Laws of the People's Republic of China

(Effective Date 1984.01.23)

CONTENTS

CHAPTER I GENERAL PRINCIPLES

CHAPTER II SALE (PURCHASE) IN ADVANCE OF HOUSE PROPERTY

CHAPTER III TRANSFER OF HOUSE PROPERTY RIGHT

CHAPTER IV HOUSE PROPERTY MORTGAGE

CHAPTER V HOUSE LEASING

CHAPTER VI HOUSE PROPERTY REGISTRATION

CHAPTER VII PENALTY CLAUSES

CHAPTER VIII SUPPLEMENTARY ARTICLES

CHAPTER I GENERAL PRINCIPLES

   Article 1. The present regulations are formulated in line with relevant laws land decrees of the People's Republic of China and the "Regulations Concerning the Special Economic Zones in Guangdong Province", in order to strengthen the management of commodity house property in the Shenzhen Special Economic Zone and protect the legitimate rights and interests of house property managers and householders.

   Article 2. Commodity house property mentioned in the present regulations refers to residential houses, industrial and commercial buildings, warehouses, parking lots and other houses built independently or jointly for sale or to let by state-owned enterprises, foreign nationals, overseas Chinese, compatriots from Hongkong, Macao and Taiwan as well as their corporations and enterprises (hereinafter referred to as overseas firms) which have been approved by the People's Government of the Shenzhen Special Economic Zone of managing house property.

The term "house property right" mentioned hereinbelow refers to the ownership of houses (roofed) and the right to the use of land occupied by the houses.

   Article 3. The Shenzhen City People's Government encourages overseas firms to engage in house property management (construction, sales and renting of houses etc.) in the Shenzhen Special Economic Zone independently or jointly with state-owned enterprises authorized by the Shenzhen City People's Government to manage house property. Overseas firms are encouraged to buy house property.

The Shenzhen City People's Government will, in line with the relevant regulations of the state and Guangdong province concerning Shenzhen Special Economic Zone, give proferential treatment to foreign citizens, overseas Chinese, compatriots from Hongkong, Macao and Taiwan in their purchase of residential houses and villas in the special economic zone.

   Article 4. Partners of house property joint ventures and cooperative enterprises should sign contracts on the basis of the principles of equality and mutual benefit and of reaching unanimity through consultation.

   Article 5. If the houses are built with exclusive investment, the house property right belongs to the investors.

If the houses are built through joint venture or cooperative efforts, the house property right shall be shared by parties to the joint ventures or cooperative enterprises.

If the housing, villas and other commodity houses are purchased by natural persons or legal persons, the house property right belongs to the buyers.

   Article 6. The Shenzhen City People's Government shall protect the house property right of householders according to law, allow them to transfer their house property right to others (natural persons or legal persons) through sale (including advance sale and purchase and auction), giveaway, exchange, bequeathal, inheritance and other legal acts, and permit house property mortgage and leasing of houses.

Householders have the right to renovate and repair their houses. But if they change the structure, purpose and appearance of the houses or expand or rebuild them, they must have the approval of the department designated by the Shenzhen City People's Government.

   Article 7. The Shenzhen City People's Government may requisition house property with reasonable compensation and proper arrangements when needs in the construction of the special economic zone arise.

   Article 8. House property management, transfer of house property right, house property mortgage and house leasing shall be conducted in compliance with the laws of the People's Republic of China and relevant laws and decrees of Guangdong Province concerning the special economic zones.

The conclusion of contracts for the transfer of house property right, sale (purchase) in advance of house property, house property mortgage and house leasing shall be notarized by the Shenzhen City Public Notary.

   Article 9. The house property Administrative Department of the Shenzhen City People's Government shall put commodity house property in the special economic zone under its unified management and is responsible for the enforcement of the present regulations.

CHAPTER II SALE (PURCHASE) IN ADVANCE OF HOUSE PROPERTY

   Article 10. A house property operator may sell in advance houses, but under the following conditions:

(1) The house operator has received the "Land Use Certificate" and the "House Building Permit";

(2) House construction contracts have been signed;

(3) The house property operator has opened a special account with the bank registered in Shenzhen City for collecting the advanced payment on his own behalf;

(4) 20% of the total budget for the present stage construction has been remitted to the bank in Shenzhen City with which accounts have been opened.

Advance sale of jointly owned house property must have written agreements between the co-owners.

