The owner sold the house for 400k. After renovations, the buyer sold it for 698k. The second buyer sued claiming a ceiling leak caused by a sewage pipe, and the first instance court held the owner responsible, awarding nearly 800k.

Ask AI · How does the court determine that the original homeowner’s concealment of a sewage-pipe leak constitutes fraud?

“My house was only sold for 400k yuan, but the court of first instance ruled that my family alone should be responsible for about 800k yuan—which is equivalent to the house being gone.” Recently, Wu, a woman from Wanzhou District in Chongqing, called the Huashang Daily Feng News hotline 029-88880000 to say that they did not accept the first-instance judgment and have appealed.

Selling the house —

The owner sold a 154-square-meter school-district home for 400k yuan; the woman renovated it and resold it for 698k yuan

Wu is from Wanzhou District, Chongqing. She said that in 2008 her family bought a school-district home at Baiyan Yi Zhi Lu in Wanzhou District—“near Gaosuntang in Wanzhou District, where there are the best primary and middle schools and kindergartens in the whole district. At that time, it was registered in the names of my husband and son. The home is on the second floor, with an area of about 154 square meters.”

She told Huashang Daily Feng News reporter that the house was built in 1998. When they bought it, it was a “plain” (unfinished) unit. Later, they rented it to others to run a beauty salon and a guesthouse. In May 2024, because they were moving, they wanted to sell the house.

On September 10 of the same year, Wu sold the house to Zhu at a price of 400k yuan through an intermediary. “After we signed the house purchase and sale contract, she paid us that money. However, at her request, the house was temporarily not processed for transfer registration. After more than two months, she renovated it again and sold it to a woman at a price of 698k yuan, to [a woman named] a certain party.”

On November 25, 2024, Wu’s husband and son, as Party A, entrusted Zhu, as Party B, and [a woman named] a certain party, to sign the “Real Estate Purchase and Sale Brokerage Transaction Contract.” The agreement stated that Party A would sell the property to Party B, on a per-unit basis, in its current condition. Party A guaranteed that the ownership title of the property being sold was clear, the procedures were legal, and that it had obtained the consent of all co-owners, and that Party A had the legal right to dispose of the property. “Party B has fully inspected and clearly understood all aspects of the property and has no objections, and decides to purchase the property.”

“[The woman named] [a certain party] paid the 198k-yuan down payment to Zhu, and the bank’s 500k-yuan mortgage loan was transferred into our account.” Wu said. “Then we transferred that 500k yuan to Zhu in two installments—actually, the proceeds from our house sale were that 400k yuan.”

On December 27 of the same year, the property was officially registered under the name of [a woman named] a certain party.

Little did they know that about 7 months later, a notice from the Wanzhou District Court triggered sudden trouble.

Lawsuit —

[The woman named] claims concealment of a sewage-pipe leak in the living-room ceiling with a foul smell; demands full refund of the purchase price and compensation for losses

In July 2025, [the woman named] filed a lawsuit with the Wanzhou District Court of Chongqing, listing Wu’s husband and son—who were Party A—as well as Zhu and others as defendants.

In the complaint, [the woman named] stated that at the time, she had purchased the house through brokerage introduced by a company. She paid Wu’s family a purchase price of 198k yuan to Zhu, paid a brokerage service fee of 10,000 yuan, and obtained a 500k-yuan purchase mortgage loan from the Agricultural Bank’s Wanzhou branch using the house as collateral. She would repay the loan monthly.

She said that recently she discovered that the main sewage drainage pipe serving the building was located directly above the living room of the house. The sewage drainage pipe leaked and was accompanied by a foul smell, which prevented her from living there normally.

She claimed that during the property transaction, the defendants, including Party A and Zhu, intentionally concealed material facts sufficient to affect the transaction, causing her to be deceived into signing the purchase contract, severely infringing her lawful rights and interests.

[The woman named] requested the court to rescind that “Real Estate Purchase and Sale Brokerage Transaction Contract,” requiring Party A and Zhu to return the down payment and pay the corresponding interest, while also returning the 500k-yuan mortgage loan and provisionally paying interest of 84,919.6 yuan. In addition, she demanded payment of transfer taxes and fees of 269,790 yuan, as well as the corresponding brokerage fees and attorneys’ fees, totaling nearly 800k yuan.

