Real Rights Law of the People's Republic of China

　　Order of the President [2007] No.62

　　March 16, 2007

　　(Adopted at the Fifth Session of the Tenth National People's Congress and promulgated by the Order of the President of the People's Republic of China No.62 on March 16, 2007, and effective as of October 1, 2007)

　　Contents
　　Part I General Provisions
　　Chapter I Basic Principles
　　Chapter II Creation, Alteration, Transfer and Termination of Real Rights
　　Section 1 Registration of Immovables
　　Section 2 Delivery of Movables
　　Section 3 Other Provisions
　　Chapter III Protection of Real Rights
　　Part II Ownership
　　Chapter IV General Provisions on Ownership
　　Chapter V State, Collective and Private Ownerships
　　Chapter VI Partitioned Ownership of Buildings
　　Chapter VII Neighboring Relationships
　　Chapter VIII Co-ownership
　　Chapter IX Special Provisions on Appropriation of Ownership
　　Part III Usufruct Rights
　　Chapter X General Provisions on Usufruct Rights
　　Chapter XI Land Contractual Operating Rights
　　Chapter XII Construction Land Use Rights
　　Chapter XIII Residential Land Use Rights
　　Chapter XIV Easements
　　Part IV Collateral Rights
　　Chapter XV General Provisions on Collateral Rights
　　Chapter XVI Mortgage Rights
　　Section 1 General Mortgage Rights
　　Section 2 Maximum Amount of Mortgage Rights
　　Chapter XVII Pledge Rights
　　Section 1 Movable Pledge
　　Section 2 Pledge of Rights
　　Chapter XVIII Lien
　　Part V Possession
　　Chapter XIX Possession

　　Part I General Provisions

　　Chapter I Basic Principles

Article 1 The Real Rights Law of the People's Republic of China (hereinafter referred to as "this Law" is enacted in accordance with the Constitution in order to maintain the basic economic system of the State, to safeguard the socialist market economic order, to clearly define the attribution of specific properties, to promote the utilities of properties and to protect the real rights of rights holders.

Article 2 The civil relationships arising from the attribution and utilization of properties shall be governed by this Law.
　　Properties referred to in this Law include immovables and movables. Where it is prescribed in any provision that a certain right be the object of real rights, such provision shall apply.
　　For the purposes of this Law, "real rights" refer to a rights holder's exclusive right of direct control over a specific property in accordance with the law, and include ownership, usufruct rights and collateral rights.

Article 3 In the primary phase of socialism, the State adheres to the basic economic system with public ownership as a principal element, and diverse forms of ownership developing jointly.
　　The State consolidates and develops the public economy, and encourages, supports and guides the development of the non-public economy.
　　The State adopts a socialist market economic system, and protects the equal legal status and the development rights of all market subjects.

Article 4 The real rights of the State, collectives, individuals or any other rights holders are protected by law, and no entity or individual may infringe upon such rights.

Article 5 The categories of real rights and their contents are prescribed by law.

Article 6 The creation, alteration, transfer or termination of a real right of an immovable shall be subject to registration in accordance with the law. The creation or transfer of a real right of a movable shall be subject to delivery in accordance with the law.

Article 7 The acquisition and exercise of real rights shall comply with the law and respect social ethics, and may not infringe upon the public interest and the legitimate rights and interests of any other person.

Article 8 Where any other relevant law contains special provision in respect of a real right, such provision shall prevail.

　　Chapter II Creation, Alteration, Transfer and Termination of Real Rights

　　Section 1 Registration of Immovables

Article 9 Upon legal registration, the creation, alteration, transfer or termination of the real rights of an immovable comes into effect; and it shall have no effect if it is not registered in accordance with law, unless otherwise prescribed by any law.
　　As for natural resources owned by the State in accordance with the law, the registration of ownership may not be required.


Article 10 The registration of an immovable shall be handled by the registrar at the locality of the immovable.
　　The State adopts a uniform registration system for immovables. The scope, registrars and registration measures of such uniform registration shall be provided for by the laws and administrative regulations.

