Overview

Long-term property leases can create significant legal risks when the agreed lease term exceeds the statutory limit under Chinese law, particularly where the tenant has already paid a substantial amount of rent in advance.

In this China arbitration case, two tenants entered into a long-term property lease with a Guangzhou investment management company and paid the agreed rent in advance. The contractual lease period substantially exceeded 20 years.

The tenants subsequently challenged the validity of the portion of the lease exceeding the statutory maximum and sought a refund of the corresponding rent, together with interest and litigation-related costs.

The lessor argued that the lease was lawful because of the nature and permitted use of the underlying land, and that the tenants were attempting to use the statutory lease limitation as a means of escaping their contractual obligations.

The arbitration tribunal rejected this position and held that the portion of the lease exceeding 20 years was invalid, while the remaining portion of the lease was not thereby rendered invalid. The tribunal ordered the corresponding rent to be returned and also allocated relevant legal and arbitration costs to the lessor.

The dispute subsequently continued into the enforcement stage, where the lessor challenged the freezing of funds in its bank account. The enforcement objection was ultimately rejected by the court.

The case illustrates an important distinction in Chinese lease disputes: a lease may remain effective within the statutory period even where the agreed term exceeds 20 years, while the excess portion can be treated separately and give rise to restitution claims.

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Case Snapshot

Item	Details
Case Type	Contract Dispute / Arbitration
Jurisdiction	Mainland China
Arbitration Institution	Guangzhou Arbitration Commission
Enforcement Court	People's Court in Guangzhou
Industry	Property Leasing / Investment Management
Contract Type	Long-Term Property Lease
Dispute Value	Approximately RMB 160,000
Main Issue	Validity of the lease term exceeding 20 years
Main Claim	Refund of rent attributable to the excess lease period
Additional Claims	Interest, lawyer fees and arbitration costs
Enforcement Issue	Objection to freezing of funds in enforcement proceedings
Attorney	Yu Yuting / Sun Jianhui
Law Firm	NEO-ARK Law Firm

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The Core Legal Issues

1. Can a lease in China legally exceed 20 years?

The central issue was the statutory limitation on the duration of a lease.

Under Article 705 of China's Civil Code, a lease term may not exceed 20 years, and the portion exceeding 20 years is invalid. The rule does not mean that an otherwise valid lease automatically becomes entirely invalid simply because the agreed term is longer than 20 years.

This distinction became critical in the arbitration.

The tenants did not simply seek to terminate the entire lease. Instead, they challenged the validity of the portion of the agreed term exceeding the statutory limit and sought the corresponding financial adjustment.

2. Does the nature of the underlying land change the 20-year lease limitation?

The lessor argued that the underlying property involved collective commercial land and that the applicable land-use period was longer than 20 years.

The defense attempted to connect the permitted land-use period with the validity of the contractual lease period.

The arbitration strategy distinguished between the statutory duration of land use and the legally permissible term of a lease contract.

The fact that a property or underlying land may have a longer permitted use period does not automatically eliminate the statutory limitation applicable to the contractual lease itself.

This distinction was central to defeating the lessor's argument.

3. Can a tenant recover rent corresponding to the invalid portion of a long-term lease?

Once the excess portion of the lease was found invalid, the next issue was the financial consequence.

The tenants had made an upfront rental payment covering the agreed long-term period.

The arbitration tribunal therefore had to determine whether the rent attributable to the invalid portion should be returned.

The tribunal supported the tenants' core restitution claim and ordered the lessor to return the corresponding rent.

This demonstrates why validity analysis and restitution analysis should be handled together in long-term lease disputes.

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Legal Strategy

Issue	Legal Approach
Excessive lease term	Focus on the statutory 20-year limit under Article 705 of the Civil Code
Lessor's land-use argument	Distinguish land-use duration from the statutory limit applicable to the lease contract
Upfront rent payment	Separate the rent attributable to the valid lease period from the invalid excess period
Restitution	Seek return of the corresponding rent rather than treating the entire lease as invalid
Interest	Include appropriate financial consequences arising from the refund obligation
Legal and arbitration costs	Seek allocation of recoverable costs in accordance with the applicable arbitration rules
Enforcement	Continue protecting the effectiveness of the arbitral award after the liability phase

The strategy was therefore based on partial invalidity rather than wholesale cancellation of the lease.

That distinction was important because it allowed the tenants to challenge the legally impermissible portion of the arrangement while preserving the legal effect of the remaining lease period.

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Why the 20-Year Rule Matters

Article 705 of the Civil Code expressly provides that a lease term may not exceed 20 years and that the portion exceeding 20 years is invalid.

