The National People's Congress of China adopted the landmark Property Law on 16 March 2007 after considerable debate and controversy surrounding its drafting. The new law will come into effect on 1 October 2007 and is regarded as one of the most complicated legislative processes in the country's history and the first to cover individual assets other than the Constitution of China.
Critics argued that the law violated the constitutional characteristics of the Mainland China as a socialist state. And by creating a single law to cover both state property and personal property, it would facilitate privatization and asset stripping of state owned enterprises.
The stated aims of the Property Law are to maintain the basic economic system of the country, maintain the order of market economy under socialism, ascertain the ownership of property, apply the effect of property and protect the rights of the property owner (Article 1). It also seeks to provide equal protection of public and private property.
The law regulates both immovable property (e.g. building) and movable property (e.g. machinery) (Article 2) and covers all three types of property within China : state, collective and private and divides property rights into : ownership rights, use rights and security rights (Article 40).
Provisions On Real Estate
One of the major aspects of the Property Law relates to real estate property rights which are of great interest to both domestic persons and foreign investors. Some salient provisions are set out below :-
Renewal of Land Use Rights
Article 149 stipulates that the term of residential land use rights upon expiry of 70 years shall be renewable automatically and the renewal of the term of non-residential land will be arranged according to the relevant laws and regulations. The ownership of the buildings and other immovable properties erected thereon shall be governed by the agreement, if any, among the parties concerned. If there is no agreement or the agreement is uncertain, the ownership issue will be dealt with based on the relevant PRC laws and regulations. The new law does not change the system of land tenure and the state still owns all land.
Registration of Immovable Property Rights
Article 9 provides that the formation, change, transfer and termination of the immovable property right shall become effective upon registration. Article 10 further states that the local authority in the place where the property is situated should be responsible for the registration of the immovable property and a unified registration system is to be adopted. This Article expressly specifies any sale and purchase of immovable property shall take effect only after completion of registration and also streamlines the registration procedures. The basic principle is that the person registered on the government registry as the owner of an immovable property will be regarded as the owner in land and the intention is also to move to a single registry.
Article 83 provides that owners' meeting and owners' committee are entitled to request any person to stop trespassing, remove the danger, pay damages etc. for any of his/her act(s) infringing the legal rights of others e.g. causing pollution or noise, obstructing the common corridors, refusing to pay management fees etc. For serious cases, the owners may commence legal proceedings in court.
In the past, owners could only take legal actions either individually or jointly, but are not able to do so in the name of the owners' committee as the latter has no such legal standing. With the passing of the Property Law, the owners' committee can act on behalf of all owners in the future.
Article 74 states that within a property development, car park spaces should firstly be allocated to existing property owners so as to meet their demands. The ownership of such car parking spaces shall be governed by sale, gift or lease agreements entered into between the parties concerned.
Although the new Property Law is not expected to directly impact foreign business in or involved with China, these laws institutionalizing private property ownership rights are expected to eventually bring large scale changes to China that will necessarily affect all businesses there.
If you wish to know more about the PRC Property Law or have any questions relating to that Law, experienced lawyers in our China Business Department will be happy to assist you.
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