Chinese property law

This article is about Chinese property laws in general. For the specific law, see Property Law of the People's Republic of China.

Chinese property law has existed in various forms for centuries. After the communist takeover in 1949, most land is owned by collectivities or by the state; the Property Law of the People's Republic of China passed in 2007 codified property rights.

History

Imperial China

Use of property are usually divided into topsoil (田皮) and subsoil (田骨) rights.[1] Landlords paid taxes to the government in return for land-owning rights (known as subsoil rights), but did not have the right to actively use the land. The landlords in turn collected rent from peasants who used the land for agricultural purposes (topsoil rights). There are still on-going debates as to whether Imperial China had actual private property rights. Some argue that the imperial state had limited control over landed property whereas others have a despotic view of imperial China as an all-controlling state. However, the bottom line was that the entire imperial era was seen as one of stagnation, during which "the system .. remain[ed] basically the same for the whole of imperial history".[2]

Communist China

Communism and largely Socialist underpinnings influenced the development of China's Property Laws and Right relating to it.

In Communist China, all land was state-owned or collectively-owned.[3] Since the establishment of the People's Republic of China (PRC) in 1949, the ruling Communist Party categorized the rural population into various classes and identified landlords as enemies of the people and the Chinese Revolution. The Communists confiscated landlord holdings and distributed them to the peasants, giving the peasants the illusion of private property rights. Soon afterwards, the Communist Party created communes with members combining their resources, with bigger communes averaging about 160 households each. Peasants that entered the communes gave up their title to land.[1]

A picture of Deng Xiaoping,a Chinese politician, statesman, and diplomat.

Deng Xiaoping's rule

In the era of Deng Xiaoping, a fundamental legal source of the regime of property and property rights in the PRC lay in the Constitution of PRC enacted in 1982.[4] The 1982 constitution provided for the "socialist public ownership" of the means of production, which takes two forms- state ownership and collective ownership. In 2004, the fourth amendment to the constitution was made. Article 13 of the constitution provided that: "The lawful private property of citizens shall be inviolable. The country shall protect in accordance with law citizens' private property rights and inheritance rights. The country may, as necessitated by public interest, expropriate or requisition citizens' private property and pay compensation therefor." It can thus be seen that China's property laws have been undergoing developments. The most recent development would be the enactment of the Property Law in March 2007 (after 14 years of debates), which is noted as one of the most important core components of the evolving civil law in the PRC.

Real property rights

An investor who wants to invest or develop land or property in China must bear in mind China's property laws, most notably the property law introduced in 2007,[5] which for the first time protects the interest of private investors to the same extent as that of national interests.[6]

Types

Real property rights in China can generally be grouped into three types. The first type is ownership rights. The second type is usufructuary rights, and the third is security rights.

Ownership rights

Ownership rights are protected under Article 39 of The Property Law of the People’s Republic of China, which gives the owner the right to possess, utilize, dispose of and obtain profits from the real property. However, this right has to comply with laws and social morality. It can harm neither public interests nor the legitimate rights and interests of others.[7]

In general, rural collectives own agricultural land and the state owns urban land. However, Article 70 of The Property Law allows for ownership of exclusive parts within an apartment building, which endorses the individual ownership of apartments.

Usufructuary rights

The owner of a usufructuary right has the right to possess, utilize and obtain profits from the real properties owned by others.[8] The obligee may not intervene in the exercise of rights by the owner of the usufructuary right.[9]

Right to land contractual management

There are several types of usufructuary rights. These include the right to land contractual management, the right to use of construction land, the right to use of residential housing land and easement. The right to land contractual management allows a contractor of the right to possess, utilize and obtain profits from agricultural land.[10] This right is transferable, but the land use rights based on agricultural household contracts cannot be changed arbitrarily for non-agricultural purposes.[11]

Right to use of construction land

The state owns urban land, but the right to use of construction land allows developers to profit from land development.

The right to use of construction land is only with regard to State-owned land, and the owner of the right is able to build buildings and their accessory facilities. This is in addition to being able to possess, utilize and obtain profits from the land.[12] This right may be established by means of assignment or transfer,[13] but transfer is limited.[14] The ownership of the buildings will change together with the land.[15] As a protection of the right, the term of the right shall be automatically renewed upon expiration[16] If it has to be taken back, compensation shall be given.[17]

Right to use of residential housing land

The owner of the right to use of residential housing land can possess and utilize such land as collectively owned, and can build residential houses and their accessory facilities.[18] The Law of Land Administration and other regulations will apply to the attainment, exercise and assignment of the right to the use of residential land.[19]

Easement

The owner of easement has the right to use the real property of others to benefit his own real property. Easement will be governed by the terms of a contract.[20]

Security rights

Forms of security rights include mortgages, pledges and liens. Holders of security rights have priority if a debtor defaults on his obligation.[21] This is to ensure obligations are met. Security rights do not exist independently, but require a valid principal claim, and lapse when the debt lapses.

