Interpretation of the Supreme People's Court on Issues concerning the Application of the Property Rights Law of the People's Republic of China(I)

Fa Shi [2016] No. 5

February 22, 2016

The Interpretation of the Supreme People's Court on Issues concerning the Application of the Property Rights Law of the People's Republic of China, which was adopted at the 1670th Meeting of the Judicial Committee of the Supreme People's Court on December 10, 2015, is hereby promulgated for implementation as of March 1, 2016.

This interpretation is formulated with a view to properly trying property right dispute cases in accordance with the provisions of the Property Rights Law of the People's Republic of China (the "Law") in civil trial practice.

Article 1 Where parties concerned file civil lawsuits with respect to property ownership disputes or the selling, donating and mortgaging of property rights, such lawsuits shall be accepted in accordance with the law unless the parties concerned have requested in administrative lawsuits to resolve such civil disputes and the court has accepted and settled them.

Article 2 Where a party concerned provides evidences to prove that the information recorded in the realty register does not conform to the actual conditions, and that it is the real holder of a property right, and requests the court to confirm the ownership of that property right, such request shall be supported.

Article 3 Where a party concerned files a civil lawsuit to request the court to confirm the ownership of a property right after the validity of dissidence registration expires due to reasons stipulated in Paragraph 2 of Article 19 of the Law, the court shall accept the case in accordance with the law. The invalidation of dissidence registration will not affect the substantive trial of the case by the people's court.

Article 4 Without the consent of the registered holder in advance notice registration, any transfer of real estate ownership, or creation of other property rights over construction land, such as use right, easement, and mortgage right, shall be deemed as null and void pursuant to Paragraph 1 of Article 20 of the Law.

Article 5 Where a realty sales agreement is avoided, cancelled or terminated, or when the registered holder in advance notice registration gives up his/her creditor's right, it shall be deemed that "the creditor's right is terminated" as stated in Paragraph 2 of Article 20 of the Law.

Article 6 Where the assignor assigns the ownership of a ship, aircraft or vehicle to the assignee and the assignee has paid the consideration and has taken possession of it, when the creditor of the assignor claims to be a "bona fide third party" under Article 24 of the Law, notwithstanding that it is not registered, such claim shall not be supported, unless it is stipulated otherwise by any laws.

Article 7 Verdicts, awards and mediation agreements that have taken effect, issued by people's courts and arbitration committees when dividing commonly-owned realty or chattel, and warrants on auction deals and debt settlement by payment in kind issued by the people's courts in the execution procedure, whereby the original property right relationships are changed, shall be deemed as legal documents of the people's courts or arbitration committees that lead to the creation, alteration, alienation or termination of property rights as stipulated in Article 28 of the Law.

Article 8 Where a proprietor who is entitled to a property right under Article 28, 29 and 30 of the Law but has not yet finished property delivery or realty registration applies for protection of the property right pursuant to provisions of Articles 34 to 37 of the Law, such application shall be affirmed.

Article 9 Where share co-owners of a common property right are changed due to reasons such as inheritance and succession, and certain share co-owners claim the preemptive right to purchase shares of the co-owned right, such a claim shall not be supported unless agreed otherwise by the share co-owners.

Article 10 The "same conditions" as stated in Article 101 of the Law shall be determined by considering a range of factors such as transfer price of co-owned right, and payment terms and deadline.

Article 11 Where there are provisions agreed by share co-owners during the period of preemptive purchase right, such provisions shall be observed; where there are no provisions or the provisions are not clear, the following provisions shall be observed:
1. where an exercising period is specified in the notice on the "same conditions" issued by the assignor to the share co-owners, it shall be exercised within such period;
2. where no exercise period is specified in such notice or the exercise period is less than 15 days from the receipt of such notification, the exercise period shall be 15 days;
3. where no such notice is issued from the assignor, the exercise period shall be 15 days from the day when the share co-owners know or ought to know the final "same conditions"; or
4. where no such notification is issued from the assignor, and the day the share co-owners know or ought to know the final "same conditions" cannot be confirmed, the exercise period shall be six months from the date of transfer of co-owned right.

