Buying a second-hand home is often the largest transaction a family will make, and the seller's silence about known defects can turn that purchase into a source of daily distress. In a case handled before the courts in Jiangsu, the buyer paid the full price for a resale apartment after asking repeatedly about the neighbourhood. The seller knew that the unit below had a long-running dispute involving repeated hammering and noise, but concealed it and described the neighbours as friendly. After moving in, the buyer suffered continuous noise disturbance. The court found that the seller had violated the duty of good faith and truthful disclosure, held the seller in breach of the purchase contract, awarded liquidated damages of RMB 40,000, and ordered the seller to bear the buyer's lawyer fees of RMB 8,000 in full under the contract.
This article examines the disclosure obligations of resale housing sellers in China, the evidence that proves concealment, and the strategies available to buyers who discover a hidden defect after closing.
Good Faith and the Duty of Disclosure in Resale Transactions
Chinese contract law is built on the principle of good faith. The Civil Code of the People's Republic of China (2021), Article 7, provides that the parties shall adhere to the principle of good faith in concluding and performing contracts. In a resale housing transaction, this principle imposes on the seller a duty to disclose material facts about the property that a reasonable buyer would consider decisive. A peaceful living environment is at the core of a residential purchase; a seller who knows about a serious and long-standing noise dispute with the downstairs neighbour cannot describe the neighbours as friendly and say nothing.
Concealment of a material fact is not merely bad manners; it is a breach of contract. The buyer's decision to pay the full purchase price was made on the basis of the seller's representation, and the court in the Jiangsu case held that the seller's false assurance constituted a breach of the duty of honest disclosure arising from the contract itself.
The parties shall perform their obligations in accordance with the agreement and in compliance with laws and regulations and with the principle of good faith, and shall abide by the principle of honesty and credit in exercising their rights and performing their obligations.
Civil Code of the People's Republic of China (2021), Article 509, paragraph 2
Proving Concealment: The Evidence That Wins
Concealment is a fact, and facts must be proved. In the Jiangsu case, the buyer's evidence was assembled into a complete chain: police call-out records showing that the noise dispute had been reported repeatedly before the sale; a video recording of the signing session in which the buyer asked about the neighbourhood and the seller assured her that the neighbours were friendly; telephone recordings in which the seller acknowledged the problem; and chat records with the agent. Together these materials showed that the seller knew of the defect, was asked about it directly, and chose to lie.
The lesson for buyers is to create such a record before signing. Ask about the neighbourhood, the building management, pending disputes, and known defects, and do so in a way that can be evidenced: in writing, in recorded conversations, or during the signing session with the agent present. A buyer who can show that a specific question was asked and answered falsely has already won the hardest part of the case.
Two Independent Paths: Nuisance Against the Neighbour, Breach Against the Seller
A common defence raised by sellers is that the buyer should sue the neighbour for nuisance instead of the seller for breach of contract. The court rejected this argument as a matter of law. Neighbour noise giving rise to liability in tort, and the seller's concealment giving rise to liability in contract, are two separate legal relationships. The buyer was not required to exhaust the nuisance claim against a third party before enforcing the contract against the seller.
This distinction matters for strategy. The buyer in the Jiangsu case concentrated on the claims most likely to succeed: liquidated damages and lawyer fees. The court awarded RMB 40,000 in liquidated damages, but it also declined the buyer's claim for a higher amount and rejected the demand for an apology, because in a purely contractual dispute an apology is a remedy associated with infringement of personal rights rather than breach of contract. Choosing the right claims is as important as proving the facts.
Recovering Lawyer Fees Under the Contract
In many civil cases in China, each party bears its own lawyer fees. The Jiangsu case is a useful exception. The purchase contract contained a clause providing that the breaching party bears the lawyer fees actually incurred by the non-breaching party. Because the seller was found in breach, the buyer's lawyer fee of RMB 8,000 was awarded in full, supported by the engagement agreement and the invoice.
Buyers should therefore read the dispute-resolution clause of the resale contract before signing and, where possible, include an express provision that the defaulting party bears the other side's reasonable lawyer fees and costs. Such a clause does not guarantee recovery, but it converts a significant litigation cost into a recoverable claim.
Judicial Adjustment of Liquidated Damages
Buyers sometimes assume that a large liquidated damages clause will automatically produce a large award. In fact, Chinese courts actively review agreed penalties for fairness. Article 585 of the Civil Code provides that where the agreed liquidated damages are excessively higher than the loss actually suffered, a party may request the court or an arbitration institution to reduce them appropriately; conversely, where the agreed amount is lower than the loss, the party may request an increase. The benchmark is the actual loss caused by the breach, including the benefit that performance would have produced.
In the Jiangsu resale case, the buyer had claimed a higher penalty, but the court assessed the actual injury and fixed the liquidated damages at RMB 40,000. The judgment illustrates the practical approach of Chinese courts: they will not automatically rubber-stamp a penalty clause, but they will award an amount that compensates the victim realistically. Sellers and buyers should therefore draft penalty clauses with the actual-loss benchmark in mind, and litigants should frame their claims realistically rather than aiming at the ceiling of the contractual clause.
Practical Guidance for Buyers and Sellers
For buyers of resale housing in China, the practical steps are: inspect the property and its surroundings, ask direct written questions about known disputes and defects, preserve every communication, obtain police call-out records if a neighbourhood conflict already exists, and review the contract for a lawyer-fee clause. These steps cost little at the signing stage but can decide the outcome of any later dispute, and they are best taken before the deposit is paid, when the buyer still has negotiating leverage. For sellers, the guidance is equally clear: disclose material facts truthfully. A seller who conceals a known defect risks not only losing the litigation but also paying liquidated damages, the buyer's lawyer fees, and a share of the court costs, in addition to the reputational damage of a published judgment. Shenghao Ma of Shanghai advises clients on commercial contracts and property-related transactions, including resale housing purchases, disclosure obligations, and breach remedies.
