April 26, 2018

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Real Estate Law in China

While real estate law in some incarnation or other has existed in China for centuries, the current Property Law of the People’s Republic of China was enacted only in 2007. This new set of laws offers protection to the interests of private proprietors, where before only state interests received a similar level of protection.

Right of ownership 

Under Article 39 of the Property Law, private entities are given the right to posses, use, get rid of and profit from immovable property. This right is subject to public interest and the rights of other individuals.

While urban land is state-owned and agricultural land is owned by rural collectives, the Property Law allows for the private ownership of buildings, which are conceived of as distinct from the state-owned land on which they stand. Article 70 of the Property Law carves out the right to own spaces within a building, as in an apartment unit.

Right of usufruct

The Property Law allows for private individuals to gain usufructuary rights over immovable property. This means that private individuals can have the right to use and enjoy the property belonging to another proprietor without destroying or exhausting it.

Examples of usufructuary rights include the right to use construction and residential land and the right to the use of easements. Contractors are allowed to manage land in accordance with the terms of the contract. Tenancies, leases and licenses imbue usufructuary rights on the tenant, lessee or licensee. While usufructuary rights may stop short of ownership rights, they allow the Chinese government to maintain the status quo of land being state owned without denying its people the right to use this land.

Right of security

Individuals and organizations have the right to security. For instance, a mortgagee bank can in the granting of a loan obtain a security on immovable property.

How to obtain land use rights

In order to obtain a grant to use state land, an individual or legal entity must obtain a land grant contract. Such contracts are usually obtainable from the land administration department within the municipal or county jurisdiction.

Residential land can be leased from the state for a period of up to 70 years, while industrial land use is capped at 50 years. Land to be used in an educational, cultural, scientific, or medical capacity can be leased for a period of up to 50 years, while land for commerce, tourism and recreation can be used for up to 40 years. Land to be used for a combination of purposes can be leased for up to 50 years.

Land use rights are only recognized by the government when they are lodged with the appropriate government registry. Article 10(2)(i) of the Property Law establishes a linked registration system for all kinds of property rights in Shanghai.

The government’s right of reclamation

The Chinese government retains the right to reclaim any land or property at any time so long as they do so on the grounds of public interest or public policy. Since 2004, the government has been required to provide compensation for any reclamation. However, there is no requirement that the payment must be commensurate to the value of the land being reclaimed.