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real estate used as collateral for the debt

people who have not been exposed to online asset trading auctions may really not be able to imagine how deep the water is. even experienced lawyers may lose all their money.

on september 3, lawyer liu from wuhan, hubei, bought a mortgage claim for 338,001 yuan on an online auction platform - "[mortgage claim] transfer of a judgment claim of 660,000 yuan for a high-end residential property in the core area of ​​wuhan". but when he successfully bought the claim and communicated with the auction company yifeng jiateng (jiangsu) auction co., ltd., he found that the mortgage of the claim he bought was a priority mortgage, commonly known as "second mortgage". but lawyer liu had never found this "second mortgage" information in the auction display information before.

when lawyer liu expressed his dissatisfaction to zhou ping, manager of yifeng jiateng (jiangsu) auction co., ltd., which handled the business, zhou ping explained the issue to the reporter from the china times by saying, "one mortgage and two mortgage are both informal terms among the people. there are no such words on the mortgage certificate, so we can only disclose that this debt enjoys the mortgage right."

"if this house is put up for auction now, it can only pay off the first mortgage. whoever bids for this debt will not get a penny." the father of the owner, mr. wang, told the reporter of china times. in addition, this house cannot be put up for auction because two 90-year-old people live in it. the reporter noticed that this debt had actually been auctioned once on august 1, 2024, but the buyer regretted the purchase because he found out that it was a "second mortgage."

in recent years, online auctions have been very popular. from a house to a watch, they have become common items in online auctions. data shows that as of 2023, the annual turnover of various online auction activities has exceeded one trillion yuan. however, the booming online auctions have also seen chaos such as unlicensed operation, licenses without certificates, substitution of auction concepts, and unreviewed auction items of cultural relics. on may 22 this year, the state administration for market regulation, the ministry of commerce, and the state administration of cultural heritage jointly issued the "guiding opinions on promoting the standardized and healthy development of online auctions", which is the first normative document in my country's online auction field, filling the institutional gap in online auction management.

mortgage claims become secondary mortgage claims

on september 2, lawyer liu saw an auction promotion video on an online auction platform, which introduced the mortgage debt he later participated in. according to the information displayed, the mortgage of this debt is the house 503, building 7, rongqiao huafu, heping avenue, wuchang district, wuhan city. at the end of the promotion video, it was written "with the real estate certificate in hand, you can auction with confidence." on the real estate certificate displayed in the auction information, there is only one stamp on september 17, 2018 that says "the real estate has been mortgaged."

"the principal of this debt as of august 10, 2022 is 660,000 yuan. when it comes to execution, interest, late performance fees, etc. should also be added. since there is real estate as collateral, it is worthwhile to buy this debt for less than 400,000 yuan." lawyer liu explained to the china times reporter why he spent 338,000 yuan to buy this debt.

but when he successfully bid, he found that the mortgage of the debt he bid was a priority mortgage, also known as "second mortgage". the so-called "second mortgage" is a second mortgage loan, which means that the borrower mortgages an asset (such as real estate) that has been mortgaged once again to obtain an additional loan amount. when repaying the debt, only when the debt of the first mortgage is fully repaid, the remaining funds will be used to repay the debt of the second mortgage in accordance with legal procedures.

the auction information never mentioned that the debt was a second mortgage. the real estate certificate on display had only one stamp on september 17, 2018 that said "real estate has been mortgaged". but this stamp was for the first mortgage.

zhou ping told the reporter of china times: "the information we provide online is only for customers to see. that is to say, we upload whatever information the client gives us when he entrusts us to auction. the information on the real estate certificate is also sent to us by the client. customers can only see all the information after the auction, including us. not all information must be made public online. if customers want to make an accurate price for the auction item before the auction, we accept customers' telephone consultation and come to the site to see the sample. customers must come to our site to sign a confidentiality agreement before they can see all the information. mr. liu did not call to consult before. for those who called to consult, i have clearly told them that they are the second mortgage."

during the investigation, the china times reporter also found that this "[mortgage debt] transfer of a judgment debt of 660,000 yuan for a high-end residential property in the core area of ​​wuhan" had actually been auctioned once on august 1, 2024, and was bought by a bidder codenamed w5349 for 82,001 yuan. according to zhou ping, the winner also regretted the bid due to the "second mortgage".

so why was there no special note in the september auction that it was a “second pledge”? zhou ping explained that it was to protect the interests of the client and reserve the client’s right to seek compensation from the person who regretted the first auction.

in fact, the debt that lawyer liu bought had the words "priority mortgage" in the remarks column on the wuhan real estate registration result inquiry notice. the reporter then asked zhou ping why he did not disclose the "priority mortgage", and zhou ping's answer was "just a note."

is there any concealment in the information released by the platform?

in the subsequent investigation, lawyer liu found that two elderly people in their 90s were living in the house no. 503, building 7, rongqiao huafu, heping avenue, wuchang district, wuhan, which was used as collateral. in china's judicial practice, it is almost impossible for such a house to be forcibly executed and auctioned. this information was not mentioned in the auction information.

but zhou ping told reporters that he did not know the situation of the elderly living in the house. "we must disclose what we know, but we cannot understand the situation of every debt. our auction company only guarantees the authenticity of the debt. as for the current status and defects of the debt, we are afraid of various problems, so we put forward in the announcement and instructions that bidders should do their own investigation and research before the auction, and bear the risk of not being able to recover the debt. we have made reminders. we are doing online auctions nationwide. we do not have the material and financial resources to investigate. we only provide an auction platform and are not the real creditor, so we do not bear the responsibility and obligation to investigate the current situation. we are just a platform intermediary agency." zhou ping said.

