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Homeowners: Let the seller beware
( 2003-08-28 09:05) (China Daily HK Edition)

Ever since developers in China started selling houses on the open market, there have been homeowners wanting to protect their investments. Now, new 'homeowner rights groups' are growing in strength and sophistication, as China Daily senior writer Raymond Zhou discovered.

Real-estate salespeople receive potential customers before a poster in Beijing. Long pushed in a disadvantageous position by developers, homeowners are gradually rising to power in seeking justice by legal and rational means. [newsphoto.com.cn]

"This is not a parade or a demonstration. It is an automobile group tour," explained the driver of the lead car of a 48-vehicle motorcade to the policeman who stopped him.

The convoy, extending 500 metres, had departed from Fangzhouyuan, a residential community along the Fourth Ring Road in northeastern Beijing, in the early morning hours of July 4. Although there was no honking or flag waving, each car window displayed a slogan: "Fangzhouyuan homeowners denounce evil developers!"

Thousands of similar incidents take place nationwide regularly, pitting angry homeowners against housing developers. While perhaps melodramatic, the exhibition was nevertheless non-violent and resulted in a six-hour meeting attended by municipal government officials who mediated in the conflict.

As the housing industry booms in China, the number of disputes between homeowners and developers sky-rockets. According to the China Consumer's Association, housing-related complaints and disputes have been growing at a phenomenal annual rate for the last six years. In the first half of 2003, 9,900 disputes were recorded, a rise of 23.4 per cent over last year, of which 5,300 concerned quality, 1,300 had to do with contracts, 600 involved discrepancies in measurements, 580 were over pricing and 500 targeted advertising.

Meanwhile, an additional 7,600 cases concerned home improvement matters, of which 5,100 were about quality and 160 related to contracts. On top of that, another 5,100 cases involved home remodelling issues and community housing management.

"Housing is a durable good," analyzes An Xuehui, a professor with Tsinghua University. "Some people may regard it as an investment, but how can you insure its value if there are latent quality problems?"

Shifting foundations

Real-estate developers are known for a tendency to make claims they cannot realistically fulfil. To expedite sales, they are apt to make grossly exaggerated pitches. Many of their promises amount to little more than illusions: the swimming pool on the blueprint, the Viennese garden in the expensively produced commercial, the imported marble floors. Few, if any, such amenities materialize once sales are closed and tenants move in.

A woman walks past an advertisement for a villa campus at a real-estate fair in Shanghai. Fancy amenities' failure to materialize have led to a bulk of housing-related complaints and disputes.

In some of the more outrageous cases, facilities that actually do exist when the buyers first inspect the housing units disappear over time. In several instances, a housing complex comes with a beautifully landscaped park, complete with rock formations and other artistic touches. But after construction of the whole complex is finished and sold, usually a few years later, the homeowners wake up one day to find their idyllic park gone - the space was either sold to another developer for more housing or it turned out to be part of a thoroughfare on a government drawing board.

"We bought into the concept of 'getting closer to nature', and we paid the premiums accordingly. But we ended up living in a noisy, dusty environment," complained the owner of a home in Guangzhou's White Cloud Golf Park. The estate included a 900-square-metre lawn as a major selling point, but it was leased by the developer, as were the furniture and interior decorations gracing the demo house.

Fangzhouyuan, the Beijing community that organized the July motorcade protest over developers' deceptions, had planned for three more high-rises to be built in the last phase of construction. But after tenants moved into the completed units, the developer suddenly squeezed two additional buildings into the space.

"We felt like suckers. We were taken for a ride and became pawns in an elaborate game devised by the developer," said one of the protesters.

However, the municipal official who acted as mediator had a different opinion. "In this world, change is absolute. Stasis is relative," he said philosophically.

The homeowners were not convinced. "We were not consulted on the revision. It seems the developer can do anything to maximize his profits regardless of professional ethics or legal obligations."

Structural flaws

If anything, the biggest "defect" lies in the imperfect legal system. Many loopholes and flaws exist in the legal mechanisms that govern our housing market, said Fang Lixin, professor of law at Zhejiang University in the city of Hangzhou, where the housing market is white-hot. Consumers may know that they are in the right but find it hard to get due compensation.

Homeowners sometimes appeal to the media for help. [newsphoto.com.cn]

For example, houses in China are usually priced by the square metre. But a "shrinkage" factor that may include uninhabitable areas like walls or common areas shared with neighbours often comes into play. Homeowners would have to hire professionals to measure their units in order to determine whether they have been cheated. But measurement agencies sometimes turn down individual clients for fear of offending developers.

Even if the homeowner does win a lawsuit or dispute, the compensation is usually insignificant. "I had saved (money for) much of my life for a unit with a view. Even several thousand yuan in compensation is not going to remove the building that has taken over the lawn and now blocks our view," said a Fangzhouyuan homeowner named Zhao.

As a matter of fact, most compensation takes the form of waiving a year's worth of management fees.

But matters took a dramatic turn in April, when a new court and legal interpretation placed stringent limitations on developers, said Zhao Hangen, a partner in the Guangzhou-based Everwin Law Firm. "It stipulates that a homeowner can return the unit and get a full refund, plus interest, if one of the following takes place: completion of the unit is three months behind schedule; the developer cannot secure the ownership permit for the homeowners one year after they move in; the floor space is more than 3 per cent smaller than it was claimed to be. It is very pro-homeowner," Zhao told China Daily.