Procedures in engaging in property investments

Property in Beijing

Buying land

A foreign investor is not allowed to buy land in China. The land in China belongs to the state and the collectives.

Obtaining land use rights

A land user obtains only the land use right, not the land or any resources in or below the land.[22] A land grant contract shall be entered into between the land user and the land administration department of the people’s government at municipal or county level.[23]

The land grant contract must be signed. Land use rights can be obtained from the land administration department by agreement, tender or auction.[24] Regardless of the method by which the land use rights is granted, a contract for grant of land use right, or more commonly known as a land grant contract, must be entered into by the land user and the local land administration authority or municipal governments at or above the county level as grantor.[25]

Article 12 of the Provisional Regulations on Grant and Assignment of Urban State-owned Land Use Right states the different duration of rights provided for different purposes.

Purpose Years of Grant
Land for residential purposes 70 years
Land for industrial purposes 50 years
Land for purposes of educational, scientific and technological, cultural, health care or sports 50 years
Land for commercial, tourism or recreational purposes 40 years
Land for combined usage or other purposes 50 years

Registration

In China, there is no unified official procedure for the rules on the registration of land-use rights and the ownership of property.[26] All interests in land must be recorded in the official government register. This register is proof of ownership. However, different interests might be registered under different registries.[27] The Property Law only offers a general guideline as to recordation.

Article 6 provides for a general registration requirement in the cases of creation, modification, transfer, and elimination of rights to immovables.

Article 10(2)(l) requires a unified registration system for all real property rights, but this unified system is currently only adopted in tier one cities[28] like Beijing and Shanghai. The unification of interests in a single registry is still not prevalent in the smaller cities and will take more time before its implementation.[27]

Furthermore, Article 10(1) allows for respective local rules of registration.

Function of notaries

China has a system of public notaries which are a subordinate agency of the Ministry of Justice of the People's Republic of China. They are responsible for certification of property titles.

Government powers and procedures to expropriate real property

Rural property expropriation procedure

The Chinese authorities are empowered under the Constitution and various statutes[29] to expropriate private land. Since all land is owned either collectively or by the state,[30] expropriation of rural land only requires the withdrawal of land use rights for the reason of "public interest."
The definition of public interest is intentionally vague, and a general list of such interests has been expounded in an attempt to define what it means.[31][32]

These include interests such as defence, transportation infrastructure, education and health.

Recent amendments to the implementing regulations have allowed for greater access to justice

Currently, the types of compensation are:

  1. Compensation for loss of land[33]
  2. Resettlement subsidy[34]
  3. Compensation for structures and standing crops[35]

However, the first two are paid to the collective landowners instead of the farmers. Compensation for non-land rural assets is also highly discretionary.

Once the farmers and collective land owners are notified, the expropriation can commence. Disputes regarding the compensation and resettlement shall not affect the implementation of the expropriation.[36]

Urban property expropriation procedure

The Land Administrative Law provides five situations under which land use rights may be withdrawn:[37]

  1. Public interests
  2. Renovation of old towns
  3. Expiration of land terms without renewal
  4. Dissolution of holder of allocated land rights
  5. Termination of use of public infrastructure

The rights holder is entitled to "appropriate compensation" in the first two situations.[38] As the state owns the land, compensation is not made for the loss of the rights holder's land use rights,[39] but for the private property which he had lost. It is made either in cash (based on market prices) and accounts for any moving expenses or resettlement subsidies, or in kind (in the form of a replacement structure).[40]

Under the current legal framework, land developers no longer have the legal power to expropriate, and are no longer involved in the demolition and relocation procedures. The local government or non-profit organisations are now in charge of land expropriation and compensation.

By minimising the business interests in the expropriation procedure, incidents of forced expropriation might be reduced.[31]

If a rights holder wants to protect his property, he can evoke certain procedural safeguards, which include:

In the event that an agreement cannot be reached between homeowners and the government, the expropriation can only be carried out after judicial review.[31]

New regulations effective from January 21, 2011 have provided hope for the future with regards to several controversies surrounding urban property expropriation.

In January 2011,a 54-year-old man was beaten to death for refusing to leave his house that was expropriated for demolition.[31] Following this instance, the employment of violence or coercion, or illegal methods like cutting off the water and power supply, to force homeowners to leave is officially disallowed.

