Chapter 1: A Brief History of Chinese Real Estate Law 1
1.1. LandOwnership 1
1.1.1. Early Concepts of Private Land Ownership 1
1.1.2. Land Ownership Policies of the Communist Government Before 1949 6
1.1.3. Land Ownership System under the Kuo Minh Tang Government on the Mainland before Liberation 7
1.1.4. The Nationalization of Ownership of Urban Land after the Establishment of PRC 9
1.2. Development of Chinese Real Estate Law 11
1.2.1. Real Estate Regulation 1949-1988 14
1.2.1.1. 1949-1956 14
1.2.1.2. 1956-1962 (The period for Socialist Transformation) 15
1.2.1.3. 1966 - 1976 ( the Cultural Revolution) 17
1.2.1.4. 1978-1988 17
1.2.2. The Modern Era 18
1.2.2.1. The Granted Land Use Right 18
1.2.2.2. Commercial Development 19
1.2.2.3. Housing Development 21
1.2.2.4. Agricultural Land Preservation 25
Chapter 2: Legal Background 29
2.1. The Impact of Civil Law Concepts 29
2.1.1. Principles of Civil Law 30
2.1.2. Judicial Interpretation 30
2.1.3. Principle of Fairness 32
2.2. The 1999 Contract Law 33
2.2.1. Similarities to Common Law 35
2.2.2. Special Distinctions from the Common Law of Contract 37
2.2.2.1.No Consideration Required 37
2.2.3. Unenforceable Promises 38
2.2.4. The Principle of Fairness 38
2.2.5. The Principle of Good Faith 39
2.2.6. Choice of Law 40
2.2.7. "Standard Terms"-- Limits on Waiver of Responsibilities 40
2.3. The Distinction Between Credit Rights and Rights In Rern 42
2.4. Concepts of Co-Ownership 45
2.4.1. Condominium Ownership 47
2.5. Inheritance Laws 49
2.6. Spousal Rights 51
2.7. Dispute Resolution; the Judicial System 52
2.7.1. Mediation (Conciliation) 52
2.7.1.1. Conciliation by the Court 53
2.7.2. Arbitration 54
2.7.3. Litigation 55
2.7.3.1. Litigation involving Real Estate Interests 57
2.7.3.2 Attorney's Fees 58
Chapter 3: The Ownership of Land 59
3.1. State Land Ownership 60
3.1.1. The Scope of the State Land Ownership 60
3.1.1.1. Urban Land 62
3.1.1.2. Expansion of Urban Land into Agricultural Collective Areas 62
3.1.1.3. Countryside or suburban land which has been purchased, confiscated, requisitioned, collected, or nationalized by the State 64
3.1.1.4. Forest land, grassland, waste land, tidal-flat areas, flood land and other land, which has not been ascertained by the State to be owned by Agricultural Collectives 65
3.1.1.5. Land used for various state public works, public security and public safety purposes 65
3.1.2. Institutions Embodying State Land Ownership 68
3.1.2.1. Central Government 68
3.1.2.2. Local Government 69
3.1.3. Origins of the State Land Ownership 70
3.1.3.1. Confiscation 70
3.1.3.2. Buying Out (Policy of Redemption) 70
3.1.3.3. State Trusteeship 71
3.1.3.4. Nationalization 72
3.1.3.5. Requisition 73
3.2. Agricultural Collective Land Ownership 74
3.2.1. What is an Agricultural Collective? 74
3.2.2. Confirmation of Agricultural Collective Ownership by Continuous Use 75
3.2.3. Varieties of Agricultural Collective land 76
3.2.4. The Origins of the Agricultural Collective Land Ownership 77
3.2.5. Agricultural Collective Land Registration and Certification 79
3.2.6. Limitations on Agricultural Collective Land Ownership 81
3.2.7. State RequisitioningofAgricultural Collective Land 83
3.2.7.1. Conversion of Arable Land 83
Chapter 4: Allocated Land Use Rights 85
4.1. Allocated Land Use Rights Defined 86
4.2 Allocated Land Use Rights on State-Owned Land 87
4.2.1. Distinctive Characteristics of Allocated Land Use Rights vs. Granted Land Use Rights 89
4.2.1.1. Term of Allocated Rights 91
4.2.1.2. Purpose 91
4.2.1.3. Nature of Interests Conferred 91
4.2.1.4. State's Right to Terminate 92
