Interpretation of the Supreme People’s Court on the Application of Law for the Trial of Cases of Disputes on Contracts Involving the Right to Use State-owned Land 2005

Interpretation of the Supreme People’s Court on the Application of Law for the Trial of Cases of Disputes on Contracts Involving the Right to Use State-owned Land 2005

Announcement of the Supreme People’s Court
(Interpretation No. 5[2005] of the Supreme People’s Court)

The Interpretation of the Supreme People’s Court on the Application of Law for the Trial of Cases of Disputes on Contracts Involving the Right to Use State-owned Land, which was adopted at the 1334th meeting of the Judicial Committee of the Supreme People’s Court on November 23, 2004, is hereby promulgated and shall come into force as of August 1st, 2005.
June 18, 2005

Interpretation of the Supreme People’s Court on the Application of Law for the Trial of Cases of Disputes on Contracts Involving the Right to Use State-owned Land
(Adopted at the 1334th meeting of the Judicial Committee of the Supreme People’s Court on November 23, 2004)

The present Interpretation is formulated according to the provisions of such laws as the General Principles of the Civil Law of the People’s Republic of China, the Contract Law of the People’s Republic of China, the Law of the People’s Republic of China on Land Administration and the Law of the People’s Republic of China on Urban Real Estate Administration and the practice of civil trials concerning the issues on the application of law for the trial of cases of disputes on contracts involving the right to use state-owned land.

I. Disputes over the Assignment Contract of the Right to Use State-owned Land
Article 1 The term “the assignment contract of the right to use state-owned land” as mentioned in the present Interpretation refers to the contract in which the administrative department of land of the people’s government at the municipal or county level, as the assigner, transfers the right to use state-owned land within a certain term to the assignee who shall pay the assignment fees for the right to use state-owned land.

Article 2 Any assignment contract of the right to use state-owned land as concluded between the administrative committee of the development zone, as the assigner, and the assignee shall be deemed as invalid.
The assignment contract of the right to use state-owned land as concluded between the administrative committee of the development zone, as the assigner, and the assignee before the implementation of the present Interpretation may be deemed as effective if it has been ratified by the administrative department of land of the people’s government at the municipal or county level before any litigation is filed.

Article 3 For the land use right that has been approved by the people’s government at the municipal or county level for assignment by contractual means, where the assignment fees of the land use right is lower than the minimum price as decided in light of the state provisions by the local people’s government when the contract is concluded, the price clause as stipulated in the assignment contact of land use right shall be deemed as invalid.
Where the party concerned asks to pay the assignment fees of land use right in light of the market evaluation price when the contract is concluded, it shall be supported; where the assignee refuses to make up in light of the market evaluation price and asks to terminate the contract, it shall be supported. The loss as incurred there from shall be born by the parties concerned according to their faults.

Article 4 Where the assigner to an assignment contact of land use right fails to transfer the land due to its failure to handle the formalities for approval of assignment of land use right and the assignee requests to terminate the contract, it shall be supported.

Article 5 Where the assignee alters the use of land as stipulated in the assignment contact of land use right upon the approval of the assigner as well as the administrative department of city planning of the people’s government at the municipal or county level, and the party concerned requests to adjust the assignment fees in light of the assignment fee standard as applied for the land of the same use when an litigation is filed, it shall be supported.

Article 6 Where the assignee unlawfully alters the use of land as stipulated in the assignment contact of land use right and the assigner requests to terminate the contract, it shall be supported.

II. Disputes over the Transfer Contract of Land Use Right

Article 7 The term “the transfer contract of land use right” as mentioned in the present Interpretation refers to the contract in which a person who has the land use right, as the transferor, transfers the land use right to the transferee who shall pay the price thereof.

Article 8 Where a person who has the land use right, as the transferor, concludes a transfer contract of land use right with the transferee and thereafter, one party concerned requests the contract to be deemed as invalid for the reason that both parties haven’t handled the formalities for altering the registration of land use right, it shall not be supported.

Article 9 Where the transferor concludes a transfer contract of land use right with the transferee before acquiring the certificate of the right to use the land as transferred, and before any litigation, the transferor has acquired the certificate of the right to use the land as transferred or the people’s government with the approval power approves the transfer, the contract shall be deemed as valid.

Article 10 Where a person who has the land use right, as the transferor, concludes several transfer contracts concerning the right to use the same land as transferred, in the event that the said transfer contracts are all effective and the relevant transferees all request the performance of the said contracts, it shall be handled respectively under the following circumstances:
(1) Where the transferee who has handled the formalities for altering the registration of land use right requests the transferor to perform such obligations stipulated in the contract as transferring the land, it shall be supported;
(2) In the event that all the transferees haven’t gone through the formalities for altering the registration of land use right, where the transferee that has lawfully occupied the land for investment and development in advance requests the transferor to perform such obligations stipulated in the contract as altering the registration of land use right, it shall be supported.
(3) In the event that none of the transferees has gone through the formalities for altering the registration of land use right or has occupied the land for investment and development, where the transferee who has paid the assignment fees in advance requests the transferor to perform such obligations stipulated in the contract as transferring the land and handling the formalities for altering the registration of land use right, it shall be supported; or
(4) Where all the contracts haven’t been performed, the transferee who has concluded the contract in advance according to law requests the performance of the contract, it shall be supported.
Where the transferee who fails to obtain the land use right requests to terminate the contract and claims the compensation for loss, it shall be handled according to the relevant provisions of the Contract Law of the People’s Republic of China.

Article 11 Where a person who has the land use right concludes any contract to transfer or assign the land use right with a transferee without any approval from the people’s government with the power of approval, the contract shall be deemed as invalid. However, where the people’s government with the power of approval approves the formalities for transferring the land use right before any litigation is filed, the contract shall be deemed as valid.

