New Measures On Disposal Of Idle State Owned Land
On June 1, 2012 the PRC Ministry of Land and Resources issued the amended version of the Measures of Idle Land Disposal ("New Measures"). They took effect on July 1, 2012 and provide a more precise definition of both what idle land is and also the consequences of its presence.
Adjusted Definition of Idle Land
The definition of idle land has become much clearer and more precise. In the previous law there was a degree of ambiguity as to how long construction would have to be delayed to render the land "idle", using the phrase "failing to commence... within prescribed time limits." Such time limits were usually stipulated in the land use right granting contract. The New Measures now provide that once construction has not begun one year after it was due according to the land use right granting contract, the land is deemed as idle land. As in the past, construction or development that does not reach a certain scale (25% of the proposed total investment or one third of the proposed development area) one year after commencement was due, land will likewise be deemed idle.
Commencement of Construction
In the past, statutory law did not provide clear criteria as to what works constituted commencement of construction. Frequently, especially when construction was delayed, land use right owners were faced with the question of whether it is sufficient to start the piling works or to just build a garage or shack on the land. The New Measures now define the following dates as commencement dates of the construction after the construction permit has been obtained:
- if the construction project needs deep foundation pits, the work for the deep foundation pits has been completed;
- if piling is necessary, all foundation piles have been installed;
- for all other construction projects, one third of the foundation works have been finished.
The New Measures further stipulate that when calculating the actual investment and the proposed investment amount, the land use right granting fee and taxes shall not be included. This is in contrast to the current practice of some local authorities.
Process of Investigation and Identification
The New Measures provide that should local land and resources authorities suspect that they have discovered what could constitute idle land, they shall conduct verification and investigation within 30 days. The owner of the land use right shall be issued with a notice of investigation and upon receipt of this, must provide all documents and materials so as to assist the authorities in their investigation.
Methods of Disposal
Previous measures only had one article containing possibilities for disposal of land that has been deemed idle. The New Measures distinguish between land becoming idle due to government behaviour or unforeseeable circumstances on the one hand and conduct of the land use right owner on the other hand.
1. Where the land has become idle due to the behaviour of the government, the remedies are flexible and include extensions of commencement deadlines, adjustment of land planning conditions, temporary use by the government, recovering the right to the land in exchange for compensation, replacing the land or any other suitable remedy.
Behaviour of the government includes failure to transfer land parcels within agreed time limits, changes in the planning that entail that commencement of construction is not permitted, disposal of a mass petition related to the land, military activity preventing commencement or any other behaviour of a government department that prevents the commencement of development.
To prevent such situations occurring, the New Measures also provide for requirements that must be included in the land use right granting contract, prior to the land use right being granted;
(i) The land rights are clear and there are no economic or legal disputes with regard to the land;
(ii) Resettlement compensation is made correctly; and
(iii) Clear planning conditions, including express agreements on the dates of project commencement and completion, along with liabilities for breach.
Failure to provide the owner of the land use right with the fulfillment of these requirements will result in the local authorities bearing liabilities for breach of contract.
2. Where land has become idle due to the fault of the owner of the land use right, as in the past, there are two possible sanctions dependent on the length of time that the land has been idle. If the land has been idle for over a year, the owner of the land use right will be imposed with a fine of 20% of the original granting fee. The owner has 30 days to choose to pay the charge or simply forfeit the land use rights. If the status of the land remains idle for over 2 years, the authorities are entitled to confiscate the land use right with no compensation. The authorities must concurrently issue the owner with notice of the right to apply for a hearing.
Land is an important resource in China and - especially in the economic centers - is becoming increasingly scarce. At the same time, land is an important source of revenue for local governments, that therefore sometimes tend to be rather generous by not strictly implementing the statutory regulations on land use and timing of construction. The New Measures are an indication that the central government intends to impose stricter controls. It now remains to be seen how the New Measures will be implemented by local authorities in practice.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 16/07/2012.