4.2.2. Creation of Allocated Rights 93
4.2.2.1. Circumstances in Which Allocated Rights are Still Created 93
4.2.2.2. Process for Creation of Allocated Rights Before 1999 94
4.2.2.3. Creation of Allocated Land Use Rights After 1998 96
4.2.2.4. Compensation to Former Occupants or Agricultural Collectives 96
4.2.3. Transferring, Leasing, and Mortgaging Allocated Land Use Rights 98
4.2.4. The Future of Allocated Land Use Rights on State-Owned Land 100
4.3. Collective Enterprise Allocated Land Use Rights 103
4.4. Military Allocated Land Use Rights 104
4.5. Allocated Land Use Rights of Educational Institutions, Scientific Research Institutes, Cultural Organizations and Health Institutions 105
4.6. Interim Rights 106
4.7. Homestead Rights 107
4.8. Foreign-investment Enterprise Allocated Land Use Rights 110
4.8.1. How Can a Foreign-investment Enterprise Obtain New Allocated Land Use Rights? 111
4.8.1.1. Land Use Rights Allocated by County or City Government 111
4.8.1.2. Land Use Rights Contributed by Chinese Venturers as their Investment to Joint Ventures 113
4.8.2. Characteristics of Foreign-investment Enterprises' Allocated Land Use Rights 114
4.9. Allocated Land Use Rights on Agricultural Collectiveowned Land 116
4.9.1. Land Used Under the Agricultural Contract Responsibility System 116
4.9.2. Homesteads on Agricultural Collective-owned Land 117
4.9.2.1. Rural Residents' Homesteads on Agricultural Collective-owned Land 117
4.9.2.2. Urban Residents' Homesteads on the Agricultural Collective-owned Land 119
4.9.2.3. The Future of the Rural Residents' Homestead System 120
4.9.3. Township Enterprise's Land Use Rights on Agricultural Collective-owned Land 120
4.9.4. Land Use Rights Contributed by Agricultural Collectives to Joint Venture Enterprises 121
4.9.5. Termination of Allocated Land Use Rights on Agricultural Collective-Owned Land 123
Chapter 5: Granted Land Use Rights 125
5.1. Characteristics of Granted Land Use Rights 126
5.1.1. Use Limitations 126
5.1.1.1. Changing the Use 127
5.1.2. Term of Granted Land Use Rights 127
5.1.2.1. Renewal 128
5.1.2.2. Termination 129
5.1.2.3. Forfeiture 130
5.1.3. Transferability of Granted Land Use Rights 131
5.2. Who Can Own 132
5.3. Creation of Granted Land Use Rights 134
5.3.1. Authority to Grant 134
5.3.1.1. Agricultural Collectives 135
5.3.1.2. Bureaus of Land Administration 135
5.3.1.2.1. Approval System for Granted Land Use Rights Prior to 1999 135
5.3.1.2.2. System for Approval of Granting or Allocating Land Use Rights Subsequent to 1999 (The "Land Use Purpose Control System") 136
5.3.2. Planning Requirements 138
5.3.3. Qualifying to Obtain a Land Use Right 140
5.3.4. Types of Granting Contracts 141
5.3.5. Select of Grantee 147
5.3.5.1. The Auction Requirement 148
5.3.5.2. Bid Invitations 149
5.3.5.3 Private Negotiation 150
5.3.6. The Land Use Fee 152
5.3.6.1. Timing of the Payment 152
5.3.6.2. Basic Land Price 152
5.3.6.3. Infrastructure Contribution 156
5.3.7. Limit on Government Expenditure of Proceeds of Granted Land Use Rights 156
5.4. Remedies for Breach of Granting Contract 157
5.4.1. Enforcement of Price Obligation 157
5.4.2. Enforcement by Buyer 157
Chapter 6: Registration and Conveyancing 159
6.1. Registration of Real Estate Interests 159
6.1.1. The Requirement for Registration 159
6.1.2. Registration Systems 162
6.1.3. Inspection of Registration Records 165
6.1.4. Land Registration 167
6.1.4.1 Registration of Mortgages on Land Use Rights 167
6.1.5. Registration of Rights in Buildings 168
6.1.5.1. Liability of the Registration Office for Erroneous Registration of Buildings 171
6.1.6. Registration of Leases 171
