Interpretation of the Applicable Law in Hearing Cases Concerning Contractual Disputes over State-owned Land Use Rights
July 02, 2005 | BY
clpstaff &clp articles &As China's property market continues to advance, the shift from a state-centric to a market-orientated land transaction system has predictably given rise to numerous disputes. These latest Interpretations issued by the Supreme People's Court clarify the handling of disputes regarding state-owned land use rights, thereby furthering reform of the system.
By Edward E. Lehman, Gregory M. Sy and John Lee, Lehman, Lee & Xu, Beijing
The Supreme People's Court's Issues Concerning the Application of the Law in Trials of State-owned Leasehold Contract Disputes Interpretations (关于审理涉及国有土地使用权合同纠纷案件适用法律问题的解释)(the Interpretations), which becomes effective on August 1 2005, was adopted at the 1,334th Session of the Adjudication Committee of the Supreme People's Court on November 23 2004 and promulgated on June 18 2005. The promulgation of these Interpretations has aroused great interest among the real estate industry and the following sets out some preliminary comments on the matter.
BACKGROUND
Whilst Chinese real estate laws and regulations are still in their developmental stages, China's real estate sector is forging ahead at great speed. However, due to the immaturity of these laws (for example, jus in rem) and the weakness of market administration, the real estate market has been expanding at an uncontrolled pace, obstructing its stable development.
Over the past 10 years, since the promulgation of the PRC's Administration of Urban Real Property Law*, the number of real estate-related cases heard by the PRC courts has been continuously on the increase. Furthermore, as most provisions of the aforesaid law are more like principles than general rules, the courts are often confronted, and even confused with the lack of relevant applicable and enforceable regulations
Since the implementation of this law, PRC courts have followed various practices when hearing real estate disputes. On December 27 1995, the Supreme People's Court issued the Instructions of Relevant Issues Concerning the Hearing of Cases Involving Real Property Development and Business Before the Implementation of the PRC Law on the Administration of Urban Real Property (the Instructions) with a view to resolving the problems which occurred in the grant and transfer of state-owned land use rights and the cooperative development of the same.
Given the conditions existing at the time, the Instructions extended the grace period for effecting registration procedures to cases of first instance, allowing for the redress of improper grants and transfers of land use rights, and cooperative real estate development, thereby avoiding a great number of invalid contracts. Following implementation of the Instructions, a number of administrative regulations and policies have been released and the real estate sector is moving closer towards legal compliance and uniformity as a result.
Nevertheless, with the quickening of the economic structural adjustment and the deepening of land reforms, the present real estate laws in China are inadequate to address the needs of the explosive market. Moreover, taking advantage of the incomplete market structure, real estate entities are gaining confidence in a rush of illegal development and business. As cases involving real estate disputes and new emerging issues are increasing every day, courts are being challenged with the 'yardstick' of applicable laws in hearing such cases. Thus, since 2002, the Supreme People's Court has commenced the drafting of judicial interpretations, outlining how to effectively deal with disputes after the implementation of the PRC's Administration of Urban Real Property Law. On April 28 2003, the Interpretations of the Applicable Law in Hearing Cases Concerning Disputes over Commercial Housing Sales Contracts was promulgated, and became effective as of June 1 2003. The present Interpretation is another result of the Supreme People's Court in this regard.
MAJOR POINTS IN THE INTERPRETATIONS
Applicable Scope: CollectiveLandand Land for Farm Use Excluded
It is stipulated in Article 2 of the Administration of Urban Real Property Law (城市房地产管理法)that China adopts the principle of "socialist public ownership of land"; that is, ownership by the whole people and collective ownership by the working people. Correspondingly, China adopts two types of land use rights
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