   Article 11. House barter contract shall be signed before sale (purchase) in advance. The content of the contract should be decided by the two contracting parties through consultation. It must, however, contain the following points:

(1) The names of the two contracting parties (or the names of the legal persons), addresses (or location) of the legal persons;

(2) The total floor space covered by the houses, the location (position) of the houses and their boundary lines (with maps attached);

(3) The size (or proportion) and time limit of the land used;

(4) Purpose of house property;

(5) Price of house property;

(6) Methods of payment for advanced sales (purchase);

(7) The date or predicted date for commissioning house property;

(8) Liabilities for breach of contract;

(9) Methods of settling contract disputes and the name of the department to accept the case; and

(10) Other matters deemed necessary by both parties.

   Article 12. A house property buyer must deposit his advanced payments in the bank with which the house property operator has opened special account in accordance with Article 10 (3).

Advanced payments for house property must be used for the construction of the houses sold in advance.

The draft of the advanced payments or house property shared in common by several house operators can be made only with the common endorsement or the endorsement by the agent commonly appointed by them.

   Article 13. Upon receiving the certificate for the completion of houses, the house property operators should notify in advance house buyers of it in good time and file an application with the House Property Administrative Department of the Shenzhen City People's Government for going through the formalities required for the transfer of the house property right.

CHAPTER III TRANSFER OF HOUSE PROPERTY RIGHT

   Article 14. In buying and selling house property, barter contracts shall be signed by parties involved in pursuance of Article 11 of the present regulations.

In presenting his house property as gifts to others, the householder should sign with the gift receiver contracts for giving the house property.

   Article 15. The buying, selling and exchange of jointly possessed house property must have the unanimous consent of the co-owners supported by a written agreement. The co-owners bear joint liability for the house property they have unanimously agreed to sell or exchange.

In case no written agreement has been reached, the co-owners may sell or exchange their respective shares of the houses.

If a co-owner of the houses sells his share of the house property, the other co-owners enjoy the priority, under equal conditions, to buy over that share.

   Article 16. One of house co-owners may give away or bequeath his share of the house property to others without the prior consent of the other co-owners.

The above provisions apply to the inheritance of jointly-owned houses properly.

   Article 17. Before the house property right is transferred in accordance with item two of Article 15 and Article 16, the co-owners must divide their house property and sign a contract thereof.

CHAPTER IV HOUSE PROPERTY MORTGAGE

   Article 18. In applying for house property mortgage loans, a house property owner must go through the formalities at the bank located in the Shenzhen Special Economic Zone and have the following prerequisites:

(1) A contract for the sale of house property has been concluded;

(2) The householder has received the "Certificate for House Property Right."

   Article 19. When house property is to be mortgaged, a contract must be concluded. The content, which should be decided by both sides through consultation, must specify:

(1) The name of the mortgagor and the name of the mortgagee;

(2) The name, floor space, location (position) and the boundary of the houses (with maps attached);

(3) The amount of the mortgage loans and methods of payment;

(4) The interest rate of the mortgage rate of the mortgage loans;

(5) The time and the amount of loan repayment;

(6) The liability of compensation for the damage caused by the mortgagor to the house property mortgaged;

(7) Responsibility for breach of contract;

(8) The methods for settling disputes over the contract and the name of the organ to accept the case; and

(9) Other matters deemed necessary by both sides.

The mortgage can entrust the legal Advisory Office of Shenzhen City with the signing of the contract of house property mortgage upon the strength of a letter of attorney.

   Article 20. The mortgage of house property sold (purchased) in advance should follow the following procedures:

(1) The mortgagor signs a house property mortgage contract with the mortgagee;

(2) The mortgagor receives the "Certificate for House Property Right" from the House Property Administrative Department of the Shenzhen City People's Government upon the strength of the house property contracts.

(3) The mortgagor gives the mortgagee the "Certificate for House Property Right" for preservation and the mortgagee should make payments according to the amount specified in the house property mortgage contract.

   Article 21. Should the mortgagor fail to repay the mortgage according to the provisions of the house property mortgage contract, the mortgagee has the right to sell the mortgaged houses by auction.

   Article 22. Before auctioning the houses, the mortgagee get the mortgagor notified and set the time limit for the mortgagor to move out. The time limit should not be less than 30 days beginning from the date when the mortgagor receives the notification.

If the mortgagor fails to move out within the set time limit, the mortgagee or his agent may apply with the people's court to have it implemented according to the provisions of the "Civil Procedure Law of the People's Republic of China (for Trial Implementation)". The mortgagor shall be held responsible for compensating for the losses caused upon the mortgagee.

   Article 23. In renting out the mortgaged houses to others, the mortgagor should get the prior approval of the mortgagee.

   Article 24. The auctioning of mortgaged houses shall be conducted by the Materials and Property Management Corporation of Shenzhen City on a commissioned basis. The mortgagee and the Shenzhen City Materials and Property Management Corporation should sign a contract for entrusting with the auctioning of the mortgaged house property.

