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New Developments in Chinese Property Law. Donald Clarke Oct. 24, 2008. Bottom line: not much change. Urban land Rural land. Urban land. Pre-Property Law (March 2007) State “ownership” “Granted” LURs of 40, 50, or 70 years “Property” rights good against the world Transferable

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bottom line not much change
Bottom line: not much change
  • Urban land
  • Rural land
urban land
Urban land
  • Pre-Property Law (March 2007)
    • State “ownership”
    • “Granted” LURs of 40, 50, or 70 years
    • “Property” rights good against the world
    • Transferable
    • Reversion back to landlord (state) at end of term
urban land1
Urban land
  • Property Law
    • Housing LURs
      • “Automatic” renewal
    • Non-housing LURs
      • Renewal “according to laws and regulations”
    • Does it matter?
      • PV of 70-year LUR > 95% of fee simple
rural land
Rural land
  • New policy?
    • Oct. 19th Central Committee communique
rural land1
Rural land
  • Pre-Property Law
    • Rural land “owned” by “collectives”
    • Land contracted out to farmers for 30 years (30-year LURs)
    • Deemed contract rights
    • Transferable with limits
      • Assignments: if transferor has stable income
      • Subleases: other collective members have ROFR
rural land2
Rural land
  • Sublease
  • Assignment

T’or

T’ee

T’or

Owner

0

10

29

30

T’or

T’ee

Owner

0

10

30

rural land3
Rural land
  • Consequences of transferability under existing rules
    • Farmer can realize full (almost full) PV of remaining LUR term by assignment (sublease)
    • No safety net if farmer sells remaining LUR term
    • So why the concern about farmers losing land through mortgage foreclosures?
rural land4
Rural land
  • Property Law
    • Includes rural LURs as “property”
      • Consequences
        • More security against land readjustments?
        • No approval needed for transfer?
        • Direct compensation from state upon taking?
rural land5
Rural land
  • Property Law
    • Renewal of rural LURs
      • Art. 126: When the contracted term expires, the contractor may continue the contract according to relevant provisions of the State.
      • Anything new?
rural land6
Rural land
  • Central Committee communique
    • No intention to abolish collective ownership
    • Affirms existing rights to transfer, sublease, etc.
    • May sell, but may not use as collateral
  • New developments
    • Chengdu rural LUR exchanges
rural land7
Rural land
  • Bottom line
    • Lack of credit not caused by existing rules, won’t be fixed by changing rules to allow collateralization
    • Caused by poor definition and documentation of LURs and rigid system of rural finance