While property and real estate pricing in China continue to suffer, the real estate law sector is seeing a huge boom in activity. The Chinese real estate market has been in a slump for approximately two years now. While there are small signs of incremental improvement, within the market, it’s not enough for many Chinese residents who have already shelled out money for property investments, and legal action is starting to take place all over the country.

Lawsuits are not the norm when it comes to settling disputes in China; the Chinese government usually encourages its residents to take the mediation route. But, with so much money on the line, lawsuits are quickly taking precedence over any other options. The increase in cases is so severe that Zhong Lun Law firm, the largest in China, has worked to double the number of employees they have working on dispute resolution.  Zhao Xianlong, a partner at a different law firm, King & Wood Mallesons, was quoted saying,

“The spike in legal disputes reflects economic realities.”

There are two layers to the legal disputes. On one end, individuals who purchased homes are suing property developers for false advertising. On the other, property developers are suing the local governments, seeking out refunds for property prices. As a whole, it’s not a very pleasant situation.

In just one year, civil suits related to real estate development increased 36%. Most of those cases stem from homebuyers trying to get their money back from the developers. During the peak of real estate development in China, developers were promising a whole array of offerings in order to drive up the housing demand.

One of the more prominent examples of this can be seen in the suit between several home buyers and Poly Property Group Co (which is state owned). Poly Property Group Co marketing promised buyers access to a mall, a theatre, a school, and a host of other perks within their housing community. But, they failed to deliver on all fronts, and the buyers cannot take that as their reality. Poly Property Group Co stated that they were delaying their builds due to an oversaturation of commercial developments in their area, but will respect whatever verdict comes of the suit.

On the developer side of things, property developers are trying to sue entire counties for damages as property values are nowhere near where they were at the time of purchase. Property developers are getting to the point where they are defaulting on interests, which is only triggering more lawsuits.

All aspects of the Chinese real estate market is scrambling to make up for their financial losses. As one of the plaintiffs in a real estate case states,

“Litigation appears the only way left.”


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