Key Points:

  • Ensures equal legal status and rights for all market players 
  • Covers all property creation, transfer and ownership

On March 16, 2007 China finally adopted a Property Rights Law, which takes effect on October 1. The law, which covers the creation, transfer and ownership of property, is part of an ongoing effort by the PRC to gradually develop a civil code.

The law provides equal protection to state-owned assets, collective assets and private assets. The state implements the socialist market economy, ensuring equal legal status and rights for development of all market players.

The establishment, modification, transfer and lapse of real property rights is premised upon a registration system and takes effect only upon legal registration of the property. Registration should take place where the property is located. Owners of valuable personal property, such as watercraft, aircraft and motor vehicles, should register this property as well to prepare it for defense against third-party claims.

Prior to the law, land use rights for home construction were set at 70-year terms. The new law stipulates that these terms may be automatically renewed upon expiration, which should relieve many rights owners’ concerns. The law specifies that mortgages on houses, land use rights and buildings under construction take effect only upon registration, whereas mortgages on production equipment, raw materials, semifinished and finished products, means of transportation and ships and aircraft under construction may take effect at the same time as the mortgage contract comes into effect. However, a party who does not register mortgaged property may not defend it against third-party, good-faith claims.

If a citizen believes his or her property has been seized illegally, he or she must exercise his or her right to request return of the property within one year of the date of seizure. Otherwise, his or her right to request return of the original property will lapse. The new Chinese property law will have a significant impact on the Chinese economy and the society as a whole. However, because many of its provisions are based on very broad principles, more detailed measures will need to be developed.