Article 106 of the Property Law provides the legal basis for the application of the system for bona fide acquisitions of immovable property. It stipulates that the criteria applicable to the recognition of a bona fide acquisition of movable assets must apply. In the Interpretations of the Supreme People’s Court of Several Issues Concerning the Application of the Property Law of the People’s Republic of China (1), published on 2 February 2016, the Supreme People’s Court (SPC) fully considers the particulars of the method of publication of the rights in rem in immovable property and covers such issues as the factors to be referenced and assessed in determining the acquirer’s “good faith”, allocation of the burden of proof, determining the point in time of good faith, etc.
Q: How is the subjective good faith of an immovable property acquirer determined?
A: Under article 15 of the interpretations, if the acquirer at the time of acquisition was not aware that the transferor did not have the right to dispose of the same and was not himself/herself grossly negligent, he/she should be deemed to have acted in good faith.
The determination by the acquirer of whether the transferor had the disposal right is based on the state and details indicated in the property announcement. Under the Property Law, the basic method of publication of the rights in rem in immovable property is immovable property registration. The state and details of the rights recorded have general credibility and should be presumed to be true and correct; accordingly, the acquirer’s reasonable reliance on the immovable property register is subject to the protection of law. Even if the details recorded in the register are completely at odds with the actual state of the rights, as long as the acquirer carried out the transaction based on the register, he/she should be presumed to have acted in good faith and his/her rights should be recognized and protected.
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Gao Ping and Cheng Bing are partners at AnJie Law Firm
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