Article 11 In light of the different registration items, an applicant shall, when applying for the registration of an immovable, provide such necessary materials as the ownership certificate of the immovable and the location and area of the immovable.

Article 12 The registrar shall perform the following duties:
　　1. Verifying the ownership certificate and other required materials as provided by the applicant;
　　2. Querying the applicant on the registration items concerned;
　　3. Registering the relevant items in accordance with the facts and in a timely manner; and
　　4. Other duties as provided for in any law or administrative regulation.
　　The registrar may require the applicant provide supplementary materials where further proof in relation to the situation of the immovable under application for registration is needed, and may conduct on-site inspection when necessary.

Article 13 The registrar shall not commit any of the following acts:
　　1. Requesting an appraisal of an immovable;
　　2. Undertaking repeated registration in the name of annual inspection; and
　　3. Any other acts beyond the scope of registration duties.

Article 14 Where the creation, alteration, transfer or termination of a real right of an immovable is required by law to be registered, it takes effect on the date it is recorded in the register of immovables.

Article 15 Where a contract is entered into by the related parties concerning the creation, alteration, transfer or termination of the real rights of an immovable, the contract takes effect upon the establishment of the contract, unless it is otherwise prescribed by any law; and the validity of the contract is not affected, whether the real right has been registered or not.

Article 16 The register of immovables shall be the basis for deciding the ownership and contents of an immovable.
　　The register of immovables shall be under the management of the registrar.

Article 17 The certificate of ownership of an immovable shall be the evidence for the rights holder's ownership of an immovable. The items recorded in the certificate of ownership of an immovable shall accord with those recorded in the register of immovables. In the case of any inconsistencies, unless there is any evidence showing that the register of immovables contains any error, items recorded in the register of immovables shall prevail.

Article 18 A rights holder or interested party may apply to consult and copy the registration materials, and the registrar shall make these materials available.

Article 19 Where a rights holder or interested party believes that any item recorded in the register of immovables is incorrect, he may apply for a correction of the registration. The registrar shall alter the registration accordingly if the rights holder recorded in the register of immovables agrees in writing to revise the registration, or if there is evidence showing that the registration contains any error.
　　Where the rights holder recorded in the register of immovables does not agree to such alteration, the interested party may apply for objection registration. Where the registrar grants the objection registration but the applicant fails to lodge an action within 15 days, the objection registration shall lapse. Where the objection registration is improper, causing damage to the rights holder, the rights holder may request the applicant to compensate for damages.

Article 20 Where the related parties enter into a purchase agreement on a premise or the real rights of any other immovable, they may apply to the registrar for pre-registration so as to ensure realization of real rights in the future. After the pre-registration, any disposal of the immovable without the consent of the holder in the pre-registration is not valid.
　　If, after the pre-registration is made, the obligee's right is terminated or the application for the registration of the immovable is not filed within 3 months of the date it can be registered, the pre-registration shall lapse.

Article 21 Where any related party provides false materials in applying for registration and causes damages to any other person, he shall be liable for compensation of damages.
　　Where a registrar causes damages to any other person by virtue of a mistake in registration, the registrar shall be liable for compensation of damages. After making the compensation, the registrar may seek to recover the amount from the person responsible for the registration mistake.

Article 22 Immovable registration fees shall be charged per unit, and may not be charged on the basis of the size, volume or price of the immovable. The relevant departments of the State Council, in collaboration with the competent pricing department, shall formulate specific rate of fees.

　　Section 2 Delivery of Movables

Article 23 The creation or transfer of the real rights of a movable takes effect upon delivery, unless otherwise prescribed by any law.

Article 24 The creation, alteration, transfer or termination of the real rights of any vessel, aircraft, or motor vehicle, etc. may not challenge any bona fide third party if it is not registered.


Article 25 Where the rights holder has taken legal possession of a movable prior to the creation or transfer of a movable's real rights, the real rights take effect upon the effectiveness of the legal act.

