Succession of Real Estates in China by Foreigners
China has been developing rapidly during last decades. With this trend, many foreigners invested into China or came to work in China. Meanwhile, a growing number of Chinese immigrated to other countries. Many of these people own considerable real estate properties in China. Like many other countries, the public notary handles most of the administrative aspects related to the transfer of inherited property. However, it should be noted that the public notary in China is very cautious in dealing with the succession of real estates, especially that involving foreigners. As such, the successors of the real estate properties owned by foreigners may find it complicated to process the succession.
According to the Law of Succession of China, effective as of 1 October, 1985, the succession by a foreigner of real estate properties within China shall be governed by the law of China. The Law of Succession provides two means of succession: 1) succession by will, and 2) succession by law. A will generally takes precedence while succession by law will apply when a decedent does not leave a will, or if a portion of a will is invalid.
1. Succession by Will
It is important that the will shall be prepared in such forms and manners in compliance with the law of China. Furthermore, if the will is made outside China, before it can be submitted to the pubic notary, it shall be legalized, i.e. first notarized by a public notary outside China and then certified by the Chinese embassy or consulate there. In addition to the will, the successors shall also provide additional documents, including: 1) the ownership certificates of the real estate property, 2) the identity documents of the decedent and the successors, which shall also be legalized, if applicable.
2. Succession by Law
Under the laws of China, the assets of a couple are generally considered as being jointly possessed by the husband and wife and should first be split equally between them. Only the portion of the decedent should be inherited. The succession shall follow the order below: 1) first in order: spouse, parents and children; and 2) second in order: brothers and sisters, paternal grandparents, maternal grandparents.
When succession opens, the successors first in order shall inherit to the exclusion of the successors second in order. The successors second in order shall inherit in default of any successor first in order. Successors same in order shall, in general, inherit in equal shares.
In the case of succession by law, the successors are required to provide documents to prove their relationship with the decedent and confirm there are no other successors. Understandably, this is the most complicated part of work due to the difficulties involved to locate documents, some of them produced decades ago, and clarify the inconsistences caused by name changes and immigration. The documents produced outside China must also be legalized. Our experience is that it might take months of work to prepare the necessary documents to be submitted to the public notary.
If the successors are not be able to provide all such documents as required, they will have to file a lawsuit with the court where the real estate properties are located to claim their rights. The court proceedings takes much longer time as the court must make a public announcement to ensure that there are no other successors.
In light of the above, given the complication involved in the succession, it is highly advisable for foreigners to prepare a proper will if they own real estate properties in China.