Article 12 Where a share co-owner transfers his or her share to a person other than a co-owner, and other share co-owners request to buy such share in the same conditions pursuant to the relevant laws and judicial interpretations, such request shall be supported.
Requests by other share co-owners shall not be supported under any of the following circumstances:
1. failing to assert the preemptive right to purchase in the exercise period stipulated in Article 11 hereof, or having asserted the preemptive right but requesting substantive changes such as reducing transfer price and increasing the amount to be borne by the assignor; or
2. merely requesting to cancel the transfer agreement for co-owned shares or to legally invalidate the agreement on the pretext of infringement on their preemptive purchase rights.

Article 13 Where a share co-owner claims preemptive right to shares transferred by other share co-owners pursuant to Article 101 of the Law, such claim shall not be supported unless agreed otherwise by the share co-owners.

Article 14 Where more than two share co-owners, who claim the purchase preemptive right but fail to reach an agreement, request to exercise preemptive purchase rights in proportion to their shares held at the time of transfer, such request shall be supported.

Article 15 Where the assignee of a realty or chattel is not aware that the assignor is not entitled to dispose of the property, and the assignee has not committed a serious fault, the assignee shall be regarded as a bona fide assignee.
Where the real right holder asserts that the assignee is not a bona fide assignee, he/she shall provide related proofs.

Article 16 If any of the following circumstances applies, it shall be regarded that the assignee of realty knows that the assignor is not entitled to dispose of the realty:
1. there is effective dissidence registration in the register;
2. consent is not obtained from the registered right holder in advance notice registration within the validity period of such registration;
3. the register contains records of rulings and decisions on the seizure or restrictive disposal of the realty right, etc by judicial organs or administrative departments;
4. the assignee knows that the right holder in the register is not right; or
5. the assignee knows that the ownership of the realty right has been assigned to others.
Where real right holder has evidence that the assignee knows that the assignor has no right to dispose of the realty, it shall be regarded that the assignee has committed a serious fault.

Article 17 Where the transaction subject, place or time does not conform to customary practices in the process of transfer of a chattel, it shall be regarded that the assignee has committed a serious fault.

Article 18 "When the assignee accepts a realty or chattel" as described in Item 1, Paragraph 1 of Article 106 of the Law refers to the time the statutory realty transfer registration is completed or chattel is delivered.
Where a chattel is delivered in the way stipulated in Article 25 of the Law, the time when the transfer becomes effective shall be the delivery time of the chattel; where chattel is delivered in the way stipulated in Article 26 of the Law, the agreement between the assignee and the assignor on the transfer of the right to request return of property by a third party shall be the delivery time of the chattel.
Where there are laws stipulated otherwise in respect of the creation of realty or chattel rights, it shall be determined whether the right holder is a bona fide holder or not according to the time stipulated by the laws.

Article 19 The "reasonable price" as specified in Item 2, Paragraph 1 of Article 106 of the Law shall be determined by considering a range of factors such as the nature and quantity of the transfer subject, payment terms, and local market prices at the time of transaction, and transaction practices.

Article 20 Where the assignor delivers a ship, aircraft or vehicle to the assignee as prescribed in Article 24 of the Law, it shall be regarded that the transfer meets the conditions of bona fide acquisition as stipulated in Item 3, Paragraph 1 of Article 106 of the Law.

Article 21 Where the assignee asserts the acquisition of ownership pursuant to Article 106 of the Law, such assertion shall not be supported is any of the following circumstances applies:
1. the transfer agreement is considered to be invalid due to violation of Article 52 of the Contract Law; or
2. the transfer agreement is cancelled due to legal reasons, e.g. fraud, threat, and profiteering on the side of the assignee.

Article 22 This interpretation shall take effect as of March 1, 2016.
This interpretation shall apply to first instances of cases accepted by people's courts after the implementation of this interpretation.
First and second instances of cases accepted by people's courts before the implementation of this interpretation and not yet finished after the implementation of this interpretation, and cases settled before the implementation of this interpretation and the parties concerned request the court to retry such cases or the court decides to retry them pursuant to the relevant trial supervision procedure after the implementation of this interpretation shall not be governed by this interpretation.