The Judicial Interpretations on Building Ownership cover a number of issues long-discussed among legal scholars after the Property Law of the PRC was adopted in 2007. The highlights of this set of judicial interpretations include the following:
The Judicial Interpretations on Building Ownership define, for the first time, some legal terms, such as “Owner”, “Exclusive Part” and “Common Part”. According to these interpretations, persons who obtain ownership of an exclusive part of the building in question through title registration or by court rulings, inheritance, and/or lawful construction, and persons who have legally occupied an exclusive part of the building after purchasing the real estate from a developer but have not yet completed the title registrations are all “Owners” within the meaning of the Property Law. Previously, a person could not be formally recognized as the rightful owner of real property or enjoy the right of an owner without having completed the necessary title registration procedures. With these judicial interpretations, however, the purchasers of real estate are now entitled to enjoy their ownership rights during the period when the real estate transaction has taken place but the relevant title registration has yet to be completed. Properties that have the following characteristics constitute an “Exclusive Part” of a building:
- independent in structure and distinguishable;
- independent in utilization and suitable for exclusive use; and
- can be registered as an object of a specific person’s ownership.
For example, Exclusive Parts include the parking lot, commercial space and balconies that are included in the property sale and purchase agreement. In general, real properties having the following characteristics constitute a “Common Part” of a building:
- the basic structure of a building, such as its infrastructure, load-bearing structures, and exterior walls and roof;
- the publicly accessible parts, such as the passageways, stairways, and main hall; auxiliary facilities and equipment, such as those for fire control and public lighting; and special-purpose structures, such as mechanical floor (or room) and refuge floors; and
- other space or facilities of or in the building that are neither an Exclusive Part belonging to the owner nor owned by public utilities or other persons.
While Property Law does not specify the method for counting the area of Exclusive Parts and the total areas of the building(s) and the number of owners, the Judicial Interpretations on Building Ownership provides for the method. This is essential to determining whether a majority vote is reached at an owners’ meeting since under Property Law, a majority vote for a proposal requires that at least a certain percentage of the owners vote for the plan, and the Exclusive Parts owned by these owners, account for a required percentage of the total area of the whole building(s). While previously, there were frequent disputes as to whether the Common Part should be included in the total area of the building(s), the Judicial Interpretations on Building Ownership make it clear that it will not be included for the purposes of voting and allotment of expenses and profit. Under these circumstances, the total area of the whole building(s) equals the aggregated area of the Exclusive Parts and the number of owners equals the number of the Exclusive Parts, excepting that when an owner owns more than one Exclusive Part or when the developer has more than one unsold or undelivered Exclusive Part, the owner or developer will be deemed to have only one Exclusive Part.
The Supreme Court of the PRC indicates in these interpretations its objection to the practice of converting residential properties into commercial properties. According to the interpretations, unanimous consent from all of the other owners who have an interest in the property (Interested Owners) is required to convert a residential property into a commercial property. Otherwise, the court will support an Interested Owner’s claim against the conversion. The interpretations state that when the owner of a residence converts the residence into a commercial property, owners of the other parts of the same building are considered the Interested Owners. For owners outside of the building who claim an interest, they must prove that their property value or quality of life has been or may be affected by the conversion.
Finally, the Judicial Interpretations on Building Ownership prescribe the statute of limitations for the exercise of the owners’ right to sue, to rescind any resolution or decision made by the owners’ meeting or owners’ committee on the basis that it infringes upon the owner’s legitimate rights or it violates procedures prescribed by law. Specifically, the owner must file a lawsuit with a court within one year of the owner reasonably being expected to know of or actually learning of such resolution or decision being made, whichever period is shorter.