Real estate law in China

By Hao Han, Zhong Lun Law Firm
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As the central government changes its attitude toward foreign investment in real estate, new policies are providing new opportunities to enter the market

For more than a decade, while making a profound impact on the economy of the country, China’s real estate market has always been the object of macro control. Starting with the Opinion on the Standardisation of Access to and Administration of Inbound Investment in the Real Estate Market, issued by six government departments including the Ministry of Construction and the Ministry of Commerce, China’s policy on inbound investment in real estate has shifted from an open and welcoming position to strict restriction.

Thereafter, the government released a series of policies to restrict foreign investment in real estate, which were collectively known to the industry as “inbound investment restriction policies”, and blocked foreign capital from pouring into China’s real estate markets by setting up barricades in governmental approvals, foreign exchange settlement, outbound investments and other aspects.

Hao Han Equity Partner at Zhong Lun Law Firm in Beijing Tel: +86 10 5957 2010 Email: haohan@zhonglun.com
Hao Han
Equity Partner at Zhong Lun
Law Firm in Beijing
Tel: +86 10 5957 2010
Email: haohan@zhonglun.com

However, as China’s economic growth slows down, with the Chinese currency experiencing accelerated internationalization, the expectation for the renminbi to appreciate has eased and the currency is under pressure to depreciate, while foreign exchange reserves are shrinking substantially. Against this backdrop, the Chinese authorities have drastically changed their attitude towards foreign investment in real estate and loosened the restrictive policies they issued.

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Regulatory basics

Governing law/ordinance
Land Administration Law of PRC and its implementing regulations, Urban and Rural Planning Law of PRC, Urban Real Estate Administration Law of PRC, Administrative Measures for the Pre-Sale of Urban Commodity Housing, Administrative Measures for the Sale of Commodity Houses, Administrative Measures for Commodity Housing Tenancy, Provisions on the Administration of Qualifications of Real Estate Development Enterprises, Construction Law of PRC, Bid Invitation and Bidding Law of PRC, Property Law of PRC, Contract Law of PRC and other laws, regulations and rules issued by competent authorities.
Regulator/s
Planning Bureau, Land and Resources Bureau, Housing Management Bureau, Commission of Housing and Urban-rural Development, Real Estate Registration Centre, etc.
What are the requirements for registration or recording ownership or leasehold?
Within 30 days upon signing a lease agreement, the related parties must file for record-keeping regarding such agreement with the competent local authority.
What are the requirements for foreign investor on own or lease?
Under the principle of commercial existence, the foreign investors who intend to purchase non-self-use property within the PRC must form a foreign-invested enterprise before conducting business as approved by the authority.
What is the investment mode of choice for foreign investors? Why?
Foreign investors may purchase assets or shares based on factors including tax and whether there is any offshore structure.
Can owners protect themselves from liability? What types of insurance are available?
Owners can protect themselves from liabilities through purchasing relevant insurance such as Contractor’s All Risks Insurance.
Which courts have jurisdiction over real estate disputes?
Real estate disputes must be governed by the competent courts at the real property’s location.
How are remedies against a debtor in default enforced?
The related parties may submit the dispute to court or arbitration. After a binding judgement/rule is obtained, the parties may apply for enforcement to the governing courts.
What are the typical avenues for due diligence?
The disclosure from the party being investigated; (2) The research on the title, mortgage, or the existence of seizure of real property by third party at the competent real estate registration authority with the cooperation of the obligee; (3) The registration information of the company at the competent administration for industry and commerce; and (4) The relevant information on the websites of courts, administrations for industry and commerce.
Are there remedies for breach of contract to sell or finance a deal?
The related parties are entitled to the remedy as specified in the contract. If there is no agreement on liquidated liability, the parties are entitled to the remedy as stated under the Contract Law.

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Zhong Lun Law Firm

33, 36, 37/F, SK Tower, 6A Jianguomenwai Avenue

Chaoyang district, Beijing 100022, China

Tel: +86 10 5957 2288

Fax: +86 10 6568 1022/1838

Email: beijing@zhonglun.com

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