6.2. Property Descriptions and Surveys 173
6.2.1. Boundary Disputes 174
6.3. Real Estate Brokerage and Appraisal 175
6.3.1. Real Estate Intermediaries Generally 175
6.3.2. Appraisers 177
6.3.3. Can a Foreigner be a Real Estate Intermediary in China? 179
6.4. Transfer of Land Use Rights 179
6.4.1. Conversion of Allocated Rights for Transfer 180
6.4.2. Preconditions for the Transfer of Granted Land Use Rights and Housing 183
6.4.2.1. Preconditions for the Transfer of Granted Land Use Rights 183
6.4.2.2. Preconditions for Housing Presale 184
6.4.2.3. Preconditions for the Sale of Housing Purchased from Working Units and Economic, Appropriate Housing Purchased at Subsidized Prices 184
6.4.3. Contracting for Transfer 185
6.4.3.1. Basic Land Price 186
6.4.3.2. Rights Created Under Contract 186
6.4.3.3. Requirement for a Writing; Notarization 187
6.4.3.4. Earnest Money and Liquidated Damages Provisions 188
6.4.3.5. Seller's Responsibility for Condition 189
6.4.4. Risk of loss 189
Chapter 7: Commercial Leasing 191
7.1. Basic Legal Concepts Affecting Lease Contracts 192
7.2. What Can be Leased? 194
7.2.1. Land Ownership Itself 194
7.2.2. Leasing of Land Use Rights 196
7.2.3. Leasing of Buildings 200
7.2.3.1. Buildings That Cannot be Leased 201
7.3. Who Can Be Tenants 202
7.4. Details of the Lease Agreement 203
7.4.1. Requirement of a Writing 203
7.4.2. Requirement of Registration 203
7.4.2.1. Registration of Leases of Buildings 204
7.4.3. Main Clauses of a Lease Contract 205
7.4.4. Lease Term 207
7.4.5. Rent 208
7.5. Implied Warranties of Landlord 209
7.6. Implied Duties of Tenant 211
7.7. Tenant's Rights to Transfer Interests in the Leased Premises 212
7.8. Refusal Right 214
7.9. Tenant's or His Family Members' Right to Continue the Lease Contract When the Landlord Transfers the Premise or the Landlord Dies 215
7.10. Remedies for Breach of Lease 215
7.11. Non-Mortgageability of Leasehold Estates 218
7.12. Economic Analysis of the Chinese Commercial Lease 219
Chapter 8: Mortgage Law 225
8.1. Introduction 225
8.2. Mortgage Loans Generally 227
8.3. Underlying Statutes 234
8.3.1 The 1999 Contract Law 234
8.3.2 The 1995 Commercial Banking Law and the General Provisions on Lending 235
8.3.3 The 1995 Security Law 235
8.3.4 The 1996 Auction Law 236
8.3.5 Laws and Regulations on Land and Urban Real Estate 236
8.4. Who Can Make a Mortgage Loan? 238
8.5. What Can Be Mortgaged? 240
8.5.1. Land Use Rights 240
8.5.2. Multiple Parcels 242
8.5.3. Commonly Owned Property 242
8.5.4. Leaseholds 244
8.5.5. Presale Interests 246
8.5.6. Inprovements to Mortgaged Property 247
8.5.7 Restrictions on Mortgaging Certain Interests 248
8.6. The Mortgage Debt 250
8.6.1 GeneralTerms 250
8.6.2 Loan Term 250
8.6.3 Interest 251
8.6.4 Prepayment 252
8.6.5 A Special Problem Regarding the Amount of Loans -- Construction Loans 253
8.6.6 Future Advances 253
8.6.7 Registration and Priority 254
8.7. Transfer of Mortgagee's Rights 257
8.8. Transfer of Mortgagor's Rights 258
8.8.1. Basic Transfer Restriction 258
8.8.2. Problem With Contracting for Sale of Mortgaged Property 258
8.8.2.1. The Basic Problem 258
8.8.2.2. Partial Interpretive Solution 259
8.8.2.3. Substitute Security and the Issue of Defeasance 260
8.8.2.4. Drafting Around the Problem 262
8.8.2.5. Contrary Authority in the Urban Mortgage Measures 263
8.8.3. Impact of Transfer on Original Mortgagor 264
8.9. Leasing of Mortgaged Property 264
8.10. Condition of Property; Insurance 265
8.10.1. Physical Condition of Property 265
8.10.2. Insurance 266
8.10.3. Expanding a Mortgagee's Rights 267
8.11. Default and Acceleration 267