   Article 25. The mortgagee should use the proceeds from auctioning for the purposes in the following order:

(1) To pay for all the expenses arising from the auctioning of the mortgaged houses;

(2) To pay overdue taxes;

(3) To repay the loans and interests owed by the mortgagor;

(4) The surplus after the above-mentioned payments are made should be given to the mortgagor.

If the proceeds from the auctioning is not enough to cover the payments, the mortgagee has the right to make separate claims.

   Article 26. Mortgage of jointly owned house property shall be conducted in reference to provisions of Article 15.

CHAPTER V HOUSE LEASING

   Article 27. Contract must be signed for house leasing (or sub-leasing) and the content of the contract, which should be decided by both parties concerned through consultation, must contain the following points:

(1) The location (position) of the houses, floor space, decorations and fittings;

(2) The purpose of the houses;

(3) The leasing period (fixed or unfixed);

(4) The amount of rent and methods of payment;

(5) Terms and liabilities for renouncing a contract ahead of schedule;

(6) Responsibility for breach of contract; and

(7) Other matters deemed necessary by both sides.

   Article 28. The period for leasing should not exceed the time limit set for the use of the land covered by the houses.

   Article 29. The co-owners must reach unanimity through consultation, conclude a written agreement and assume joint liabilities for the signing, renunciation and continuation of the house property leasing contract and sub-leasing by the lessee.

If one of the co-owners leases his own share of commonly-owned house property, the provisions of Article 17 of the present regulations shall be followed.

   Article 30. A lessee may sub-lease the house to others, with prior consent of the house owner.

The time limit for sub-lease should not exceed that set in the original lease contract.

   Article 31. The lessor may cancel the house leasing contract ahead of schedule in one of the following cases:

(1) When the lessor, due to unforeseeable reasons, really has the need to use the houses;

(2) When the lessee has changed the purpose of the leased houses in violation of the contract;

(3) When the lessee fails to pay rents for three months or longer than the time limit specified in the contract;

(4) When the lessee violates the provisions of Article 30 of the present regulations;

(5) When the lessee damages the houses or house facilities and refuse to do repairs or make compensation;

(6) When the houses have been proved to be in danger of collapsing due to major damages.

   Article 32. The lessee may renounce the house property leasing contract in one of the following cases:

(1) When the lessee has built or bought houses and there is no need to continue the leasing;

(2) When the whole family of a lessee moves out of Shenzhen City;

(3) When the houses are in danger of collapsing due to major damages and the lessor refuses to do repairs;

   Article 33. When the lessor fails within three months to rebuild the houses it has recovered in pursuance of (1) or (6) of Article 31 and has no justifiable reasons, he should compensate the lessee for the losses arising from the removal.

A lessee should compensate to the lessor for the losses when he terminates the house leasing contract before the expiry date according to (1) and (2) of Article 32 of the present regulations.

   Article 34. The original lessee has the priority to lease the house again after they have been recovered and rebuilt according to (6) of Article 31.

   Article 35. If without good reasons the lessor refuses to accept rents duly paid by the lessee according to the contractual stipulations, the lessee may ask the Notary Public of Shenzhen City for notarization so as to free himself from the liability for delaying the payment.

The fees spent on the afforesaid notarization shall be stopped from the house rents.

   Article 36. Expenditure for repairing the houses on lease should be borne by the lessor; and if any loss has been caused deliberately or by error on the part of lessee, the losses shall be borne by the lessee.

   Article 37. When one of the parties to the leasing contract cancels the contract, he should notify the other party one month in advance for civil houses on fixed period of leasing, two months in advance for civil houses on current lease, and six months in advance for industrial and commercial buildings.

If the lessee refuses to move out within the set time limit after the renunciation of the lease contract, the lessor may apply with the people's court to have the lessee move out according to the provisions of the "Civil Procedure Law of the People's Republic of China (for Trial Implementation)" and the loss caused therefrom to the lessor shall be compensated for by the lessee.

   Article 38. The leasing of houses shall not hinder the transfer of house property right.

The house leasing contract remains effective after the transfer of house property right, and the old and new householders should jointly notify the lessee in writing.

When leased houses are sold, the lessee has the priority, under the same conditions, to buy them over.

