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Legalities

LEGALITIES

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Legalities: China's Landmark Law - a second legal opinion Issue 31 - Jul 2007 Following the new PRC Law on Property Rights (RFP issue 30), which takes effect on October 1, 2007, it is time to examine the law and it's implications for the industries that make up the built environment. Supporters of teh Law argue that it fundamentally strengthens the rights of property holders in China. Its opponents argue that the Law belies basic tenets of China’s socialist economy. Lawmakers themselves argue that the Law represents a new landmark in the country’s economic reform, consistent with China’s promotion of a “harmonious society” in which the rights of the state, the collective, and the individual are provided protection under the law. In the midst of all these arguments, real property owners, investors, developers and financiers are left to question the extent to which the Law impacts their interests in China, both presently and in the future. The short answer to this question is that the Law represents the first consolidated legal framework in China governing the totality of property rights and relationships, including ownership, co-ownership, homeowners’ association, possession, transfer, mortgage, pledge and lien of and over all types of movable and immovable properties. Specifically, the Law promises to impact parties active in the real estate sector in the following ways. title registration as foundation of property rights The Law provides that real estate title registration records (“Registration Records”) shall serve as the definitive legal basis for a party’s property rights. In other words, under the Law, the creation, change, transfer or relinquishment of property rights shall take legal effect only upon successful registration with title registration authorities. According to the Law, any discrepancy between Registration Records and other records (e.g., property title certificates issued by registration authorities), will be resolved in favor of Registration Records. The Law also introduces a number of key new concepts in relation to title registration, including the concepts of: (a) “Title objection”, pursuant to which a party may register an objection and commence formal legal proceedings to challenge an erroneous Registration Record;		Contributed by: Michelle Gon and Mark Herz Baker & Mckenzie, Shanghai
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(b) “Notification registration”, pursuant to which parties to a sale and purchase of real estate may register a separate notification protecting the property from subsequent disposal without the consent of the purchaser; (c) Registration liability, pursuant to which parties shown to provide false registration materials and authorities shown to perform erroneous registration shall be liable to real estate owners injured as a result of these actions. These concepts and procedures, both independently and in combination with one another, should offer increased legal protections for purchasers and investors in real estate, as well as their financiers, and should bring some measure of comfort and security to all participants acting in major real estate transactions. status of Land Use Rights The Law includes numerous provisions in relation to land use rights, including residential, commercial and industrial rights. Under the Law, residential land use rights may be automatically renewed at the expiry of their current term. Although detailed procedures and payment for such automatic renewal await clarification, this new provision will likely be welcomed by urban home owners and embraced by residential property developers. The Law also confirms existing policy requiring local land administration authorities to grant industrial and commercial land through competitive processes such as “tendering, auction or listing”. Additionally, the Law formalises the legal concept of “condominium rights” (along with the obligations associated with such rights) and introduces a basic regime of land easement rights. land expropriation Unfortunately, the Law’s provisions with respect to land expropriation remain uncertain, with no clear guidance as to what “public interests” are sufficient for invoking expropriation procedures. For example, it remains unclear whether a simple change of local zoning plans would suffice to evict an enterprise from its premises. Moreover, provisions relating to compensation for expropriated land contain major gaps (e.g., no reference is made to loss of profit, relocation costs, or other expenses). conclusion Following many years of deliberation among lawmakers, a new debate with respect to the Property Rights Law is set to begin, as participants in the real estate market begin to feel out the full extent of the Law and the impact it has on their activities in China. While the Law has alternatively been labelled as“radical”, “controversial” and even “revolutionary”, ultimately it will be labelled “successful” only if it follows through on its promise to safeguard the legal interests of property owners throughout China. At the end of the day, the impact of the new law will be decided in its gradual and measured implementation rather than its “revolutionary” enactment. .RFP

ISSN 1994-9464
Key title: RFP magazine
Abbreviated key title: RFP mag.

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