REAL PROPERTYLEASESDRAFTING CONSIDERATIONS.docx

REAL PROPERTYLEASESDRAFTING CONSIDERATIONS.docx

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REALPROPERTYLEASESDRAFTINGCONSIDERATIONS

REALPROPERTYANDLEASES

1.OVERVIEW

ThisChapterdescribeslegalmattersrelatingtorealpropertyandleasesinChina（i.e.thePeople’sRepublicofChinawhich,solelyforthepurposeofthisChapter,doesnotincludetheHongKongSpecialAdministrativeRegion,theMacauSpecialAdministrativeRegionorTaiwan）andprovidesamodellanduserightstransfercontract,acommercialpremisesleasecontract,andaresidentialhousingleasetransactioncontract.ThisChapterdoesnotcoverthepurchaseorsaleofcommodityhousingorthemortgageofrealestate.

TherearemajordifferencesbetweenChineserealestatelawsandthelawsonrealestateincommonlawjurisdictions.InChina,alllandissubjecttoasystemofpublicownership,thatistosay,thereareonlytwotypesorclassificationsoflandownership:

state-ownedlandandcollectivelyownedland.Broadlyspeaking,landwithinurbancitiesandmunicipaldistrictsisstate-ownedland,whereasthatinruralareasandsuburbsofmunicipalitiesiscollectivelyownedbyfarmers,withtheexceptionofthatwhichisspecifiedinlawtobestate-owned.Ontheonehand,Chineselawstrictlyprohibitsanyunitorindividualfromseizing,buyingorsellingorotherwiseillegallytransferringland（i.e.ownershipofland）and,ontheotherhand,strictlylimitsthemeansbywhichtheownershipoflandcanbetransferredlawfully.Inpractice,themostcommonlyseenchangeinlandownershipisthelegalrequisitioningofcollectivelyownedlandanditsconversionintostate-ownedlandbythestateforthepublicgoodorconstructionrequirements.Othercircumstanceswhichresultinachangeoflandownership（forexample,forthepurposeofrequisitioninglandforstateconstruction,anorganicfarmers’collectiveisabolishedoritsentirepopulationisconvertedintoanon-farmingpopulation,andthelandnotrequisitionedbecomesstate-ownedland;changesinlandownershiparisingduetoachangeintheadministrativesystem,aswhenfarmers’collectivesaremergedordivided;etc.）arerarelyencounteredbyforeigninvestors.Accordingly,withtheexceptionoftheneedtopayheedtothelegalityoftherequisitioningofcollectivelyownedlandanditsconversionintostate-ownedlandforcertaininvestmentprojectswhichinvolvetherequisitioningofcollectivelyownedlandandwhetherrelatedtaxesandfeeshavebeenpaidinfull,landownershipitself,unlikelanduserights,doesnottakemanyformsandisnotworthdiscussing.

WhileChineselawsplacestrictrestrictionsonthetransferoflandownership,theyalsoestablishtheprinciplethatlanduserightsmaybeseparatedfromlandownership.Landuserightscanlegallybeusedbyunitsorindividualsand,whencertainconditionsaremet,theycanlegallybetransferred,leasedormortgaged.Accordingly,understandingthedifferenceinChinabetweenlandownershipandlanduserightsisveryimportant.Although,inrecentyears,therehasbeenarelaxationonthecirculationofuserightstocollectivelyownedlandpolicy-wiseandinlocallegislation,thelegalspaceatpresentforforeign-investedprojectstousecollectivelyownedlanddirectlywithoutcarryingouttheproceduresforrequisitioningcollectivelyownedlandandconvertingitintostate-ownedlandremainsverynarrow.Accordingly,theremainderofthisChapterwillfocusonstate-ownedlanduserights.

2.STATE-OWNEDLANDUSERIGHTS

2.1RelevantLegislation

InChina,theobtainingofstate-ownedlanduserightsismainlygovernedbythefollowinglawsandregulations:

（1）theLawofthePeople’sRepublicofChinaontheAdministrationofLandpromulgatedin1986andamendedthreetimes,respectivelyin1988,1998and2004（the“LandLaw”）;

（2）theProvisionalRegulationsofthePeople’sRepublicofChinafortheGrantingandTransferofUrbanState-OwnedLandUseRightspromulgatedin1990;

（3）theProvisionalMeasuresforAdministrationoftheInvestmentin,Developmentof,andDealingin,LargeTractsofLandbyForeignBusinessEntitiespromulgatedin1990;

（4）theLawofthePeople’sRepublicofChinafortheAdministrationofUrbanRealEstatepromulgatedin1994;and

（5）theImplementingRegulationsfortheLawofthePeople’sRepublicofChinaontheAdministrationofLandpromulgatedin1998.

Additionally,thestandingcommitteesoflocalpeople’scongresseshaveformulatedimplementingmeasuresfortheLandLawwhichmustbeobservedintheplacesconcerned.Forexample,theMeasuresofBeijingMunicipalityfortheImplementationofthe“LawofthePeople’sRepublicofChinaontheAdministrationofLand”promulgatedbytheStandingCommitteeoftheBeijingMunicipalPeople’sCongressin1991andtheMeasuresofShanghaiMunicipalityfortheImplementationofthe“LawofthePeople’sRepublicofChinaontheAdministrationofLand”promulgatedbytheStandingC