What Are the Basics of Buying Commercial Property in China? (Part 1)
A Guide to Commercial Property in China for Self-Use
You Will Learn:
What Are the Qualifications of the Buyer?
How does Real-Name Registration Work?
Policies pertaining to real property vary in different cities of China and there is no one uniformed answer that applies to all situations, however, the following requirements must always be met when a foreign institution or individual seeks to purchase a commercial property FOR SELF-USE in China (acquisition of commercial property for purposes other than self-use will be discussed by the author in a separate article):
What Are The Qualifications of the Buyer?
There are in general two types of bodies that will be qualified to obtain real property for self-use in China:
Protected content and representative entities in China of foreign institutions;
Protected content individuals who have been employed or have studied in China for over a year.
Noteworthy is that this requirement of qualification applies to purchases of real property from both the developers and owners.
How Does Real-Name Registration Work?
According to PRC laws and regulations, foreign institutions and individuals need to use their real names when filing for real property ownership registration. The real property registrar may decline an application if it’s not in compliance with laws and regulations.
It happens sometimes that a foreign institution or individual enters into agreement with a Chinese entity/individual to acquire real property under the name of the latter so as to circumvent the requirement of “self-use”. However, the legal risks involved here are huge. If, hypothetically, the Chinese entity/individual resells the property to a third party, the risk is the foreign party may only claim the repayment in relation to the real property, and not the real property itself. This is because the supremacy is given to the entity/person who enjoys title to the real property according to the ownership certificate, i.e. the Chinese entity/individual in this case. The pre-existence of that agreement between the foreign party and the Chinese party may not be helpful and may run the risks of being declared null and void by the court because such an agreement is in conflict with relevant laws and regulations. In this case, unless the foreign party can demonstrate successfully to the court that the buyer is not a bona-fide buyer, which is in itself a heavy burden of proof on the foreign party, otherwise the foreign party loses his/her title to the property.
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This article is the original work of Stephanie Wu, Attorney-at-Law at the Shanghai-based full-service Hui Ye Law Firm and may not be copied, reproduced, distributed or displayed without the express written consent of the author.