Legal information

Introduction to the article: Lu’s factory was first shut down for rectification and then demolished. The demolition party refused to compensate it because it was a polluting enterprise. Is this reasonable? If a polluting enterprise is shut down, under what circumstances will there be compensation?

(Part 1) Case Story

A factory received a notice of closure for rectification. The reason was that the factory produced too much noise, and many nearby residents complained about the nuisance. Five months after the company was shut down, someone claiming to be a staff member from the demolition office verbally informed the business owner, Lu, to make preparations as soon as possible and to vacate the factory within a month and prepare for relocation. The staff member held a form and asked Lu to sign it. Lu believed that this demolition procedure was illegal because he had never received a formal written notice and the form was not a formal demolition and resettlement agreement, so he refused to sign. Not only that, when Lu mentioned compensation for losses due to suspension of production and business, the people from the demolition office said that because it was a noise-polluting enterprise, there was no compensation for suspension of production and business. A month later, the factory that had not been completely vacated was demolished. How is this legally regulated?

(Part 2) How the law provides for such cases

1. What procedures should be followed before forced demolition?

(1) An administrative decision to demolish within a time limit must first be made.

(2) Make reminders.

(3) Make administrative enforcement decisions.

(4) Implement administrative compulsory demolition decisions.

(5) Announce the demolition within a time limit for the unspecified majority of the society.

(6) Yingting reminds you that only when the parties neither apply for administrative reconsideration nor initiate administrative litigation within the statutory period, they can prepare for forced demolition.

2. What is the nature and content of the demolition and resettlement compensation agreement?

The demolition compensation agreement is an administrative agreement, that is, an administrative contract, which is signed on the basis of equality, voluntariness, and consent of both parties. The specific terms of the agreement must be approved by both parties and a consensus can be reached before they can be signed. Ying Ting suggested that the following terms should be clarified in the demolition compensation agreement: (1) The total amount of compensation and the specific details of each compensation content. If there is a factory lease, the specific details of each compensation content are particularly important. This involves the determination of the shares of the two parties when dividing the demolition compensation in the future. (2) Time and method of payment of compensation. (3) Clarify the area and specific location of resettlement houses and resettlement land, as well as the nature of the land, because the geographical location determines the location value of the land. Whether the nature of the land is residential, industrial or commercial also directly determines the value of the land. If both parties do not have a clear agreement in the contract, the company may not receive reasonable compensation in the end. (4) If a supplementary agreement is signed, its content must be legal and not conflict with the terms of the main contract. If there are major changes to the main contract, it must be clearly stated that the compensation agreement shall prevail.

3. How to assess losses caused by suspension of production and business?

(1) Losses due to suspension of production and business include “must be paid” and “should be earned”. Loss from production and business suspension caused by enterprise demolition refers to the loss caused by the suspension or termination of the enterprise's production and operation activities due to the expropriation and demolition of houses. It includes various expenses that the company must pay due to the suspension of production, as well as the normal income that should be obtained. For example, employees' salaries, various contract liquidated damages, bank loan interests, normal income from business operations, etc. The calculated losses due to suspension of production and business operations should indeed be losses caused by the demolition of houses and have a considerable causal relationship, otherwise no compensation will be given.

(2) a. In terms of wages and remuneration, if the labor contract is terminated due to demolition, it should be considered in accordance with the relevant labor regulations; if the labor contract has not been terminated, the basic salary and social security expenses during the suspension period should be considered. Social security and other related expenses should be based on the relevant social security regulations.

b. Various contract liquidated damages, including sales contract liquidated damages and purchase contract liquidated damages. Losses due to breach of contract due to demolition should be considered based on the negotiation to terminate the contract and review of the specific content of the contract terms.

c. The inability to repay loans caused by the company's suspension of production and business, as well as the overdue interest on bank loans, etc., shall be calculated based on the actual situation.

d. The normal income of an enterprise when operating refers to the net income after tax. It should be comprehensively considered and calculated with reference to the average rate of return in the same industry, the normal income level of the enterprise in the past three years, and the duration of production and business suspension. Specific measures shall be formulated by provinces, autonomous regions, and municipalities directly under the Central Government. The duration of suspension of production and business refers to the period from the date of suspension of production and business after the enterprise receives the demolition notice to the date of reconstruction and resumption of normal operations.

e. The lessee's loss from business suspension shall be calculated based on the remaining lease term stipulated in the original contract.

f. Other losses caused by suspension of production and business.

(Part 3) What should the evicted people do?

1. Focus of Dispute (1) What procedures need to be carried out before dismantling the factory?

First, an administrative decision is made to demolish within a time limit, then a reminder is issued, and then an administrative enforcement decision is made to implement the administrative compulsory demolition decision. Finally, a time limit for demolition was announced to the unspecified majority of society.

2. Focus of Dispute (2) Only by signing the demolition and resettlement compensation agreement can the relationship of rights and obligations be formed.

The demolition compensation agreement is an administrative agreement, that is, an administrative contract, which is signed on the basis of equality, voluntariness, and consent of both parties. The specific terms of the agreement must be approved by both parties and a consensus can be reached before they can be signed. The formal agreement must have major statutory provisions, and the demolished person should try to keep the original copy of the agreement to prepare for future protection of rights and interests.

3. Focus of controversy (3) Can polluting enterprises not receive compensation for losses caused by suspension of production and business?

First of all, the Yingting Demolition Team believes that the polluting enterprise in this case is not a real polluting enterprise. The relevant departments have not issued test results. It is still unknown whether the noise pollution caused by exceeding a certain standard is unknown. Secondly, the demolition should provide compensation for the losses caused by the suspension of production and business. Losses from production and business suspension include “must be paid” and “should be earned”, both of which must be taken into consideration.

4. What can enterprises do to safeguard their legitimate rights and interests?

If business owner Lu still cannot reach an agreement after negotiating with the demolition party, he can apply for administrative reconsideration or file an administrative lawsuit. It is best to hire professional legal professionals to intervene in negotiations and legal procedures.

Yingting reminds you:

1. According to relevant regulations, if a factory is shut down due to environmental issues and has formal procedures, reasonable compensation should be given. If there are no relevant local legal provisions on compensation, the assessment should be made with reference to the relevant provisions on land acquisition and demolition. Compensation content mainly includes compensation for house losses, losses due to production and business suspension, equipment loss and damage, and loss of ground attachments, etc.

2. If you have objections to the decision or compensation conditions after your factory is demolished or closed, please file an administrative review within 60 days of taking the specific administrative action and file an administrative lawsuit within 6 months. If your house is forcibly demolished, you must file a lawsuit to defend your rights within 6 months of knowing the date of demolition. If this statute of limitations is exceeded, the opportunity for legal relief will be lost. In order to strive for the maximum benefit, you can read more relevant legal knowledge and understand the policies related to local business closures, or you can seek solutions from lawyers specialized in business closures and expropriation and demolition.