Article 26 Where a third party has taken legal possession of a movable prior to the creation or transfer of a movable's real rights, the person assuming the obligation of delivery may assign the right to request the third party to return the original object in lieu of delivery.

Article 27 Where both parties agree to let the transferor retain possession of the movable when the real rights of a movable are transferred, the real rights take effect upon the effectiveness of the agreement.

　　Section 3 Other Provisions

Article 28 For the creation, alteration, transfer or termination of real rights resulting from a legal document issued by the People's Court or arbitration committee or a requisition decision issued by the People's Government, etc., the real rights take effect upon the effectiveness of the legal document or the requisition decision of the People's Government, etc.

Article 29 Where real rights are acquired through inheritance or bequest, the real rights take effect at the commencement of the inheritance or bequest.

Article 30 Where real rights are created or terminated as a result of such factual events as the legal construction or demolition of premises, the real rights take effect upon the accomplishment of the factual event.

Article 31 Regarding real rights of an immovable appropriated according to the provisions of Articles 28 through 30 of this Law, any disposal thereof does not effect the real rights until it is registered as required by law.

　　Chapter III Protection of Real Rights

Article 32 Where real rights are infringed upon, the rights holder may settle the problem by means of conciliation, mediation, arbitration or action, etc.

Article 33 Where the ownership or contents of real rights are in dispute, the interested parties may request the confirmation of the real rights.

Article 34 Where an immovable or movable is under unauthorized possession, the rights holder may request the return of the original object.


Article 35 Where real rights are under obstruction or may be obstructed, the rights holder may request the removal of the impediment or the elimination of the danger.

Article 36 Where an immovable or movable is damaged, the rights holder may request the repair, remake, change or restoration to the original state.

Article 37 Where an infringement upon any real right causes losses to the rights holder, the rights holder may request compensation for the losses or the assumption of any other civil liability.

Article 38 The methods for protecting real rights as prescribed in this Law may apply either independently or jointly in light of the circumstances of infringement.
　　In addition to assuming civil liabilities, any entity or individual infringing upon real rights shall assume the administrative liabilities where he violates any provision on administrative regulation; and where any crime is established, he shall assume the criminal liabilities.

　　Part II Ownership

　　Chapter IV General Provisions on Ownership

Article 39 The owner of an immovable or movable is entitled to possession, use, benefit and disposal of the immovable or movable in accordance with the law.

Article 40 An owner of an immovable or movable is entitled to the establishment of usufruct rights or collateral rights over the immovable or movable. When exercising the right, the holder of usufruct rights or collateral rights may not infringe upon the rights and interests of the owner.

Article 41 Where an immovable or movable is exclusively owned by the State according to law, no entity or individual may acquire the ownership thereof.

Article 42 For the purpose of public interest, the requisition of lands owned collectively, premises owned by entities and individuals or other immovables is permitted according to the limits of statutory power and procedures.
　　The requisition of collectively owned land requires, in accordance with the law, the full payment of land compensation fees, relocation subsidies, compensation for the above-ground fixtures of the land and seedlings, etc., the arrangement of social security fees for farmers affected by the land requisition, the guarantee of their livelihood and protection of their legitimate rights and interests.
　　The requisition of premises or other immovables owned by entities and individuals requires compensation for demolishment and relocation in accordance with the law and protection of the legitimate rights and interests of the owners of the requisitioned immovables. The requisition of individuals' residential houses requires the guarantee of the housing conditions of the owners of the requisitioned houses.
　　No individual or entity may embezzle, misappropriate, privately divide, detain or delay the payment of compensation fees for requisition and other fees.

Article 43 The State provides special protection for agricultural lands, stringently restricts the conversion of agricultural lands into construction lands and controls the aggregate quantity of construction lands. Any collectively owned land shall not be requisitioned in violation of the limits of statutory power and procedures.

Article 44 In emergency situations or for disaster relief, the use of immovables or movables owned by entities and individuals according to the limits of statutory power and procedures is allowed. After emergency use, the immovables or movables shall be returned to the owners. Where an immovable or movable owned by any entity or individual is damaged or lost after being used, commensurate compensation shall be made.

