What Law says
in China, neither domestic companies or foreign investors
companies can own land outright; Instead they have a land use
Rights. There are two types of land use rights – Assigned and
licensee. In comparison with Western common law concepts,
Allocated Land Use Rights are in some way similar
leaseholds, and granted land use rights are to a certain extent
similar to life estates.
Allocated land use rights are usually provided by the
government indefinitely (usually state-owned
members) and can not pledge, mortgage, lease, or
performed by the user. Furthermore, Allocated land can be
recovered by the government from time to time.
Granted land use rights are granted by the government
is the concentration of charge, and bear right to pledge
mortgage, lease, and transfer of the duration of the grant.
Land is granted for a fixed period – usually 70 years for
residential, 50 years for use in industry, and 40 years for
commercial and other use. The term is renewable in theory
(excluding foreign investors has been in China long enough to
to find out how this works in practice). Unlike the usual case in
Western nations, Granted land use specific
purpose for which it was provided.
Allocated land use rights can be changed in the Granted Land
Use Rights upon payment of subsidy fee to the government.
Even Granted land use rights are subject to expropriation of
government under exceptional circumstances (in exchange for
fair compensation similar to eminent domain powers
US). This situation tends to work in favor of the
foreign investors – land provided to foreign invested enterprises
is seldom expropriated, but agricultural land is often
expropriated to make room for foreign investors
How Act applies to foreign invested enterprises
Most foreign investors, joint ventures acquired land use rights
from the Chinese party. A common problem is that the Chinese
party has only allocated land use rights for land it
occupies (be looking for this if the Chinese party is
state-owned entities). In this case, the authority to transfer
land use rights is in the hands of the local Land Administration
Bureau, the Chinese party will not have the right to
transfer it to the Joint Venture.
Nevertheless, if the Joint Venture can buy long- term bonds
Granted land use rights from the Land Administration Bureau
land use grant agreement, Joint Venture will then
be able to mortgage the land or transfer it to a third party.
Keep in mind, however, that vacant land shall be 25% developed
previously granted land use rights can be acquired. Do not try
to acquire Granted land use rights if you do not intend to
develop within a short time, because even if the country
constitutes 25% developed and therefore eligible for it
can still be classified as “free”, and vacant land can be
recover if the development is not started within 2 years
A second option would be for one of the investors to get
Granted land use rights and then lease the land to the Joint
Venture. However, vacant land can not be leased to third parties
(such as joint ventures or other foreign-invested enterprise)
of beneficiaries. It is also noteworthy that the rent must be
be logged in to protect against leases
potential competition requirements.
Third, if you are willing to accept the allotted land use
nations, foreign investors Enterprise could simply have
land allocated to her local Land Administration Bureau.
In the case of joint ventures, the fourth option would be to
, the Chinese party contribute allocated land use rights
Joint Venture as part of its capital contribution, in
but the Chinese party would be liable for the annual land
Another common problem is that the land and building (s)
that are owned by different parties, creating potentially messy
legal position if all parties are not willing to work.
Most importantly, it was a good idea to require
Chinese member of the true position of land use rights with
documentary evidence before applying for approval of the project.
Further, the pre-transfer due diligence should detail
environmental self-assessment (see Glossary
information). Finally, keep in mind that payment and transport
‘title’ through registration of land
Administration Bureau can not take place simultaneously –
registration of transfer of land will not be allowed unless
for payment is submitted registration transfer