But Zhao did not know of any specific cases resolved in this way. "Legal proceedings take time. There are a lot of cases in the pipeline. At least it will make developers think twice before they engage in deceptive activities again," Zhao explained.

Wild hogs

Homeowners call themselves "wild hogs", partly in self-mockery and partly for the pun (both "homeowner" and "wild hog" are pronounced "ye zhu" in Chinese). Measured in terms of purchasing power parity, China's housing market is radically overpriced compared with Western countries. With such exorbitant prices as 10,000 yuan (US$1,200) per square metre, a rate common in Beijing, one would think the market attracts only the rich and the privileged.

Qin Bin, a lawyer with the Beijing Longan Law Firm, cites a community that caters to the utmost elite, including judges, lawyers, movie stars, professors, government officials and business executives. "One would think a pack of homeowners like that would know how to protect their rights. But no, they are just like the ordinary Joe - timid and helpless before the almighty developer," said Qin.

Given the oversupply of housing units in most Chinese cities, one would also think home buyers were in a powerful position to demand quality and good service. But the contrary is more often true. For all the complaints and disputes, Chinese consumers rarely resort to legal means for resolution. "They don't know how," said Gu Liaohai, deputy chairman of the China Behaviour Law Association.

Traditionally non-confrontational and legally at a loss, they sometimes appeal to the media for help. However, most of the country's influential urban dailies generate substantial revenues from real-estate advertising. A few are even directly controlled by the industry through clandestine investment.

A collapsed building model at a sales office in Shanghai, where a dispute escalated into physical confrontation. [newsphoto.com.cn]

When a Guangdong newspaper devoted a special section to homeowners' rights, it clearly discouraged people from engaging in "contentious practices", highlighting the high cost of lawsuits. And when a Beijing Times reporter covered one such dispute in the Shiliuyuan community, he was beaten by an unidentified attacker.

That leaves the homeowners, or "wild hogs", on their own. Most of them are indeed not litigious, by nature or by necessity. Wu Jianzhong, a lawyer with the Beijing Dacheng Law Firm, classifies them in several categories: (a) upmarket buyers, who can be very intimidating or do not care about being cheated because their source of income is murky at best; (b) investors, who are prudent and calculating but never take risks when it comes to consumer rights; (c) individuals or families purchasing homes for the long term; and, (d) people being relocated due to city planning, who are usually at the bottom of the social ladder and thus unable to afford the costs of consumer rights protection.

Only Category C, generally the well-educated middle class, have the sense and means to fight the developers for their own financial interests. Sociologist Yuan Yue estimates that only 5-10 per cent of homeowners would actively pursue consumer rights, with about 30 per cent only willing to voice support, and the rest, roughly 60 per cent, acting as bystanders.

"The leaders of homeowner advocates are often young people. Their passion overrules ideological constraints. And they know how to use communication tools like the Internet to organize and rally people," revealed Yuan Yue.

Yuan attributes the failure of most homeowner disputes to the non-participation of the "silent majority". "They want a free ride. If the activists succeed, every homeowner will get an equal share of the benefits; if they fail, they are the only ones who sacrificed their time and energy."

But more and more homeowners are now spurning the wait-and-see mentality and joining the fight. Some are uniting even before they become neighbours. When buyers at Huaqingjiayuan were ready to close their sales, they did so together, creating a "collective closure", forcing the developer to heed their warnings about "shrinkage" and warning them about what would happen if the 120,000-square-metre lawn and recreation area should suddenly disappear. "The developer can afford to lose one customer, but they cannot afford to lose all of us," said one of the buyers.

Political awareness

The battle for homeowner rights has become a training ground for legal and political participation. While some homeowners resort to marching outside the sales office or even violence, either out of desperation or in an attempt to attract attention, many others have turned to the slow-revolving wheels of justice. The difference is, the more rational approach has led to the rise of community leaders.

Yu Yafei is a PR executive in Beijing. When she first confronted the development company about the less-than-accurate measurements of units in the International Friendship Garden estate, the developer bet her that she would never find an appraisal team willing to take on the job. After one year of hard work, having collected a foot-high pile of documents and following a well-polished, 20-minute presentation in court, she won "a partial victory", which included an apology from the original appraisal agency and a refund from the developer of the inflated charges for the exaggerated living space.

In Shenzhen, several homeowners who spearheaded crusades against "evil developers" ended up running for office as people's representatives in local districts. Some term themselves "sworn enemies" of the real-estate industry as they vow to protect homeowners' rights from a legally reinforced position.

Wang Yanbing, leader of Atlantic New City, a Beijing community, summed up his strategy: "Whatever we fight for has to be reasonable, since frivolous lawsuits will only damage our cause; second, keep communication open to all homeowners; third, find developer's weak points to effect breakthroughs; fourth, ensure that all negotiations with the developer are open; and finally, get on close terms with the government."

Meanwhile, developers are holding their ground. They feel they have powerful friends on their side and label homeowner activists as "an unruly bunch with ulterior motives". "We will never yield to their pressure," claimed Wang Zheng, chairman of Beijing Rongfeng Real Estate Company. "We represent the majority of honest homeowners. There are only a few troublemakers who are intent on creating chaos for the whole community."

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