|October 29, 2008|
Previously published by LexisNexis® Martindale-Hubbell® Counsel to Counsel Magazine on November 2008
Real estate counsel must master specialized and technical client concerns to stay on top of the latest market and regulatory developments. New government regulatory, tax and takings policies impact the fundamentals of mortgage lending and property investing, and add to the complexity of domestic and international projects.
Land Ownership and Development in China
Whether multinational corporations establish local operations or acquire established companies in China, legal due diligence is essential in any transaction involving land ownership rights. Under the Constitution and other laws, all land in China is owned either by the state or by agricultural collectives. Private entities, such as corporations and individuals, cannot obtain legal title to land, and only under certain conditions can they acquire the right to use land. Land in rural or suburban areas is generally collective owned and cannot be used for industrial or commercial purposes. It cannot be developed unless it is converted into state-owned land and compensation is paid to the agricultural collectives for its conversion.
In recent years, however, village and township governments have developed much collective-owned land by erecting buildings, including residences, to be sold for profit. This is despite such statutes as the Urban and Rural Planning Law and the Land Management Law, as well as a December 2007 notice from the State Council, emphasizing that use of collective owned lands by entities or individuals for real estate development is prohibited. Because the prices for illegal buildings are much lower than those for legally permissible developments, many citizens, particularly urban residents, take the risk and purchase these illegal structures. The situation has caused much debate, and many developers hope that new government policies will acknowledge the legal status of such property. Until then, American or other foreign businesses should closely investigate any representations made by sellers of property or structures that they are legally entitled to make such transactions.
Ashley M. Howlett
Partner, Construction Law