"the slogan 'with the property certificate in hand, you can auction with confidence' is definitely false. the property certificate is still in my hand," said mr. wang, the homeowner's father, to the china times reporter. according to him, when he borrowed the money in 2019, the house was valued at 3.4 million yuan, but now it is only worth more than 2 million yuan, which is only enough to pay off the mortgage debt. "whoever wants to bid for this debt will definitely not get a penny," he said.

"the value of this debt is very large. the original creditor (beijing xiantengfeng business management service co., ltd.) spent 361,000 yuan to buy a mortgage right of up to 3.401 million yuan, and there is a property as collateral. if the property is not enough to repay the debt, the individual has to continue to repay it, and the interest is still increasing every day. how can you say that this debt is worthless?" zhou ping believes that this debt is very valuable.

during this period, lawyer liu filed a complaint with the online auction platform. according to the phone recording he sent to the reporter, the online auction platform replied to lawyer liu at 5:37 pm on september 9, saying: "we have verified that it is a problem with the merchant. we are now contacting the merchant to deal with it. we are worried about the safety of your money. we suggest that you apply for a refund first to ensure that the money is not transferred to the merchant."

but lawyer liu refused to refund and demanded punitive damages from the auctioneer. he believed that if he chose to return the goods, he would have given up compensation and did not agree to return the goods according to the platform's opinion. zhou ping did not accept the request for compensation, believing that lawyer liu did not understand the situation before the auction and regretted it after the auction, which was a bad behavior and he should bear legal compensation liability.

"we believe that the auction introduction should be comprehensive and complete, and should not contain misleading statements or major omissions. since there are significant differences between the first and second mortgages in other rights, which substantially affects the possibility of realizing the creditor's rights, this behavior does not comply with the law. the platform also has a duty of care in releasing information. for major matters involving ownership and realization of creditor's rights, it should fulfill its reasonable duty of care and reminder. if it fails to do so, it should also bear corresponding legal liability. if the auction company is aware of the situation but deliberately conceals the relevant information, the auctioneer has the right to terminate the contract transaction based on this and hold the auction company liable for compensation." liu peng, a lawyer at shanghai hu zi law firm, told the china times reporter.

"the legal nature of an auction announcement is an invitation to make an offer. the auction institution is obliged to verify the specific circumstances of the transaction subject and make specific and clear disclosures in the auction announcement. if there are significant differences between the transaction subject described in the auction announcement and the actual situation, the buyer may refuse to take delivery and pursue the legal liability of the seller and the auction institution." wang zhibin, a lawyer at shanghai minglun law firm, told reporters.

online auction supervision is being followed up

data shows that by 2023, the annual turnover of various online auctions has exceeded one trillion yuan. on the online auction platform, the auction entities include court sales, government direct supply, bankruptcy sales, bank liquidation, central state-owned enterprises, etc. the auction items range from real estate, discounted cars, land and factories, debts, equity, intangible assets, lease rights to cultural relics and collections. many auction items with a starting price of 1 yuan are even more eye-catching. however, some chaos in online auctions have also emerged.

"since the auction law, auction management measures, auction supervision and management measures, cultural relics auction management measures, etc. were formulated at a relatively early time, no clear regulations have been made for online auctions. problems such as non-compliant qualifications of some entities, irregular business operations, imperfect supervision systems, and the need to strengthen the integrity system are becoming increasingly prominent." in may this year, the head of the relevant department of the state administration for market regulation said in public.

in order to further regulate the order of the online auction market and promote the high-quality development of the auction industry, the state administration for market regulation, the ministry of commerce, and the state administration of cultural heritage jointly issued the "guiding opinions on promoting the standardized and healthy development of online auctions" (hereinafter referred to as the "guiding opinions") on may 22. it is reported that this is the first regulatory document in my country's online auction field, filling the institutional gap in online auction management.

ou shuying, deputy secretary general of the china auctioneers association, said: "in recent years, the auction market has seen a split and opposition between online and offline auction activities. some online auction operators even believe that online auctions are not subject to auction law regulation and evade auction industry management and market supervision, causing adverse effects. the guiding opinions highlight the consistency of online and offline auction supervision systems in regulating and promoting online auction activities, clarify the main responsibilities of online auction platform operators, and put forward specific opinions to encourage the innovative development of online auctions."

editor-in-charge: xu yunqian editor-in-chief: gong peijia