Defense —

The property issue in question was designed by the developer; the seller did not intentionally conceal; request dismissal

At the trial, Wu’s side mainly argued that the sewage drainage pipe involved in the property was the developer’s original design. They did not conceal any facts. The location and structure of the pipes in that property were planned and built uniformly by the developer. They did not have professional architectural knowledge and could not foresee the related risks and problems of the pipes. During the transaction, they informed Zhu of the house’s condition truthfully. Moreover, Zhu renovated the house again; they had not intentionally concealed known information. The so-called sewage-pipe leakage issue existed after the handover, so they should not bear responsibility for major quality problems. The plaintiff [the woman named] cannot infer that the property had major quality problems merely because shared facilities may have had leakage in the past. The property in question was a second-hand home; according to legal provisions, the warranty period for water supply and drainage pipes is only two years.

They also argued that, during the sale of the house, they only received the 400k yuan purchase price that Zhu had paid at the time, and that all other funds belonged entirely to Zhu. “There was no fraud in the transaction. The purchase and sale contract does not fall under any statutory rescindable conditions. The property has been transferred and the transaction is completed, and the property rights have been confirmed. Under the contract terms, all parties have completed their respective rights and obligations that they must perform. The plaintiff [the woman named], as a person with full civil capacity, should make a purchase decision only after acknowledging and accepting the current condition of the property. At the same time, the right to rescind in this case has exceeded the statute of limitations. Therefore, request the court to dismiss all the plaintiff’s claims.”

Zhu, as a defendant, argued that the first item in the contract stated that the plaintiff had purchased the property only after careful consideration during the purchase process. Since the sale has been completed and the property has been transferred, she now does not know why she is regretting it. Her request should not be supported.

Zhu also argued that the plaintiff’s described pipe was formed historically; at the time of purchase, it was like that. She did not alter it during her renovation. The original right holder of the house had not informed about seepage. “After checking on site, the sewage-pipe leak with a foul smell alleged by the plaintiff is untrue. This case does not constitute statutory grounds for rescission such as major misunderstanding or fraud, nor does it constitute a fundamental breach of contract. Request dismissal of her claims.”

Judgment —

The homeowner concealed the true condition of the property with intent to commit fraud; ordered to bear about 800k yuan in responsibility

In reviewing the case, the Wanzhou District Court found the relevant facts. It also stated that at the time, Wu’s family as the seller and Zhu as the buyer signed a contract through brokerage services by a company. “This property is a second-hand home transaction, with a final transaction price of 400k yuan. The seller delivered the property for the buyer’s use according to the actual condition at the time of on-site inspection by the buyer. After Zhu purchased the property involved in the case, she renovated the interior.”

The court further found that on September 14, 2024, Wu’s family and Zhu handled a notarized letter of authorization at the Chongqing Yubo Notary Office. The contents were that because the seller was busy with affairs and inconvenient to personally go to the real estate registration center to办理 the relevant procedures for house purchase and sale transfer registration, she specially authorized Zhu to handle the following matters: sign the “House Purchase and Sale Contract” and the online signature contract with the second buyer; handle the relevant procedures for property rights transfer registration of the house, and pay and apply for reductions/exemptions of relevant taxes and fees; and sign relevant documents, and contracts, etc.

The Wanzhou District Court stated that after an on-site inspection during the trial, the base construction of the property in question was brand-new, and the ceilings in the living room throughout the home were all new. After opening the ceilings, above the ceiling of the dining area in the living room near the entry door, there was the sewage drainage pipe for the entire building. The sewage drainage pipe turned there; the pipe was relatively old and had a lot of stains. The ceiling around the pipe had turned black, and there was plastic film wrapped around the area around the pipe.

The most important focus in this trial was whether the property purchase and sale contract in this case constituted fraud?

The Wanzhou District Court also found that in 2024, the property management company had sued the owner who rented Wu’s house to run a guesthouse for unpaid property management fees. In the trial, the other party stated, “Because the sewage main pipe leaked and caused losses to my guesthouse, that’s why I didn’t pay the property fees.” Later, the matter was successfully resolved through mediation.

However, the报警 receipt from the Hongguang Police Station in Wanzhou District issued by Wu showed that at around 3:00 p.m. on April 4, 2024, she reported that she had a dispute with the guesthouse owner regarding the issue of renting the house, and later the police handled it through mediation.

In this trial, the Wanzhou District Court held that based on the on-site inspection and the civil mediation agreement involving the property management and the guesthouse owner, it could confirm the fact of leakage of the sewage drainage pipe above the dining and living room ceiling of the property in question. Zhu, as the seller’s entrusted agent, knowing that the sewage drainage pipe for the entire building was located above the dining and living room ceiling and was leaking, concealed the true condition of the property in question by renovating it and covering the pipe with plastic film. She had intent to commit fraud and carried out fraudulent conduct. When signing the contract, Zhu did not inform the plaintiff Wu of the true situation truthfully, causing the plaintiff to sign the transaction contract for the property without knowing. This conduct constitutes fraud.

