Revocation of Land Use Rights in China

An example of such revocation recently occurred in Guangzhou. The Guangzhou authorities responsible for management of state-owned land sold 70-year grants to use plots of land on Guangzhou's Xiao Guwei Island. A number of private individuals purchased these grants and obtained land use permits and approval certificates from the local development and land authorities. Most of these individuals had built or were building private homes on their respective plots of land.

However, a little more than a year after granting these land use rights, the Guangzhou government approved the construction of the Guangzhou University Village project on Xiao Guwei Island. The project was to be located on land occupied by the individuals who had obtained the land use permits. The local authorities asserted that the development of the University Village was required in the public interest. As such, the municipal authorities in charge of administering state-owned land could legally justify the revocation of all previously granted rights to use state land within the planned University Village site in order to make way for the new project.

Approval to Re-develop Land

Procedurally, national and local regulations provide that, subject to having obtained the relevant approvals from the state land authorities to re-develop land, a qualified developer may obtain a permit to carry out relocation of the current occupants without giving prior notice to the occupants. Once the permit to relocate occupants from the land has been granted, an eviction notice will be circulated by the authorities, and only then will the developer be required to begin negotiations with the occupants concerning resettlement and compensation arrangements. According to the legal counsel for the homeowners on Xiao Guwei Island, one of the more disturbing aspects of the Guangzhou University Village case is that the developer seeking the eviction of the homeowners and the approval authority that approved the request are both arms of the Guangzhou municipal government. This brings into serious question the fairness and transparency of the relevant procedures.

Resettlement Agreement

Relevant regulations provide that the occupant of land may negotiate and execute a resettlement agreement with the new developer. This agreement should stipulate such matters as the deadline for vacating the premises, the form of compensation, amount of compensation, deadline for payment, and the location and size of substitute premises. An official appraisal of the value of the re-developed land and the premises on the land must also be performed, and the result will be adopted as a basis for making compensation.

Once executed, the resettlement agreement is binding and enforceable against the occupant. Therefore, from the standpoint of protecting one's land use rights, it is imperative that no resettlement agreement be signed unless one is prepared to accept the terms.

Administrative Adjudication and Legal Recourse

If, as happened at Xiao Guwei Island, an occupant refuses to execute a resettlement agreement because he or she refuses to accept the provisions for resettlement and compensation, then the relevant regulations provide that the new developer may apply to have the dispute adjudicated by the same authority that issued the permit to relocate occupants from the land. If either party disagrees with the administrative adjudication decision, they may then apply for administrative reconsideration proceedings or file an administrative suit against the adjudicating authority in the People's Court. However, in practice, since the success rate for prior land use rights holders prevailing in such cases is very low, the legal counsel representing the individuals on Xiao Guwei Island decided not to take this course of action, choosing instead to build his case on constitutional and criminal law grounds.

The Land Administration Law does provide procedural recourse for holders of land use rights who are threatened with forced relocation. However, given the wide interpretation of the public interest argument, and in light of the example at Xiao Guwei Island, it appears that in practice the occupant of land ear-marked for re-development for a public purpose will have little alternative but to relocate. In resisting the relocation process, it would appear that the most an occupant can hope to achieve is an increase in the amount of compensation he or she will receive. However, recent cases offer little to suggest that resistance to relocation will necessarily result in a significant increase in compensation.

Relevance for Foreign Investment

The same rules that apply to the homeowners on Xiao Guwei Island theoretically apply to commercial or industrial enterprises as well. With the growth of foreign investment in China and the squeeze on desirable land for development, it is likely that takings involving land granted to foreign investors will become much more common in the future. Therefore, it is imperative that foreign investors in China seek contractual warranties and indemnities in their land grant contracts against the possibility of such takings and include in such contracts an appropriate basis for the assessment of compensation in the event of such a taking.