Starting at 1 yuan, a factory worth 130 million yuan was found for 18,000 yuan. The lawyer explains three major questions
2024-08-15
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According to Red Star Capital Bureau on August 11, a factory building worth 130 million yuan was auctioned off for 18,000 yuan recently, which caused heated discussions. The starting price of the factory building was 1 yuan, and the increment was 1 cent. It was property involved in a criminal case and had failed to be sold twice before. At present, the court has revoked the auction order.
Some netizens asked whether the starting price of 1 yuan and the increase of 1 cent were reasonable. In this regard, many lawyers interviewed by Red Star Capital Bureau believed that, first of all, the starting price and increase of this time were in compliance with the law. However, some lawyers believed that when auctioning real estate, 1 cent as the increase of the price was very rare, which was not in line with the market rules and might infringe the interests of creditors. Some lawyers also believed that the auction rules of this time might violate the original intention of setting up the no-reserve price auction system.
It is worth noting that a search by the Red Star Capital Bureau found that there had been cases where the starting price was 1 yuan and the increment was 1 cent, but the subject matter was not real estate.
Starting price and bid increments
Does it comply with relevant legal provisions?
The Red Star Capital Bureau noted that the factory building had been auctioned twice on the JD Asset Trading Platform on June 25 and July 16, both times failing to sell. At the same time, the factory building was property involved in a criminal case.
Song Wenbin, a lawyer at Shanghai Duanhe Duan Law Firm, told the Red Star Capital Bureau that for property involved in criminal cases, Article 12 of the Several Provisions of the Supreme People's Court on the Execution of the Property-Related Part of Criminal Judgments (2014) stipulates that if the property involved in the case fails to be sold at the last auction and needs to be turned over to the state treasury, the people's court shall notify the relevant financial authorities to accept it at the reserve price of the auction; if the relevant financial authorities require further price changes, an unreserved auction can be conducted. If compensation is required to the victim, the compensation shall be made in kind at the reserve price of the auction; if the victim disagrees with the compensation in kind, an unreserved auction can be conducted.
Song Wenbin said that regardless of whether it is movable or immovable property, the online auction process is one auction, two auctions, and then sale. In this case, the factory building failed to be sold for the second time, which was the last auction, so the third auction could be conducted without a reserve price. Liu Tao, a lawyer at Taihe Tai Law Firm, further explained that in the case of an auction without a reserve price, the starting price can be set at 0 yuan.
As for the price increase, Song Wenbin said that the "Notice of the Supreme People's Court on Further Regulating the People's Court's Online Judicial Auctions" (2017) stipulates that the price increase can be determined by referring to the following principles: for an object with a starting price of 100,000 yuan or less (including 100,000 yuan), the price increase should not exceed 2% of the starting price; for an object with a starting price of 100,000 yuan to 1 million yuan (including 1 million yuan), the price increase should not exceed 1% of the starting price; for an object with a starting price of 1 million yuan, the price increase should not exceed 0.5% of the starting price. Song Wenbin said that the 1 yuan starting price and 1 cent price increase in this case are in compliance with the law.
Starting price: 1 yuan.Price increase: 1 cent
Does it affect the fairness and competitiveness of the auction?
The Red Star Capital Bureau noted that local courts have previously stipulated that the starting price for criminal property is 1 yuan. According to a WeChat tweet posted by the "Zhejiang Release" public account on July 28, 2020, Article 8 of the "Procedures for Online Judicial Auctions of Property Involved in Criminal Cases in Zhejiang Courts" issued by the Zhejiang Higher People's Court stipulates that online auctions of criminal property do not limit the number of bidders, and the principle of auction is to decide the price, and the bidding rule of starting at 1 yuan and the highest bidder wins is implemented.
Screenshot from the WeChat public account "Zhejiang Release"
Previously, there were cases where the starting price was 1 yuan and the bid increment was 1 cent. On July 5, 2023, a piece of "No. 243 Xinjiang Hetian jade rough stone" was auctioned on the Alibaba judicial auction platform. The starting price of this Xinjiang Hetian jade rough stone was only 1 yuan, the deposit was 0.1 yuan, and the bid increment was 1 cent. This auction attracted 80 people to sign up for the auction, and finally after as many as 2,296 bid increases, it was sold for 140.7 yuan.