The Wanzhou District Court also held that the plaintiff [the woman named] asserted that Zhu should bear joint payment obligations. Since all of Zhu’s actions were carried out under the seller’s authorization, and Zhu was not the counterparty to the contract, the plaintiff’s claim had no factual and legal basis.

On January 4, 2026, the Wanzhou District Court rendered its first-instance judgment. It stated that it rescinded the contract signed by the plaintiff [the woman named], Wu’s family (the owner), and the intermediary company. It ordered the seller Wu’s family to return to [the woman named] the 698k yuan purchase price and the funds-occupancy interest, and also to pay transfer taxes and fees as well as brokerage fees and attorney’s fees.

“The court of first instance required us to return that 698k-yuan purchase price alone, plus interest and other costs—altogether about 800k yuan.” Wu choked up as she questioned, “Isn’t this equivalent to the court ordering us to hand over our 400k-yuan house for free?”

She said that after the first-instance judgment, they requested the Wanzhou District Court to provide a written explanation. “We listed 14 points, but so far they haven’t given any written response.”

On April 6 afternoon, the Huashang Daily Feng News reporter contacted the first-instance judge surnamed Liu based on that. She did not respond directly.

Appeal —

The failure to disclose “historical leakage” does not constitute fraud; the civil mediation agreement cannot serve as a basis for final adjudication

Wu said they were dissatisfied with the first-instance judgment results and appealed to the Second Intermediate People’s Court of Chongqing. They believed that the first-instance court found the facts unclear, applied the law incorrectly, and seriously harmed their lawful rights and interests.

In their appeal, they argued that the first-instance judgment held them to have committed fraud because they failed to disclose “historical leakage,” but that has no basis in law.

Wu said that for a historical trace that has been repaired and does not affect use—especially traces caused by leakage in common areas—they have no legal duty of active disclosure, and no intent to conceal. The first-instance court also did not ascertain whether there had been leakage before, or whether there is leakage now; whether it is leaking feces or leaking water; whether it is long-term leakage or short-term leakage; whether it is leakage in common areas or leakage due to the property’s own quality problem; whether the plastic film is an engineering anti-seepage measure or a way to conceal leakage traces. For example, the “plastic film” issue: from the appearance, it connects to a pipe. It is clearly an anti-seepage measure and not a cover for anything. But the first-instance court used this to determine there was an intent to “conceal leakage traces,” and then exaggerated the leakage problem into fraud.

Wu also said that the sewage pipe in the ceiling of the dining and living room area is the main pipe for the entire building. That pipe was the original design and construction by the developer when the building was built in 1998. They made no changes. They cannot use the current “Residential Design Code” to constrain an old building.

Wu further argued that what [the woman named] bought was the “residence” that Zhu had renovated. Her decision to buy mainly depended on the condition as seen during the viewing, and there is no legal causal relationship between the historical leakage and her decision. The fact that their family did not profit completely negates the fraud element of “intent to unlawfully possess.” During the viewing and transaction process, [the woman named] did not fulfill reasonable due care obligations; she should bear the corresponding consequences herself. The property involved is a second-hand home; the contract states “handover in its current condition.” In the transaction of the house, the buyer [the woman named] is a person with full civil capacity and also bears a duty of due diligence and careful review. During multiple viewings and inspections, she raised no objection to the quality of the property. If she believed the leakage issue was crucial, she had full ability to discover the relevant traces by carefully checking or by hiring professional institutions to test them. “Her own lack of scrutiny means she has no right to shift all responsibility to our family.”

In addition, Wu said that during the appeal, the Civil Procedure Law Judicial Interpretation Article 107 provides that when parties make concessions to reach a mediation agreement or settlement agreement and thereby recognize certain facts, those facts may not be used as a basis against them in subsequent litigation. Based on that, the statement about the guesthouse owner recorded in the first-instance judgment cannot be used as a basis to establish facts. That was his admission made in order to reach mediation, which should not affect the determination of facts in other cases. Without verification by the people’s court, it may not be used as a basis for establishing facts in other cases.

Wu requested the court of second instance to revoke the first-instance judgment, remand the case for retrial or, in accordance with law, change the ruling and dismiss all the plaintiff’s claims in the first instance. “If the ‘House Purchase and Sale Contract’ cannot be rescinded, request the court to legally add Zhu as a third party and change the judgment so that she bears all responsibility, or otherwise she should return to us the 698k-yuan purchase price and bear responsibility for all losses, etc.”

Huashang Daily Feng News reporter Huang Ping · Editor Liu Mengyu

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