This rule can be particularly relevant to commercial arrangements involving:

• long-term commercial property leases;
• prepaid rental arrangements;
• investment-style property use rights;
• long-term operating arrangements; and
• contracts marketed as extended property-use rights.

Businesses and individuals should therefore distinguish between:

the duration for which the underlying property may be used
and
the legally permissible term of the lease contract itself.

A longer underlying land-use period does not necessarily mean that the parties can contractually create an unrestricted lease term.

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Arbitration and Enforcement

Winning an arbitration does not necessarily mean that the dispute is immediately over.

After the arbitral award was issued, the respondent did not voluntarily perform the award.

The applicants therefore proceeded with enforcement.

During enforcement, the respondent challenged the freezing of funds in its account, arguing that the relevant funds were collected on behalf of third parties for utility payments and therefore should not have been frozen.

The enforcement court rejected the objection after examining the nature and ownership of the relevant account and the surrounding circumstances.

This part of the case highlights an important practical point: arbitration strategy should extend beyond obtaining an award and include a plan for enforcement.

A favorable arbitral award has limited practical value if the respondent's assets cannot ultimately be reached.

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Outcome

The arbitration tribunal supported the applicants' core position and held that the portion of the lease exceeding the statutory 20-year limit was invalid.

The respondent was required to return the rent corresponding to the invalid portion of the lease, together with the applicable financial consequences.

The tribunal also supported the applicants' claims concerning recoverable lawyer fees and arbitration costs.

After the respondent failed to voluntarily comply with the award, the applicants commenced enforcement proceedings.

The respondent's attempt to challenge the freezing of funds on the basis that the account allegedly contained third-party utility collections was rejected by the enforcement court.

For confidentiality reasons, the specific amounts awarded and enforcement figures are not disclosed in this case study.

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Why This Case Matters

A long-term lease is not necessarily wholly invalid

A lease exceeding 20 years should not automatically be treated as entirely void.

The legal analysis may instead focus on the portion exceeding the statutory limit.

This can materially affect both the tenant's rights and the financial consequences of the dispute.

Land-use rights and lease rights should be analyzed separately

One of the most important issues in the case was the distinction between the underlying land-use period and the contractual lease period.

The two concepts should not automatically be treated as interchangeable.

Upfront payment increases the importance of contract review

Where a tenant pays a substantial amount of rent in advance for a long-term arrangement, an invalidity issue can create significant financial exposure.

Long-term lease contracts should therefore be reviewed before substantial payments are made.

Arbitration does not end the matter

A claimant may need to consider enforcement strategy from the beginning of the arbitration.

Asset preservation, enforceability and potential objections should form part of the broader dispute-resolution plan.

Enforcement objections can become a second stage of the dispute

Even after an arbitral award has been obtained, the respondent may raise objections during enforcement.

The ability to defend the award at the enforcement stage can therefore be critical to achieving a practical recovery.

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Frequently Asked Questions

Can a lease in China be longer than 20 years?

The parties may contractually state a longer period, but under Article 705 of the Civil Code, the portion exceeding 20 years is invalid.

Does a lease exceeding 20 years become entirely invalid?

Not necessarily. The statutory rule specifically provides that the portion exceeding 20 years is invalid. The validity of the remaining portion should be assessed separately.

Can a tenant recover prepaid rent for the invalid portion of a lease?

Potentially. Where the excess portion of the lease is found invalid, the corresponding financial consequences may include restitution of rent attributable to that invalid period, depending on the facts and applicable legal rules.

Does a longer land-use period allow a longer lease?

Not automatically. The permitted duration of land use and the statutory duration of a lease are legally distinct concepts.

Can an arbitral award be enforced against a disputed bank account?

Potentially, depending on the ownership and nature of the funds and whether a statutory exemption from enforcement applies.

In this case, the respondent's objection to the freezing of funds was rejected by the enforcement court.

Should long-term property leases be reviewed before signing?

Yes. Particular attention should be paid to the lease term, payment structure, property rights, land-use status, renewal provisions and the consequences of invalidity.

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Key Takeaways

For parties entering into long-term property leases in China:

1. Check whether the contractual lease term exceeds the statutory 20-year limit.
2. Do not automatically equate land-use duration with lease duration.
3. If a lease exceeds 20 years, analyze the validity of the excess portion separately.
4. For prepaid leases, calculate the financial consequences of any invalid lease period.
5. Consider arbitration and enforcement strategy together rather than treating enforcement as an afterthought.
6. When an enforcement objection is raised, examine the legal ownership and nature of the relevant assets rather than relying solely on the respondent's characterization.