Screenshot from Alibaba Judicial Auction Platform
However, Liu Tao believes that "a reserve price was set in the first two auctions, but the market may not accept this reserve price, so an auction with no reserve price was set for the third time. A reserve price should not be set for the third time, even if the reserve price is 1 yuan. The bidders should make their own bids, and they can bid 1 yuan, 1 million yuan, or 10 million yuan." Liu Tao said that although the starting price of 1 yuan is already very low, it has been set after all, and this may affect the limit on the price increase, ultimately leading to a disguised limit on the total auction price without fully reflecting the market price.
Liu Tao also believes that according to the "Notice of the Supreme People's Court on Further Regulating the People's Court's Online Judicial Auctions" (2017), the law only stipulates the maximum price increase, not the minimum price increase. Different starting prices correspond to different maximum price increases, so the 1 cent price increase appears. "No reserve price auctions should not have so many restrictions, and should be completely left to the market and determined by the market." Liu Tao said.
Fu Jian, director of Henan Zejin Law Firm, believes that a starting price of one yuan and an increment of one cent are very rare in real estate auctions. An increment of one cent does not conform to market rules, is far from the value of the real estate, may infringe on the interests of creditors, and make the auction unfair and uncompetitive.
Can the bidder get the factory?
Lawyer saysStill in doubt
The Red Star Capital Bureau noted that there have been cases where the court has revoked a house auction order. In April 2019, Mr. Zhang from Jiangsu and his family participated in a house auction initiated online by the Danyang Municipal People's Court of Jiangsu Province. After successfully participating in the auction according to the rules, the court decided to cancel the auction on the grounds that the auction announcement was misleading, the transaction price was too low, and the interests of the applicant and the person subject to execution were damaged. Later, Mr. Zhang applied for a reconsideration. In November 2019, the Zhenjiang Intermediate Court held that the Danyang Court's auction announcement had serious flaws in its description, which seriously damaged the survival interests of the parents of the person subject to execution, and that the Danyang Court's cancellation of the auction was in compliance with the law.
Song Wenbin mentioned that Article 31 of the "Provisions of the Supreme People's Court on Several Issues Concerning Online Judicial Auctions by People's Courts" stipulates the circumstances under which the people's courts may revoke online judicial auctions, such as malicious collusion between bidders or between bidders and online judicial auction service providers to damage the interests of the parties or other bidders; the buyer does not have the bidding qualifications prescribed by laws, administrative regulations and judicial interpretations; illegally restricting bidders from participating in the bidding or imposing different bidding conditions on bidders with equal rights, etc.
Fu Jian believes that the court's cancellation of the order has a certain legality, mainly because the price and price increase of this auction are not in line with common sense, and there is a large gap between the auction price and the value of the house, which violates the principles of openness, fairness, justice, honesty and trustworthiness. Fu Jian said that in practice, it is possible for the court to cancel the auction order. If the bidders are not fully informed of relevant important information, or there are illegal acts such as malicious collusion and price manipulation during the auction, the court may cancel the auction.
At present, the factory building is actually occupied and used by Anhui Rijing Control Technology Co., Ltd. On February 22, 2024, the company declared to the court that it had signed a lease contract with the property owner, and the lease term was from March 5, 2019 to March 5, 2027. The contract stipulated a three-month rent-free period for renovation. Because the factory building had no waterproof layer on the roof and was leaking, and the fire protection did not meet the requirements of the new regulations, the two parties negotiated to extend the rent-free period for another month and exempted themselves from paying rent. The rent has been paid until April 4, 2024.
Liu Tao said that, aside from the fact that the court revoked the auction order, whether the bidder who "found a bargain" with 18,000 yuan can successfully obtain the factory building involves the issue of factory transfer and actual possession. The withdrawal and replacement of the previous lessee require negotiation; if the court's revocation of the auction order is legal, the bidder will not be able to obtain the factory building. Fu Jian said that after the court revoked the order, the bidder can raise an objection to the court to protect his legal rights and interests.
Red Star News reporter Yu Yao, intern reporter Zeng Han
Editor: Yang Cheng
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