Keywords: China, Ministry of Land, land use,
developers, idle land
On 27 September 2010, the Ministry of Land and Resources of
China, together with the Ministry of Housing and Urban-Rural
Development of China, said in a joint circular (Circular) that
developers failing to develop land within a year after the
construction commencement date set out in land use right grant
contracts will be banned from bidding for more land. The ban will
also be extended to cover the majority shareholders of the guilty
developers.
The Circular also reiterated that local governments must
allocate at least 70 percent of land for public bidding for the
development of subsidised public apartments and small and
medium-sized apartments. Those cities that fail to do so must not
offer land for bigger and more luxurious housing.
The purpose of the Circular are to curb land hoarding by
developers and to support public housing in order to stabilise home
prices.
Certain Developers Banned from Land Bidding
For any developers found to have committed any of the following
illegal acts, the Circular provides that such developers and their
majority shareholders will be banned from bidding for new land
sites as long as the default has not been fully dealt with by the
government or remedial actions have not been entirely
completed:
having committed criminal acts such as forgery of documents for
the purpose of obtaining land, illegal speculations of land;
having committed unlawful acts such as illegal transfer of land
use right;
possession of land which has been idle for more than a year;
or
development of land in breach of the land grant conditions set
out in the land use right grant contract.
Current Provisions on Idle Land
The term "idle land" is not specifically defined in
the Circular. However, according to the authoritative
"Measures for the Disposal of Idle Land"
(Measures), issued by the Ministry of Land and Resources and came
into force on 28 April 1999, a land is considered "idle"
if, inter alia, its developer has failed to commence construction
on the land in accordance with the contractual construction
commencement date set out in the land use right grant contract.
Under the Measures, the government has the right to re-enter the
land without having to pay any compensation if the land has
remained idle for more than two years. If the land has remained
idle for more than a year but less than two years, the developers
can face an "idle surcharge" of not more than 20 percent
of the land grant premiums.
Other Provisions in the Circular
In addition to allocating portions of land for developing public
housing, the Circular also provides that, for residential projects,
a developer must start construction within one year after the land
is delivered, and construction must be completed within three years
from the construction commencement date.
Conclusion
The Circular is regarded as an extension of efforts by the
central government to cool the property market since April this
year, which include curbing lending to developers, banning loans
for third-home purchases and requiring higher down-payments for
second-home purchases.
Copyright 2010. JSM, Mayer Brown International LLP
and/or Mayer Brown LLP. All rights reserved. Mayer Brown is a
global legal services organization comprising legal practices that
are separate entities ("Mayer Brown Practices"). The
Mayer Brown Practices are: JSM, a Hong Kong partnership, and its
associated entities in Asia; Mayer Brown International LLP, a
limited liability partnership incorporated in England and Wales;
and Mayer Brown LLP, a limited liability partnership established in
the United States. The Mayer Brown Practices are known as Mayer
Brown JSM in Asia.
This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications Disclaimer.
Specific Questions relating to this article should be addressed directly to the author.
Twitter
Facebook
Digg 