The case demonstrates that a long-term lease dispute may involve contract validity, restitution, arbitration and enforcement simultaneously. Effective representation therefore requires the dispute to be considered as a complete legal process, from contract interpretation through final recovery.

Overview

Using a person's photograph in corporate online content can create unexpected legal risks, particularly when the person is a public figure and the photograph was obtained from a publicly accessible source.

In this China portrait rights dispute, a company published an article through its corporate WeChat account that included photographs of a former public figure. The individual subsequently brought a lawsuit alleging infringement of portrait rights and sought monetary compensation, recovery of rights-protection expenses and a public apology.

The company disputed the alleged infringement. It argued that the article was a positive feature about the individual's career and achievements, the photographs had been obtained from publicly available online sources, and the publication did not distort, defame or otherwise misuse the individual's image. The company also challenged the extent of the claimed damages and the requested form of public apology.

Importantly, the case did not end with a court finding that the company had infringed the individual's portrait rights. Following the court's mediation, the parties reached a settlement that brought the dispute to a final conclusion without an infringement judgment.

The case illustrates an important risk-management issue for companies operating websites, WeChat accounts and other digital media: the fact that an image is publicly available online does not by itself eliminate portrait-rights risk, and the appropriate response to a claim may involve both substantive defenses and settlement strategy.

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Case Snapshot

Item	Details
Case Type	Intellectual Property / Portrait Rights Dispute
Jurisdiction	Mainland China
Court	Shanghai Putuo District People's Court
Industry	Commercial / Consumer Business
Dispute Type	Alleged unauthorized use of a person's photograph in corporate online content
Original Claim Value	Approximately RMB 160,000
Main Claims	Compensation, reasonable rights-protection expenses and public apology
Key Legal Issue	Whether the publication of publicly available photographs constituted an actionable portrait-rights infringement
Key Strategy	Substantive defense + litigation risk control + judicial mediation
Final Resolution	Settlement through court mediation; no judicial finding of infringement
Attorney	Yu Yuting / Sun Jianhui
Law Firm	NEO-ARK Law Firm

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The Core Legal Issues

1. Does using a publicly available photograph automatically constitute portrait-rights infringement?

The central issue was not simply whether the photograph had been used, but whether the circumstances of its use gave rise to legal liability.

The company argued that the photographs were obtained from publicly accessible online sources and were used in an article describing the individual's career and achievements.

The defense therefore distinguished between:

• the existence of a photograph online;
• the circumstances in which the photograph was obtained;
• the purpose and context of publication;
• whether the image was altered or presented in a derogatory manner; and
• whether the publication created a commercial association or other legally significant use.

This distinction was important because online availability should not be treated as an automatic license to use a person's image for any purpose. At the same time, the legal assessment of an alleged portrait-rights infringement depends on the specific circumstances of the publication.

2. Does the use of a public figure's image receive greater tolerance?

The claimant was a public figure, which formed part of the company's defense.

The company argued that the article was a positive presentation of the individual's career and did not contain defamatory, degrading or misleading content.

The defense therefore focused on the context and nature of the publication, rather than relying solely on the claimant's public status.

This is an important distinction for businesses: being a public figure does not mean that a person's portrait can be freely used without legal consideration.

Instead, the purpose, presentation, context and potential commercial implications of the use should all be assessed.

3. How should a company respond when the claimant seeks both compensation and a public apology?

The claimant sought not only financial compensation and rights-protection expenses, but also a public apology in a widely circulated newspaper.

From the defendant's perspective, the potential risk therefore extended beyond financial liability.

A judgment requiring a public apology could potentially create additional reputational and commercial consequences for the company.

The defense accordingly challenged both the alleged infringement and the proportionality of the requested remedies.

This allowed the litigation strategy to focus not only on the amount of potential compensation, but also on preventing an unnecessarily broad form of public remedy.

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Legal Strategy

Issue	Approach
Alleged portrait-rights infringement	Challenge whether the specific use of the photograph constituted actionable infringement
Source of photographs	Establish that the images had been obtained from publicly accessible online sources while avoiding reliance on this fact alone
Publication context	Emphasize the positive, non-derogatory nature of the article and the context in which the photographs were used
Commercial-use allegation	Challenge the asserted connection between the publication and commercial exploitation of the claimant's portrait
Damages	Challenge the basis and reasonableness of the claimant's compensation demand
Public apology	Challenge the necessity and proportionality of the requested form of public remedy
Overall risk	Seek a resolution that would avoid an adverse infringement judgment and minimize the company's financial and reputational exposure

The case therefore required more than a simple argument that the photographs were “found online.” The strategy addressed the legal nature of the use, publication context, alleged commercial purpose, requested remedies and overall litigation risk.