Although these new regulations relate to urban land, the legal principles established have significant implications for the rule of law in China. The outlook for China’s Land Administrative law is hopeful as future revisions regarding rural land are expected to occur in the near future.[41]

Controversies

Collectively owned properties in rural China

In China, most, if not all farms are collectively owned - a tradition and practice dating back since the rise of Maoism, an ideology heavily influenced by Socialism.

China still retains the concept of collectively-owned farmland in the rural areas. This creates a large potential for abuse as the critical decisions regarding the land and its use are made by a small number of village leaders.[42] While the Property Law enacted in 2007 provides some legal leverage to prevent the abuse of power by village councils, it remains to be seen if legal remedies are accessible or are even used by the villagers. Prevailing local culture, the fear of authority and the possibility of violent repercussions hinder a victim's inclination to seek legal recourse.[43] Also, such rules may be disregarded by the committees or councils due to lack of enforcement.[44]

While critics may be skeptical of whether the new enactments clarifying the issue of collective ownership will make a difference, such changes are still welcomed as signs of increasing protection for the peasantry.[45]

Another issue is the problem of rampant corruption arising from rural land transactions, involving both governmental and non-governmental parties. This leads to over-pricing and also improper use of land that goes unchecked.[46]

Mao Zedong was heavily influenced by Socialist ideals when he instituted law and ruled China. Many of those ideals remain prominent, even today, in Chinese Law.

Socialist values v acceptance of free-market economy

With the passing of the Property Law, a number of local legislators fear that "while the new property law would undoubtedly increase protection for home owners and prevent land seizures, it would also erode China’s socialist principles."[47] The insistence on socialist values among some of the Chinese ruling elite raises questions on whether China – an emerging world superpower – intends to open its doors fully to the Western world and ideas of free-market liberalism, or whether it will continue to differentiate itself in such matters.

Abuse by the government through a catch-all phrase of "Public Interest"

The Chinese government, while liberalizing its property laws, has still preserved its right to reclaim any property from an individual, as long as there is a public policy consideration. In 2004, it amended its 1982 Constitution to include that the Government has to pay the person compensation for expropriation (征收) or requisition (征用). However, the article neither provides, either in the constitution or in any subsidiary legislation, for the quantum of the payment, nor does it stipulate that the payment must be proportional to the size of the land. This has led to abuse by government bodies, especially in rural areas. Expropriation of land from farmers is the most frequent cause of complaint among farmers.[48] However, in 2011, the Chinese Government released regulations clarifying this, which promise to provide more transparency and a fairer compensation system.[31]

Western critics continue to call for greater transparency, but such is a difficult state of affairs to arrive at, given the largely entrenched system of state bureaucracy in China.