　　Chapter V State, Collective and Private Ownerships

Article 45 Properties legally owned by the State are owned by the State, i.e., owned by all the people.
　　The State Council shall exercise the ownership of State-owned properties on behalf of the State. Where another law contains the provision in respect to the ownership of State-owned property, such provision shall prevail.

Article 46 Mineral deposits, waters and sea territories are owned by the State.

Article 47 Urban lands are subject to State ownership. Lands in rural areas and suburban areas legally owned by the State are owned by the State.

Article 48 Natural resources such as forests, mountains, grasslands, wastelands and tidal flats are owned by the State, except for those owned collectively by law.

Article 49 Wildlife resources legally owned by the State are owned by the State.

Article 50 Radio frequency spectrum resources are owned by the State.

Article 51 Cultural relics legally owned by the State are owned by the State.

Article 52 National defense assets are subject to State ownership.
　　Infrastructures such as railways, highways, electric power facilities, telecommunication facilities, and petrol and gas pipelines legally owned by the State are owned by the State.

Article 53 State authorities have the power, in accordance with the law and the relevant provisions of the State Council, to possess, use and dispose of any immovable or movable directly controlled by them.

Article 54 A public institution held by the State is entitled to, in accordance with the laws and the relevant provisions of the State Council, possession, use, benefit and disposal of any immovable or movable directly controlled by them.

Article 55 Where an enterprise is set up with State funds, the State Council and the local people's governments shall perform the contributor's duties as well as carry the rights and interests on behalf of the State in accordance with the relevant laws and administrative regulations.

Article 56 Properties owned by the State are protected by law, and no entity or individual may occupy, plunder, privately divide, detain or damage them.

Article 57 The institutions performing the duties of managing and supervising State-owned properties and their staff members shall, in accordance with the law, strengthen the management and supervision of State-owned properties to promote the maintenance and increase of the value of State-owned properties and to prevent losses thereof. Where any entity or individual causes any loss of State-owned properties by misusing authority or neglecting duty, he shall assume legal liabilities in accordance with the law.
　　Where, in the process of enterprise restructuring, merger, division or related-party transactions, any entity or individual found causing a loss in State-owned properties by way of transferring them at less than their value, conspiring to divide them secretly, providing a guarantee without authorization or in any other manner considered a violation of the provisions on the management of State-owned properties, shall be liable in accordance with the law.

Article 58 Immovables and movables owned collectively include:
　　1. Lands, forests, mountains, grasslands, wastelands and tidal flats that are owned collectively in accordance with the law;
　　2. Buildings, production facilities, agricultural land, and water conservancy facilities that are owned collectively;
　　3. Education, science, culture, sanitation and sports facilities, etc that are owned collectively; and
　　4. Other immovables and movables that are owned collectively.

Article 59 The immovables and movables that are under the ownership of a rural collective are collectively owned by all the members of the collective.
　　Members of a collective shall determine the following issues according to statutory procedures:
　　1. The land contracting plan and whether to contract land out to an entity or individual not included in the collective;
　　2. The adjustment of contracted land among the rights holders of the contracted management of land;
　　3. The methods for use and distribution of such fees as land compensation fees;
　　4. The alteration of ownership or any other related issue of an enterprise invested by the collective; and
　　5. Other issues provided for by law.

Article 60 With regard to any land, forest, mountain, grassland, wasteland or tidal flat under collective ownership, the ownership thereof shall be exercised according to the following provisions:
　　1. Where it is owned by a rural collective of a village, the village committee or collective economic organization of the village shall exercise the ownership on behalf of the collective;
　　2. Where owned by two or more rural collectives, all the collective economic organizations or village groups of the village shall exercise the ownership on behalf of the collective; and
　　3. Where owned by a rural collective of a town, the collective economic organization of the town shall exercise the ownership on behalf of the collective.

Article 61 As regards any immovable or movable owned by an urban collective, the urban collective is entitled to possession, use, benefit and disposal of such immovable or movable according to the laws and administrative regulations.