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Settlement Strategy and Risk Control

An important feature of this case was that the objective was not merely to minimize the amount eventually paid.

The company also sought to avoid a formal judicial finding of infringement.

This distinction can be significant in intellectual property and personality-rights disputes.

A court judgment expressly finding infringement may create additional reputational consequences and may become relevant to future disputes or business communications.

Through active defense and court-led mediation, the parties ultimately reached a settlement.

The settlement:

• resolved the dispute on a one-time basis;
• did not contain a judicial finding that the company had infringed the claimant's portrait rights;
• did not require the company to issue the originally requested public apology; and
• brought the dispute to a final resolution.

For businesses, this demonstrates why settlement structure can be as important as settlement amount.

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Outcome

The case was ultimately resolved through court mediation rather than an infringement judgment.

Under the settlement arrangement, the company made a one-time payment to resolve the financial aspects of the dispute, with the final amount being substantially lower than the claimant's original demand.

The company was not required to publish the requested public apology.

The mediation agreement also provided for a comprehensive resolution of the dispute, preventing the parties from continuing to pursue additional claims arising from the same matter.

For confidentiality reasons, the specific settlement amount and other detailed financial terms are not disclosed in this case study.

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Why This Case Matters

Publicly available images still require legal review

Businesses should not assume that an image can be freely used simply because it can be found through a search engine or on a public website.

The source of an image, the identity of the person depicted, the purpose of publication and the context of use should all be considered before publication.

Portrait rights and copyright are different issues

A company may face more than one type of legal risk when publishing a photograph.

Copyright concerns may relate to the ownership or licensing of the photograph itself, while portrait-rights issues concern the rights and interests of the person depicted.

A compliance review should therefore consider both dimensions where appropriate.

Public figures are not automatically free to use

The fact that a person is well known does not eliminate portrait-rights considerations.

The purpose and manner of use remain important.

Settlement can protect against reputational consequences

In a personality-rights dispute, avoiding an adverse judicial finding may be commercially important.

A negotiated resolution can sometimes provide a more controlled outcome than allowing the dispute to proceed to a final judgment.

The form of relief matters

A claimant's requested compensation is only one aspect of the litigation risk.

Requests for public apologies, publications or other forms of corrective action may create additional business and reputational consequences.

Companies should therefore assess the full range of requested remedies, not just the monetary claim.

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Frequently Asked Questions

Can a company use a public figure's photograph in a corporate WeChat article?

Not necessarily. The fact that an image is publicly accessible does not automatically mean that a company has unrestricted rights to use the person's portrait.

The purpose, context, manner and potential commercial implications of the use should be reviewed.

Does using a photograph from the internet eliminate portrait-rights liability?

No. An image being available online does not by itself establish that its use is legally permissible.

Businesses should separately consider the rights of the photographer or copyright owner and the portrait rights of the person depicted.

Are public figures treated differently in portrait-rights disputes?

A person's public status may be relevant to the legal assessment, but it does not mean that the person has no portrait rights.

The circumstances and purpose of the specific use remain important.

Can a company avoid a public apology through settlement?

Potentially. If the parties reach a settlement before judgment, the final resolution may differ significantly from the claimant's original requests.

In this case, the dispute was resolved through mediation without the company being required to issue the requested public apology.

Is mediation appropriate in an intellectual property or portrait-rights dispute?

It can be, particularly where the parties want to control financial exposure, reputational risk and the scope of any public-facing remedy.

The appropriate strategy depends on the facts and the client's commercial objectives.

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Key Takeaways

For companies publishing photographs of individuals through websites, WeChat accounts, social media or other digital channels:

1. Do not assume that publicly available photographs are automatically free to use.
2. Assess portrait rights separately from copyright and image-licensing issues.
3. Consider the purpose, context and manner of publication.
4. For public figures, assess whether the use creates a commercial association or other legally significant implication.
5. When facing a claim, challenge both liability and the scope of the remedies being requested.
6. In appropriate cases, settlement can help control both financial and reputational risk.
7. A settlement that avoids an infringement finding may be materially different from simply negotiating the amount of compensation.

This case demonstrates that effective litigation strategy in a portrait-rights dispute is not limited to defending the alleged infringement itself. Controlling the form of the final resolution can be equally important to the client's long-term commercial interests.

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