Real Estate Law in China for foreign investors

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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

project.

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

transfer.

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

use fees.

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

application.

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