8.12. Possession after Default and Right to Rents 271
8.13. Can the Parties Avoid Legally Prescribed Mortgage Terms by Contract? 274
8.14. Foreclosure 277
8.14.1. Judicial Actions 277
8.14.1.1. Venue 277
8.14.1.2. Timing 279
8.14.1.3. Election of Remedies 279
8.14.1.4. Notice 280
8.14.2. Conduct of Auction 282
8.14.3. Distribution of Proceeds 282
8.14.4. Settlements in Lieu of Foreclosure 284
8.14.5. Rights and Duties of Foreclosure Sale Purchasers 285
8.15. Rights of Junior Parties 286
8.16. Subrogation 288
8.17. Deficiency Claims 289
8.18. Summary and Conclusions 290
8.18.1 Problems Resulting from Overfavoring Lenders 290
8.18.2. Problems Resulting from Overfavoring Lessees 292
8.18.3 Structural Issues 294
8.18.4 Enforcement 295
Chapter 9: Liens and Other Creditor's Rights 297
9.1 Collecting Judgments 297
9.2. Security Interests 299
9.2.1. Guarantee 299
9.2.2. Pledges 300
9.2.2.1. Pledges on Moveable Property 300
9.2.2.2. Pledges on Negotiable Instruments, Securities or Intellectual Property Rights 301
9.2.3. Possessory Liens 302
9.3. Dian 303
9.3.1. Enterprise Bankruptcy Law 307
9.3.1.1. Claims of Creditors 307
9.3.1.2. Concerns About Enterprise Bankruptcy 310
9.3.2. Bankruptcy of Entities Other than State Owned Enterprises 313
Chapter 10: Restrictions on Ownership and Regulations on Real Estate Development 315
10.1. Interests Reserved by the State 315
10.2. Neighborhood Rights 316
10.2.1. Pass Right 317
10.2.2. Water Rights 318
10.2.3. Utility Services 319
10.2.4. Nuisance 319
10.2.5. Responsibilities with respect to boundaries 320
10.2.6. Safety, Health and Environment 320
10.2.7. Trespass 321
10.2.8. Lateral and Subjacent Support 322
10.3. Servitudes 322
10.3.1. Easements 322
10.3.2. Covenants 323
10.4. Regulation of Land Use 325
10.4.1. Overview of Land Using Regulation 325
10.4.2. Basic Structure of Zoning System 326
10.4.3. Comprehensive Land Use Planning 328
10.4.4. Limitations on Private Participation in Land Use Decision Making 328
10.4.5. National Land Administration Information System 329
10.5. Regulations on Real Estate Development 330
10.5.1. Compliance with the Zoning Plan, Granting Contract, and Technical Standards of the Government 330
10.5.2. Establishing Real Estate Development Companies 331
10.5.3. Qualification Control on Real Estate Development Companies 333
10.5.4. Control on the Ratio of Registered Capital to the Total Investment 333
10.5.5. Polices Encouraging Real Estate Development for Residential Purposes 334
10.6. Business Regulation 334
Chapter 11: Real Property Taxation 337
11.1. Land Use Charge on Domestic Holders of Allocated Land Use Rights and Land Use Fee on Foreign Investment-enterprises' Allocated Land Use Right 338
11.1.1. The Land Use Charge On Domestic Users 338
11.1.2. The Land Use Fee on Foreign-investment Enterprises' Allocated Land Use Rights 341
11.2. Cultivated Land Occupation Charge for Conversion to Non-Agricultural Purposes 344
11.3. Building Property Tax 346
11.4. Contract Tax 349
11.5. Stamp Tax 351
11.6. Fixed-Asset Investment Adjustment Tax 352
11.6.1. New Construction or Purchase 354
11.6.2. Transformation or Renovation 355
11.7. Business Tax 355
11.8. Value-Added Tax on Land 356
11.8.1. Rational for the VAT 356
11.8.2. Incidence of the VAT 357
11.8.3. Calculation of the VAT 357
11.8.3.1. Calculation of the Amount of Taxable Appreciation 357
11.8.3.2. Rates of Tax 359
11.8.4. Penalty for Evasion 359
11.8.5. Exemptions from VAT 359
11.9. Income Tax 360
Appendix Ⅰ: Forms 363
Appendix Ⅱ: Index of Titles of Legal Documents 411
Appendix Ⅲ: Table of Titles of Statutes and Regulations 431
Index 443