Article 12 Where a person who has the land use right concludes a contract to transfer or assign the land use right with a transferee, the transfer has been approved by the people’s government with the power of approval before any litigation is filed and it’s stipulated that the transferee shall go through the formalities for transferring the land use right, the contract as concluded between the person who has the land use right and the transferee may be treated as a compensatory contract.

Article 13 Where a person who has the land use right concludes a contract to transfer or assign the land use right with a transfer, and the people’s government with the power of approval decides to directly transfer the land use right to the transferee without any formality for transferring the land use right, the contract as concluded between the person who has the land use right and the transferee may be treated as a compensatory contract.

III. Disputes over the Cooperative Development Contract of Real Estate

Article 14 The term “the cooperative development contract of real estate” as mentioned in the present Interpretation refers to the contract as concluded by the parties concerned who make a common investment of land use right and capital, etc. with the major content that both parties develop real estate in cooperation to share profits and take risks together.

Article 15 Where either party of a cooperative development contract has the qualification of developing real estate, the contract shall be deemed as effective.
Where both parties do not have the qualification of developing real estate, the contract shall be deemed as invalid. However, where either party has obtained the qualification of developing and operating real estate or has established a real estate enterprise with the qualification of developing and operating real estate in cooperation according to law before any litigation is filed, the contract shall be deemed as valid.

Article 16 Where a person who has the land use right concludes any cooperative development contract of real estate with the assignment of land use right as investment without the approval of the people’s government with the power of approval, the contract shall be deemed as invalid. However, where the formalities for approval have been handled before any litigation is filed, the contract shall be deemed as valid.

Article 17Where the investment amount exceeds that as stipulated in the cooperative development contract of real estate and the parties concerned fail to reach an agreement on the proportion of increased investment amount to be undertaken, it shall be decided according to the faults of the parties concerned. Where there is any reason for which the liability cannot be fixed on the parties concerned or the faults of the parties concerned cannot be decided, the investment proportion shall be decided in light of the investment proportion as stipulated. Where there is no stipulation of investment proportion, it shall be decided in light of the proportion of profit distribution as stipulated.

Article 18 Where the actual floor area of the house is less than that as stipulated in the cooperative development contract of real estate and the parties concerned fail to reach an agreement on the distribution proportion of the actual floor area of the house, it shall be decided in light of the faults of the parties concerned. Where there is any reason for which the liability cannot be fixed on the parties concerned or the faults of the parties concerned cannot be decided, it shall be decided in light of the distribution proportion of profits as stipulated.

Article 19 Under any of the following circumstances, where either party concerned to a cooperative development contract requests the distribution of proceeds from the real estate project, it shall not be accepted; where it’s accepted, the litigation shall be rejected:
(1) Where any real estate construction project fails to go through the due approval formalities and fails to obtain the approval of the administrative department of the people’s government with the power of approval according to law;
(2) Where any real estate construction project fails to obtain the license of construction project planning; or
(3) Where the planning of any construction project is unlawfully altered.
The loss as incurred from the disguise of alteration of construction project planning shall be born by the party concerned in light of the faults.

Article 20 Where the real floor area of the house exceeds the floor area as planned and, upon the approval of the people’s government with the power of approval, the parties concerned fail to reach an agreement on the distribution proportion of the excessive part, it shall be decided in light of the distribution proportion of profits as stipulated. Where the parties concerned fail to reach an agreement on the increased investment amount to be undertaken, it shall be decided in light of the investment proportion as stipulated; where there is no stipulation of investment proportion, it shall be decided in light of the distribution proportion of profits as stipulated.

Article 21 Any house as developed and constructed by a party concerned in violation of the planning, which has been recognized as an illegal house by the administrative department of the people’s government with the power of approval, shall be ordered to be dismantled. Where the parties concerned fail to reach an agreement on loss undertaking, the obligations thereof shall be decided in light of the faults of the parties; where the faults cannot be decided, the obligations shall be decided in light of the investment proportion as stipulated; where there is no stipulated investment proportion, the obligations shall be decided in light of the distribution proportion of profits as stipulated.

Article 22 Where the distribution proportion of profits is only decided by the investment amount as stipulated in the cooperative development contract of real estate and the parties concerned fail to contribute the capital in full amount, the profits shall be distributed in light of the actual investment proportion of the parties concerned.

Article 23 Where the parties to a cooperative development contract of real estate requires to supplement the investment by beforehand sales amount and participate in the distribution of profits, it shall not be supported.

Article 24 Where it is stipulated in the cooperative development contract of real estate that the party providing the land use right may not take any operating risk and only collects fixed interests, it shall be deemed as a transfer contract of land use right.

Article 25 Where it is stipulated in the cooperative development contract of real estate that the party providing the capital may not take any operating risk and only obtains a fixed amount of houses, it shall be deemed as a purchase and sale contract of houses.

Article 26 Where it is stipulated in the cooperative development contract of real estate that the party concerned that provides the capital may not take any operating risk and only collects fixed amount of money, it shall be deemed as a loan contract.

Article 27 Where it is stipulated in the cooperative development contract of real estate that the party concerned that provides the capital may not take any operating risk and only rents or uses the houses in any other form, it shall be deemed as a contract for lease of houses.

IV. Other Matters
Article 28 The present Interpretation shall come into force as of August 1, 2005; after the implementation, the first instance of a case shall be governed by the present Interpretation.
In the case of an inconsistency between the judicial interpretation as issued by the Supreme People’s Court before the implementation of the present Interpretation and the present Interpretation, the present Interpretation shall prevail.