Chinese land-use rights: What happens after 70 years?
China Smack
by Fauna
05 October 2013

A Chinese man holds up his real estate certificate in front of his nail house.

Xinhuanet Beijing October 4 report — After the 70-year lease/land-use rights for commercial residential housing expires, what do we do about our homes? Are the land-use rights automatically renewed/extended for several decades, or must a land transfer fee based on the land prices of the time be paid, or are there other new ways? With the “using the home for elderly income” [reverse mortgage] policy beginning to be tested in certain areas, the “what happens to houses after 70 years” problem has once again become an urgent and real issue.

Worries about 70 years
Chen Zhuoy, who just recently purchased a commercial residential property in Beijing, originally didn’t think about what happens in 70 years, until she inadvertently saw the “Beijing State-Owned Construction Land Supply Procedures (Trial Implementations)”. Clearly stipulated in this 2005-issued local legislation, “at the expiration of paid land-use, land-users who need to continue using the land should submit an application with the land administration department one year before the expiration of the land-use term, and those who did not apply or who applied but were not approved shall have their land-use rights returned without compensation to the government at the expiration of the term.”

“Expiration”, “not approved”, “returned without compensation”, such wording made Chen Zhuo begin to worry about the fate of her home. Upon thinking that one day the home her entire family had poured out all their money for may not be hers, Chen Zhuo’s heart was filled with worry. “In 70 years, is my home still my own? Or to put another way, what do I have to do for it to continue being mine?”

This is a question that every commercial residential property owner has to face.

In our country, the highest number of years for land-use rights transferred is: Residential Use 70 Years. After the expiration of the 70 years of land-use, the land is returned to the country while the buildings on that land remain under the possession of their owners. However, “with the skin gone, where does the hair adhere to”, so the expiration of land-use rights actually implies the expiration of ownership of the entire building, and this is precisely the root of people’s worries about “70 years later”.

According to the provisions of Article 149 in the “Property Law”, at the expiration of land usage rights for residential construction, it shall be renewed automatically.

According to the provisions of Article 22 in the “Law on Urban Real Estate Administration”: At the expiration of the stated term in the contract for the transfer of land-use rights, land-users who need to continue using the land should submit an application for extension one year before the expiration of the land-use term, and all land that needs not be reclaimed in accordance with public interest should be given approvals. Extensions shall require a new transfer of land-use rights contract to be signed, and land-use transfer fees paid in accordance with regulations.

So it is clear that in terms of the law, home-buyers have the right to apply and obtain extensions upon the expiration of their land-use rights, but there the specific clauses of the law provide no clear provisions on the the standards or procedures for the fees of extending land-use rights. This vacuum in the law undoubtedly leaves people space for imagination, “at the extension 70 years later, just how much of a price do we still have to pay?”

Various speculations about what happens after land-use rights expire
At a 2011 land auction in Shanghai, the “corresponding residual value for grantor’s reclaiming and compensation” provision amongst the prerequisites for pre-application had aroused a new post-“Property Law” round of debate about how the expiration of land-use rights would be handled.

To reapply for land-use rights requires paying an additional land-use right transfer amount, but how much needs to be paid, according to what guidelines, and whether or not owners who possess residential property rights [to the buildings on the land] are willing to pay it, are able to pay it, and what if one homeowner is unwilling to pay it, then how is the building on the land supposed to be handled? For the moment, there are no [government] policies whatsoever capable of answering this series of questions.

Some people pessimistically believe that when the 70-year land-use rights expire, it’ll be a situation where “the building follows the land and the government will compensate”. After all, the value of buildings drops with the passing of time whereas the value of land is the exact opposite. However, this social and economic costs involved in such a handling are excessively huge, and in the Shanghai Yiju Real Estate Research Institute Vice-President Yang Hongxu’s view, this is unlikely to become a widespread method [of handling this problem].

Yang Hongxu believes that, in accordance with the “automatic renewal/extension” spirit of the “Property Law”, ensuring the legal rights of property owners ought to be the starting point of legislation and that the possibility is extremely small that the land would be simply taken back or that people would have to pay for the cost of the land based on its market price at the time. “The government will adjust the policies in a timely manner, and a relatively complete and fair law/legislation will definitely be enacted before most land-use rights expire.”

An incomplete land system reform
In 1990 May 19, the People’s Republic of China State Council Decree No. 55 “The Provisional Regulations for the Provision and Transfer of People’s Republic of China on Urban State-Owned Land Use Rights” was announced and enacted, with Article 12 of the regulation stipulating: The highest number of years of land-use rights are to be determined by the following applications: 70 years for residential use. The government regulations stipulated that the state, companies, and individuals can pay for and trade usage-rights.

Although the “70-year land-use rights” issue suffers from controversy now, looking back on our country’s history of reform and opening up, it’s not difficult to realize that from the prohibition on the renting or sale of land to allowing the provision and sale of land-use rights, this is undeniably a milestone-like progress in the process of economic development. “70-year land-use rights for residential use” is itself an important result of land system reform.

In fact, having time limits on land-use rights is not unique. During the early planning stages of the system, it was influenced by Hong Kong’s land-use and trade/sale system. Whereas in Malaysia, Singapore, and other countries, this kind of transfer of land-use rights but not actual land ownership is also common, with the difference only being in specific year limits. Given the experience of these countries and areas, on a foundation of sound relevant legislation and policy, based on a respect for citizens’ private property. the extension of land-use rights will not cause serious social problems or infringe on the lawful interests of property owners.

However, from the formulating of our country’s relevant laws to now, over 20 years have passed. With the laws and regulations of the time not excessively touching upon the issue of what would happen 70 years later, and with the “age” of many commercial real estate increasing, a problem that was originally left for the future to resolve is becoming extremely pressing and this piece of land system reform from over 20 years ago urgently needs new footnotes and a more complete system. “What happens to land-use rights after 70 years” is not just an individual problem that home-buyers are concerned with, it is a problem that must be answered for continued China land system reform and development.

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