Taihe Information | Can an agreement between a property owner and the former property management company regarding reductions or exemptions of property fees be binding on the new property management company?
Release Date:
2026-08-27
Tripartite agreements between the property owner, the pre‑existing property management company, and the developer—such as agreements providing for reductions or exemptions in property fees—are typically entered into during the sale of commercial housing. These agreements constitute concessions made by the developer to promote sales or compensate for defects in the property. Following a change of property management company, such tripartite agreements are not binding on the new management company unless the latter expressly agrees to assume them.
Mr. Wu is a homeowner in a certain residential community. In 2020, the community’s original property management company issued Mr. Wu a “Commitment Letter on Property Fee Exemption,” stating that his unit had been acquired by the developer as payment for outstanding construction fees owed to him. Due to issues such as interior renovations not having been carried out in accordance with prescribed standards, after consultation among Mr. Wu, the developer, and the original property management company, it was agreed that, pending the developer’s liquidation and completion of required rectifications, Mr. Wu would be exempt from paying property fees and the management fees for the three associated parking spaces; these expenses were to be borne by the original property management company. Subsequently, the community established a homeowners’ committee and replaced the property management company. The current property management company now seeks payment of property fees from Mr. Wu, which he has refused, leading to litigation.
The court, after trial, finds that, Payment of property management fees is the primary obligation that owners are required to fulfill under the property service contract, and such payment may not be refused except as expressly provided in the contract or by law. At present, a lawful and valid property service contract has been established between the property management company and Mr. Wu, and Mr. Wu is obligated, both under the law and pursuant to the contract, to pay the property management fees. The “Commitment Letter on Property Fee Reduction or Exemption,” reached through consultation among Mr. Wu, the developer, and the previous property management company, constitutes a tripartite agreement with contractual force; however, in accordance with the principle of privity of contract, it binds only those three parties. Since the current property management company has not succeeded to the rights and obligations of the prior property management company under that tripartite agreement, the agreement does not produce legal effects vis‑à‑vis the current property management company. In order to fully embody the “as if I were the plaintiff” principle, substantively resolve disputes, and promote community harmony and stability, the court engaged in repeated communications with Mr. Wu, patiently explaining the relevant laws and reasoning with him. Ultimately, Mr. Wu voluntarily paid the outstanding property management fees, whereupon the property management company filed a motion to withdraw the lawsuit. The court granted the withdrawal, thereby bringing the dispute to a complete resolution.
Homeowners, developers, and the initial property management company sometimes enter into tripartite agreements—often involving concessions or compensation—due to defects in the properties. A common example is an agreement to reduce or waive property management fees, with the cost typically borne by the developer or the original property management company. However, once the owners’ committee appoints a new property management company, such tripartite agreements no longer automatically bind the new provider, potentially giving rise to a host of disputes. This issue not only constitutes a frequent point of contention in judicial practice but also directly affects the realization of homeowners’ self-governance and the smooth transition between the old and new property management entities.
In this regard, the following recommendations are proposed:
● When selecting a new property management company, the owners’ committee may explicitly stipulate in the tender documents or in the newly executed Property Service Contract whether the new management company will assume responsibility for any outstanding tripartite agreements left over from the previous phase. Additionally, during the handover between the outgoing and incoming management companies, the committee may proactively notify both the developer and the new management company of the existence of such tripartite agreements, requesting that the developer settle all related outstanding fees before the former management company departs. If the new management company agrees to assume these liabilities, it should promptly sign a confirmation letter to formally document this arrangement.
● Homeowners should keep the original copies of the pre‑property service contract and the tripartite agreement in a safe place. If a new property management company files a lawsuit seeking payment of property fees, homeowners should actively defend themselves rather than passively refusing to pay or getting bogged down in whether the new company will recognize the existing agreement. Although an agreement to reduce or waive property fees is not automatically enforceable against the new property management company, this does not mean that homeowners’ rights cannot be protected. Due to the change of property management company, homeowners are left with no… Where a property owner is not entitled to a reduction or exemption of property management fees, the owner may, after paying such fees to the new property management company, assert the corresponding rights against the obligated developer and the previous property management company in accordance with the terms of the original tripartite agreement.
● The housing and urban–rural development authorities should strengthen oversight of developers’ post‑sale commitments. It is recommended that, during the handover and acceptance of property management projects, the status of compliance with tripartite agreements be included in the handover checklist. The incumbent property management company should be required to disclose all valid tripartite agreements that remain in effect at the time of the transition between the old and new management entities. Any outstanding fees should be settled by the developer, or the new property management company should explicitly assume responsibility for them. Developers or property management companies that deliberately conceal such tripartite agreements, thereby harming owners’ rights and interests, should have their misconduct recorded in their credit files and be subject to lawful sanctions.
The Civil Code of the People’s Republic of China
Article 465 Contracts duly concluded in accordance with the law are protected by law.
A contract duly concluded in accordance with the law is legally binding only on the parties thereto, unless otherwise provided by law.
Article 937 A property service contract is an agreement under which the property service provider, within the property service area, undertakes to provide services such as the repair and maintenance of the building and its ancillary facilities, environmental sanitation, and the management and upkeep of related order, while the owner pays the corresponding property fees.
Property service providers include property service enterprises and other managers.
Article 944 The property owner shall pay the property service fee to the property service provider in accordance with the agreed terms. Once the property service provider has rendered services in compliance with the agreement and relevant regulations, the property owner may not refuse to pay the property service fee on the ground that they have not received or do not require such services.
If a property owner, in breach of the agreement, fails to pay the property service fees on time, the property service provider may issue a notice requiring payment within a reasonable period; if payment is still not made upon expiration of such period, the property service provider may bring an action or apply for arbitration.
Property service providers shall not resort to measures such as suspending the supply of electricity, water, heating, or gas in order to compel payment of property management fees.
( Source: Shanghai No. 2 Intermediate People’s Court)
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