The Supreme Court rendered the 105-Tai-Shang-1505 Civil Decision of September 1, 2016 (hereinafter, the “Decision”), holding that if the seller fails to notify the lessees, in writing, of the sales terms and conditions, such sales agreement shall not be effective to the lessees.
According to the facts underlying this Decision, the Appellee asserted that since the land at issue was changed into a residential land not for farming use in 1975, the lease at issue was terminated pursuant to the 37.5% Arable Rent Reduction Statute (hereinafter, the “Statute”). Therefore, there was no lease relationship between nine individuals (including Mr. Huang) and the Appellee over the land at issue. However, tree planation, houses at issue and grain sunning grounds owned by nine individuals including Mr. Huang still occupied the land at issue without legal basis. Therefore, a complaint was filed to confirm that the lease relationship between the Appellee and the nine individuals including Mr. Huang over the land at issue did not exist and to seek a judgment that awards compensation and vacates the land.
According to the Decision, when the arable land was sold, the lessees had the right of first refusal to purchase the land. The seller should notify the lessees, in writing, of the sales terms and conditions, and if such requirement was violated and a sales agreement was instead executed with a third party, such agreement should not be asserted against the lessees. To wit, the lessor (i.e., the seller) and buyer could not assert that the lessees’ right of first refusal was extinguished as a result of the sale, as specifically stipulated under Article 15, Paragraphs 1 and 3 of the Statute. In addition, the lessees’ right of first refusal could be relinquished only when they failed to indicate their assumption of the right in writing within 15 days upon receipt of the seller’s written notice. If the seller failed to notify the lessees, in writing, of the sales terms and conditions, such ownership transfer agreement certainly was not effective to the lessees.
It was further pointed out in the Decision that although the original decision had concluded that the land at issue was transferred many times after the original lessees leased the land at issue, it did not verify if the sales terms and conditions were communicated in writing to the lessee each time the land at issue was to be sold by the lessor (i.e., the seller). Instead, the original decision concluded that the several ownership transfers of the land at issue were effective simply because the lessees had failed to exercise the right of first refusal to purchase the land from the seller. Therefore, the original decision’s finding that the Appellee could terminate the lease at issue in the capacity of the lessor is obviously inconsistent with relevant legal requirements, and the original decision was reversed and remanded.