Land lease renewals may cost money

If a renewal fee were to be required, this could allow the government to control the macro-economy as well as the real estate market.

“[This] is actually beneficial to enhance the government's capacity in controlling the market,” said Luo.

Other lawyers have pointed out that, under the PRC Property Law, land used for residential purposes is renewed automatically, but the term of land use for other purposes will be renewed only upon the land user's application and payment of the land premiums.

“We can see that the Property Law is silent on whether land premiums must be paid upon automatic renewal of the term for residential land,” said Yingying Wang, a partner of Fangda Partners.

“It will be unfortunate if the amended Land Administration Law still remains unclear on this point,” Wang's colleague Stephen Lin added.

The two also expect that the charge of the leasehold renewal will gradually affect the price of second-hand property.

“We may find that the price of a residential property with a 10-year remaining land use term may be lower than that of a residential property with a 20-year remaining term,” said Lin.

The impact on the second-hand market will not become apparent in the short term: the earliest expiration date of a leasehold will be in 50 years from now.

According to the PRC Tentative Regulations for the Grant and Assignment of Urban State-owned Leaseholds, the maximum terms for which leaseholds may be granted are 70 years for residential purposes, 50 years for industrial purposes, 50 years for educational, scientific and cultural purposes, 40 years for commercial, tourism or recreational purposes and 50 years for land used for combined or other purposes.

“[This] means that the residential land under the category of land used for combined purposes might be the first to face the leasehold renewal issues,” said Luo.