New Registration Measures Provide Clarity for China Land Owners

By issuing the Land Registration Measures (the Housing Registration Measures were issued by the MOC but the Land Registration Measures were issued by the Ministry of Land Resources), the Ministry of Land Resources has also taken what were, in essence, internal guidelines or a handbook for the registration authorities and made them part of Chinese legislation. Such change from informal policy to legislation should shed more protection on the property rights and is a big step forwards for rule of law and increased transparency in China.

Another implication of the new Measures is that, under PRC law, registration is the formal creation of the land interest, and has been confirmed by the Property Law (Article 16 of the Property Law). In future all transfer of titles on land must be registered, or the property rights will not be protected by the law. For example, if a seller contracts with A to transfer the land interest, and later registers a transfer to B, the transfer to B is good and will be confirmed by law; and A would have some kind of “credit right” against the transferor - a claim for return of any money paid, against the seller.

Additionally, under the previous Rules, the registration authorities were responsible for investigating and confirming the land cadastre after receiving applications for land registration. With the new Measure in place now, applicants would be liable for providing the registration authorities with sufficient proof of land cadastre as application documents. If there is any ongoing dispute over the property, the land interest will not be registered. In addition, the purchasers will only be able to register the land interests upon the full payment of land premium or land transfer price as well as the related taxes and fees, and this is crucial for real estate developers as they will need to pay up the land premium before applying for loans from banks and commencing the construction.

WHEN CONFLICTS ARISE

It is important to note that, in the event of conflicts between the registration certificates and the official registry, the latter prevails (Article 16 of the Measures). In practice, most potential investors or purchasers rely on the registration certificates, and do not even try to check the official registry. The Measures expressly state that the land administrations are obliged to provide the land registration information, and the details are subject to the Measures on the Public Access to Land Registration Information issued by the Ministry of Land Resources in December 2002. However, the Property Law does not address the question of access to the land records so it is uncertain whether and when the public will have access to Land Registry records.

Article 2 of the Measures provides a comprehensive listing of what property must be registered and includes:

• State-owned land use rights (LUR) which takes into account that PRC law differentiates between land ownership and LUR.

• Farmers' Collectives-owned land ownership

• Farmers' Collectives-owned LUR

• Land mortgage;

• Servitude;

• and any other land interests which must be registered under the relevant laws and regulations.

For the registration of mortgage or servitude, etc, the Third Party Land Interests Certificate will be issued.

THE ISSUE OF REGISTRATION

Under the previous Rules there were only two categories of land registration, namely the Original Registration and the Amending Registration. The Original Registration was the comprehensive registration which refers to the general registration of all land in certain jurisdiction while the Amending Registration included all other land registration other than the Original Registration. In other words, if a buyer has obtained LUR through LUR transfer, he will need to file for an Amending Registration. Such concepts led to confusion in practice.

The new Measures have clearer categories of registration and include: the Comprehensive Registration, the Original Registration, the Amending Registration, the Canceling Registration, and other registrations (including the Correction Registration, the Objection Registration, the Pre-notification Registration, and the Seal Registration). The Objection Registration, the Pre-notification Registration, the Seal Registration and the registration of servitude are new, and in compliance with the Property Law.

CONCLUSION

Although the Measures are comprehensive, the real challenge now is how to realize them. Not only may there be difficulties in consolidating the tasks of different registration authorities, but the government has mandated a brief period to complete registrations. Unless otherwise approved by the Ministry of Land Resources, the land registration must be completed by local authorities within 20 days upon the acceptance of applications. This is consistent with the PRC Administrative Licensing Law, and will be very crucial for the purchasers, but it is more than likely that such time limit may not be realized in practice, at least in the near term. In the long run, however, the government is definitely on the right track. Introduction of formal legislation that will undoubtedly help protect land owners and purchasers, provide clarity and reduce cut down on bureaucratic procedures will give both foreign and domestic investors a higher level of comfort and result in a much more robust and transparent property market.

*About the authors

Ashley Howlett leads the Jones Day Greater China construction practice. Ashley's practice is concentrated on construction and engineering issues connected with infrastructure and major projects. His experience includes representation of a broad range of clients including owners, contractors, and design professionals throughout Asia. He is involved in all aspects of the design and construction process including drafting and negotiating contract documentation, dispute avoidance, and dispute resolution by way of mediation, arbitration, and litigation.

Li Hong joined Jones Day directly upon graduation from Peking University in July 2006. Her practice is focused on real estate development, construction, and foreign investment-related transactions in China. Hong has particular experience in advising foreign construction, engineering, and design companies on establishing their operations in China. She also has been involved in drafting construction contract documentation for projects in China and has advised Chinese construction companies on issues arising on projects outside China.