See also

References

  1. ↑ 1.0 1.1 See China law for more information. Also, for a discussion on the rural property law in China, please see Benjamin W. James (2007), "Expanding the gap: How the Rural Property System exacerbates China's Urban-rural Gap" (PDF), Columbia Journal of Asian Law 20:2: 451
  2. ↑ Peter C. Perdue (2004), Property Rights on Imperial China’s Frontiers (PDF)
  3. ↑ See U.S. Relations With China, US Department of State, 6 September 2011 for statistics on property ownership in China.
  4. ↑ Albert H.Y. Chen (2011), "The Law of Property and the evolving system of property rights in China", The Development of the Chinese Legal System – Change and Challenges', London and New York: Routledge, pp. 81–112, ISBN 978-0-203-83775-7
  5. ↑ The Property Law of the People's Republic of China
  6. ↑ Property Rights China New Property Law
  7. ↑ Article 7 The Property Law of the People's Republic of China
  8. ↑ Article 117 The Property Law of the People's Republic of China
  9. ↑ Article 120The Property Law of the People's Republic of China
  10. ↑ Article 125The Property Law of the People's Republic of China
  11. ↑ Article 128The Property Law of the People's Republic of China
  12. ↑ Article 135The Property Law of the People's Republic of China
  13. ↑ Article 137The Property Law of the People's Republic of China
  14. ↑ Article 43The Property Law of the People's Republic of China
  15. ↑ Article 146The Property Law of the People's Republic of China
  16. ↑ Article 149The Property Law of the People's Republic of China
  17. ↑ Article 148The Property Law of the People's Republic of China
  18. ↑ Article 152The Property Law of the People's Republic of China
  19. ↑ Article 153The Property Law of the People's Republic of China
  20. ↑ Article 156The Property Law of the People's Republic of China
  21. ↑ Article 170The Property Law of the People's Republic of China
  22. ↑ Chapter II Article 8 Land Administrative Law of the People's Republic of China
  23. ↑ China real estate law: Part 1: Land use right, 1 March 2007
  24. ↑ Article 13 Urban Real Property Administration Law
  25. ↑ Articles 11 and 14 Urban Real Property Administration Law
  26. ↑ Rehm, Gebhard M.; Julius, Hinrich (Spring 2009), "The New Chinese Property Rights Law: An Evaluation from a Continental Perspective", Columbia Journal of Asian Law 22 (2): 192
  27. ↑ 27.0 27.1 Harris, Dan (May 16, 2007), China's New Property Law, Part II -- General Principles, Harris & Moure, pllc, retrieved September 25, 2011
  28. ↑ Cities in China, Star Mass
  29. ↑ Article 42 of the Property Law states that:
    "For the purpose of public interest, the collectively-owned land, houses and other real property owned by institutes or individuals may be expropriated in line with the procedure and within the authority provided by laws. For expropriation of collectively-owned land, such fees shall be paid as compensations for the land expropriated, subsidies for resettlement, compensations for the fixtures and the young crops on land, and the premiums for social security of the farmers whose land is expropriated shall be allocated in full, in order to guarantee their normal lives and safeguard their lawful rights and interests.
    Where houses and other real properties of institutes and individuals are expropriated, compensations for demolition and resettlement shall be paid according to law in order to maintain the legal rights and interests of the expropriated; where individual residential house is expropriated, the residential conditions of the expropriated shall be guaranteed.
    No institution or individual shall withhold, misappropriate, embezzle or privately divide the compensation for expropriation."
    Article 44 of the Property Law states that:
    "For the purpose of emergency handling or disaster relief, real or movable properties of institutions or individuals may be expropriated in line with the procedure and within the authority provided by laws. After such use or expropriation, the real or movable properties shall be returned to the owner. Compensation shall be made if the real or movable properties of institutions or individuals were damaged or lost after being expropriated."
  30. ↑ Article 10 2004 Constitution of the People's Republic of China.
  31. ↑ 31.0 31.1 31.2 31.3 31.4 "China issues new regulations on house expropriation". China Daily. 22 January 2011. Retrieved 22 September 2011.
  32. ↑ John Chung (27 January 2011), Regulations on Expropriation of Immoveable Property on State-owned land and compensation - Effective January 21, 2011, China Legal Brief, retrieved 22 September 2011
  33. ↑ set at 6 to 10 times the annual output value
  34. ↑ set at 4 to 6 times the average annual output value
  35. ↑ To be determined by provincial governments
  36. ↑ Article 25 Land Administrative Law
  37. ↑ Regional Technical Assistance (RETA 6091) (2007), "Expropriation Laws and Practices: The People's Republic of China (PRC)", Capacity Building for Resettlement Risk Management: Compensation and Valuation in Resettlement:Cambodia, People's Republic of China, and India, Asian Development Board, p. 16
  38. ↑ Article 58 Land Administrative Law
  39. ↑ China Rule of Law Publishing House, 2004. New compilation of Laws on Demolition, Compensation and Resettlement for Houses [Xinbian Fangwu Chaiqian Buchang Anzhi Falu Shouce], 129-130.
  40. ↑ Article 31 2001 Urban Structure Demolition Regulations
  41. ↑ Li Ping (22 March 2011), New Laws in China Could Protect Individual Land Rights, retrieved 22 September 2011
  42. ↑ Wang Weiguo (August 2007), Property Law and Land Reform in Rural China, China: China Law. See also,Albert H.Y. Chen (2011), "The Law of Property and the evolving system of property rights in China", 'The Development of the Chinese Legal System – Change and Challenges', London and New York: Routledge, pp. 81–112, ISBN 978-0-203-83775-7 and Pitman B. Potter (2011), "Public regulation of private relations: changing conditions of property regulation in China", The Development of the Chinese Legal System – Change and Challenges', London and New York: Routledge, pp. 51–80, ISBN 978-0-203-83775-7, c.f. Sun Xianzhong (August 1999), Crafting Real Property Law for the New Age, China: China Law
  43. ↑ Chinese Peasants Petitioners Attacked and Beaten by Security Personnel and Hired Thugs Rdio Free Asia
  44. ↑ Wuquanfa lun (The Law of Property)(rev. edn), chapter 17, China: Zhongguo Zhengfa Daxue Press, 2003
  45. ↑ "China's next revolution", The Economist, 8 March 2007
  46. ↑ Refugee Review Tribunal, Refugee Review Tribunal: Research Response: China (PDF)
  47. ↑ "China passes new law on property", BBC News, 16 March 2007
  48. ↑ Bezlova, Antoaneta (March 15, 2007), "China's New Property Law ignores farmers' rights", Albion Monitor

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