan China Resources Center, 11111 Jingshi Road, Lixia District, Jinan City, Shandong Province