CHAPTER VI HOUSE PROPERTY REGISTRATION

   Article 39. Owners or obligees of commodity house property should register their house property with the House property Administrative Department of Shenzhen City according to the following provisions:

(1) Registration for affixing house property right: householders apply for the fixing of house property right, receive the "Certificate for House Property Right" and go through registration procedures;

(2) Registration for property transfer: transfer of house property right should be registered by both parties involved, except in cases of property bequeathal and inheritance which may be registered by the bequeathed or the inheritor independently upon the strength of presentation of certificates;

(3) Registration for changes: if the house property right changes hands due to expansion, reconstruction, dismantle, devision or merger, the householders should apply for registration and, if the changes involve other persons, he must go through the registration procedure together with the people involved;

(4) Registration for other rights: if other rights including preference right, mortgage right, land service right (right-of-way) are involved in the house property, the registration should be done by the obligee and the obligor.

(5) Registration for alteration: if the holding "Certificate for House Property Right" has become inconsistent with reality, or owing to change in address and house number plates and alterations are necessary, the householder or the obligee should apply for registration.

(6) Registration for cancellation: if, owing to ravage by natural calamities or dismantlment of the houses, the house property right has ceased to exist or other rights involved have ceased to be effective upon the expiration of the contractual time limit, the householders or the obligees and persons involved should apply for registration for cancellation.

   Article 40. House property registration requires the presentation of the following documents:

(1) An application form for registration;

(2) Identification card of the applicant; and

(3) All the documents for acquiring, changing and transfering house property right.

The registration for the house property right jointly possessed may be done by one of the co-owners who must have the power of attorney and other relevant certificates produced by the other co-owners.

   Article 41. House property may be registered by proxy who should produce, apart from the documents required in Article 40, notarized documents certifying the proxy.

If the applicant is a legal person, registration may be conducted by its agent, who must submit documents certifying his identity as an agent of the legal person.

   Article 42. For householders or obligees, persons involved and agents who reside in Hongkong, Macao and Taiwan province or in foreign countries, apart from having their house property registration documents certified by the notary public, attestation formalities are required in accordance with the following provisions:

(1) Those living in Hongkong and Macao should go through attestation procedures at the representative office in Hongkong of Shenzhen Special Economic Zone.

(2) Those living in Taiwan province should go through the attestation procedures upon the strength of identification documents at the representative office in Hongkong of the Shenzhen Special Economic Zone.

(3) Those living in foreign countries should go through attestation procedures at the Chinese embassies (or consulates) in these countries.

   Article 43. Registration fees should be paid for house property registration. The rate shall be determined by the House property Administrative Department of the Shenzhen City People's Government.

If house property is registered by both parties, registration fees shall be borne by the party receiving the rights.

   Article 44. Should the certificate for house property right received by the householder after registration be destroyed or lost, the householder must file a report immediately to the House Property Registration Department, applying for a reissue.

   Article 45. The obligee shall apply for registration within three months after he obtains the various kinds of house property rights. Failing this within six months, the houses shall be left to the care of the House Property Administrative Department of the Shenzhen City People's Government. If no registration is done within three years, the house property will be regarded as being ownerless and the House Property Administrative Department shall submit the case to the judicial organ for disposal according to law.

   Article 46. When the term for the use of the land occupied by the commodity house property expires, the owner should apply with the Shenzhen City People's Government for extension. If no application is filed within six months, the house (roofed) shall be disposed of in reference to the provisions of Article 45 of the present regulations.

CHAPTER VII PENALTY CLAUSES

   Article 47. Any contract signed in violation against the present regulations shall be invalid and losses arising therefrom shall be borne by the violator.

   Article 48. Those who willfully change the structure, purpose and appearance of the houses or expand or dismantle them for reconstruction without the approval of the Shenzhen City People's Government or the organ designated by it shall, apart from being ordered to stop or restore the original appearance, be fined for less than 5,000 yuan Renminbi according to the seriousness of the cases.

   Article 49. For those who register house property by resorting to deception, assumption of other's name, forgery of documents, bribery and other unlawful means, a fine ranging from 2,000 yuan to 5,000 yuan Renminbi shall be imposed according to the seriousness of the cases in addition to nullifying the registration. If a crime is committed in violation of the "Criminal Law of the People's Republic of China", criminal responsibility shall be affixed on the person directly responsible by the judicial organs.

   Article 50. For those who fail to register the house property in due time, a fine from one to five yuan Renminbi shall be imposed for each day overdue.

For those who fail to apply for extension of the time for the use of land after the term expires, a fine up to one per thousand of the land use fees shall be imposed for each day overdue.

CHAPTER VIII SUPPLEMENTARY ARTICLES

   Article 51. When the various legal documents pertinent to the present regulations must be available in Chinese and a foreign language, the Chinese version should be regarded as authentic.

   Article 52. The Regulations shall be put into effect from the date of promulgation.