Chinese fear homes are castles in
the air By Stephen Wong
SHANGHAI - Lacking full legal protection
of their property rights, housing owners in China
are worrying that the homes they have bought with
their life savings may be just castles in the air.
As the country's constitution stipulates
that all land belongs to the state, the government
only grants the right to use land for building
housing. In other words, homeowners do not own the
land on which their homes are built. For
residential housing, people have the right to use
land for no longer than 70 years. For office
and
commercial buildings, the period is much shorter.
There is no stipulation that homeowners
are entitled to renew their lease when it expires.
As such, the government can legally take back a
piece of land, together with whatever is built on
it, when the lease expires. Nor is there any
stipulation that the government has to compensate
leaseholders.
In response to widespread
public concern, the National People's Congress is
considering "real rights" legislation. Real rights
refer to rights concerning tangible property in
general, including real-estate rights. The laws
regarding real rights, together with laws
concerning intangible property, such as creditors'
and intellectual-property rights, constitute
property law.
Zhang Wei, a 30-year-old
white-collar worker in Shanghai, just bought a
second-hand apartment in the metropolis for about
10,000 yuan (US$1,264) per square meter. For the
five-year-old apartment he has to pay the bank
about 2,500 yuan a month for a 30-year mortgage,
which takes away a quarter of his monthly income.
Plus, for the down payment he already spent most
of his savings.
However, Zhang now fears
that even when he pays off the mortgage 30 years
later, he will not fully own the apartment.
"The apartment is mine, but the land under
the apartment is not. If the law does not change,
I will be living in a castle in the air in 65
years," said Zhang.
Zhang's fear is shared
by millions of homeowners who are afraid that the
government might take away their homes when their
land leases expire.
While it will be many
years before Zhang's lease runs out, some
commercial estates in southern China's booming
city of Shenzhen have already become "castles in
the air".
Therefore, while China's
lawmakers are still debating the legislation on
real rights, Shenzhen is forced to deal with the
problem in practical terms. And in this regard,
Shenzhen's experiment may provide some insights
into how China can deal with the issue of renewing
land leases.
Shenzhen, as a special
economic zone, was the first city in China to sell
land (or the right to use land), in the early
1980s. Now the land leases of some commercial
estates have expired.
According to Chinese
law, the length of a land lease varies according
to its usage. The maximum term is 70 years for
residential housing, followed by 50 years for
industrial estates, and then 40 years for
commercial estates, according to a law passed in
1990.
But the piece of land under the
Guoshang Building (Shenzhen International Arcade),
built in 1983 at Shenzhen's busy commercial
district of Luohu, expired in 2002, because the
land-use right was granted in 1982, long before
the national law went into effect in 1990. So the
lease followed a 1982 Shenzhen regulation
stipulating that the term of land use for
commercial estates was only 20 years.
The
Guoshang Building is not the only "castle in the
air" in the city. A number of other projects built
in the early 1980s are facing the same problem.
The Shenzhen government introduced a local
regulation in 2004 requiring housing owners with
expired land leases to pay 35% of the current land
price as a fee so as to extend their lease to the
maximum 40 years as stipulated by the national
law. "Or the government will take away the land
after paying the depreciated cost of the
construction," according the regulation.
The Shenzhen government said many
developers got the land free of charge in the
early 1980s, when Shenzhen was still trying to vie
for investment. "It will be unfair if they are
allowed to continue to use the land without any
charge," said a government official.
But
owners complained that they did not know the land
lease would expire so soon when they bought
property from the developer. Property-ownership
certificates issued in the early 1980s did not
specify the length of time the land could be used.
In fact, in the 1980s, selling land (or the right
to use land) was still taboo. When Shenzhen made
its first public sales of land-use rights in 1987,
it risked violating the national constitution.
Although the Shenzhen government does not
take any action to force out property owners who
have not yet to renewed their land leases, the
owners have already found it difficult to sell or
rent out their property. "Nobody wants to buy or
rent a space whose land lease is already expired,"
said Lai Guoqiang, deputy managing director of
real-estate agency Centaline (China).
Before the market reform in the 1980s,
city dwellers would get an apartment from their
work units. Rich "work units" such as the tax
authority and big state-owned companies usually
gave their employees nice, large apartments, but
the employees of small companies had to wait years
before getting a home.
China lifted the
ban on the sale of land-use rights in 1988 and
land sales have since become a major source of
income for local governments.
In 1990, the
central government passed a law setting a ceiling
on the maximum allotted time land could be used
Insiders say the idea of a 70-year
land-use contract came from Hong Kong. The Hong
Kong government did not sell land to users for
permanent occupation, because British colonists
obtained only 99 years' right to the land from the
Qing Dynasty authority in the late 19th century.
Economist Mao Yushi said the 70-year
land-use period was "absurd". He added: "It leaves
too many problems to the future."
There
have been heated discussions about land-use rights
in recent years as lawmakers consider a
real-rights law to protect private assets in a
country where public or state assets are given
priority over private property.
Homeowners
hope the law can give them more rights to the land
than the 1994 law that allows the government to
take back expired land from them in the name of
the "public interest". With frequent riots over
forced relocations in the country, the Chinese
people have plenty of reason to believe that the
"public interests" may turn out to be the
interests of the privileged.
Eight years
have passed since the first draft of the
real-rights law was presented to China's
parliament. So far the draft has been revised four
times, and the latest one, submitted last month,
finally allowed homeowners "automatically" to
renew their land-use rights after their lease
expires. However, it did not say how long the
lease could be extended, and whether homeowners
should have to pay extra money for the renewal.
The draft real-rights law on ownership is
being criticized by conservative scholars. Gong
Xiantian, a law professor at Peking University,
argued that the draft was "unconstitutional".
Only when the real-rights law is finally
passed can China's homeowners put their minds at
ease.
Stephen Wong is a
freelance writer based in Shanghai.
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