Article 62 In accordance with the relevant laws, administrative regulations, articles of association, village regulations and villagers' pledges, the collective economic organization or village committee or group shall make known the situation of the properties owned by a collective to the members of the collective.

Article 63 Properties under collective ownership shall be protected by law, and no entity or individual may occupy, plunder, privately divide, detain or destroy such properties.
　　Where the legitimate rights and interests of any member of the collective are infringed upon by any decision made by a collective economic organization, village committee or the principle thereof, such member may request the People's Court to revoke the decision.

Article 64 An individual is entitled to the ownership of his legal income, premise, household goods, production equipment, raw materials and other immovables and movables.

Article 65 An individual's legal savings and investments and their proceeds are protected by law.
　　An individual's right of inheritance, as well as other legal rights and interests are protected by the State in accordance with the law.

Article 66 An individual's legal properties are protected by law and any entity or individual may not occupy, plunder or destroy them.

Article 67 The State, any collective or individual may invest in the establishment of a limited liability company, a company limited by shares or any other form of enterprise. Where the State, a collective or an individual invests the immovables or movables it owns in an enterprise, the contributor shall, in accordance with the agreement or on the basis of his proportion of investment, hold rights such as return on assets, important decision-making, and selection of operators and managers, and perform its duties.


Article 68 An enterprise legal person is entitled to possession, use, benefit and disposal of its immovable or movable in accordance with the laws, administrative regulations and its articles of association.
　　The rights over immovables and movables owned by any legal person other than an enterprise legal person are subject to the provisions of related laws, administrative regulations and its articles of associations.


Article 69 Immovables and movables owned by social organizations are protected in accordance with the law.

　　Chapter VI Partitioned Ownership of Buildings

Article 70 An owner is entitled to the ownership of the private areas including residential premises or premises used for business purposes within a building, and to the common ownership and management over the common areas of the building.

Article 71 An owner is entitled to possession, use, benefit and disposal of the private areas of the building. No owner may compromise the safety of the building or infringe upon the legitimate rights and interests of any other owner when exercising his rights.

Article 72 An owner holds the rights and assumes the obligations over the common areas of the building, and may not neglect his obligations to waive his rights.
　　In case an owner transfers his residential premises or premises used for business purposes within the building, the common ownership and management right held by him over the common parts shall be transferred at the same time.

Article 73 Roads within the building area, except for municipal public roads, are co-owned by the owners. Green space within the building area, except for municipal public green space or those, which are privately owned by individuals, shall be co-owned by all the owners. Other public spaces, common facilities and premises used for property management services within the building area shall be co-owned by all the owners.

Article 74 Parking spaces and garages within the building area planned as vehicle parking spaces shall be used to meet the needs of the owners above all else.
　　The ownership of the parking spaces and garages planned as vehicle parking spaces shall be agreed upon by the related parties in regard to their sale, complimentary use or leasing, etc.
　　Parking spaces occupying roads or other areas co-owned by all owners shall be under the common ownership of all the owners.

Article 75 Owners may set up an owners' assembly and vote for an owners' committee.
　　For the establishment of the owners' assembly and the election of the owners' committee, the related departments under the local people's government shall provide guidance and assistance.

Article 76 The following matters shall be commonly determined by all owners:
　　1. The formulation and revision of the rules of procedure for the owners' assembly;
　　2. The formulation and revision of the provisions on building management and the affiliated facilities thereof;
　　3. The election of the owners' committee or amendment of the members thereof;
　　4. The employment and discharge of a property management service or any other manager;
　　5. The raising or use of funds for maintaining the building and affiliated facilities thereof;
　　6. Rebuilding the building or any of its affiliated facilities; and
　　7. Other important matters in relation to common ownership and common management rights.
　　For making decisions on matters prescribed in Item 5 or 6 of the preceding paragraph, the consent of two thirds or more of the total owners with private areas accounting for two thirds or more of the total area of the building must be obtained. For making decisions on any other issue prescribed in the preceding paragraph, the consent of half of the total owners with private areas accounting for half of the total area of the building must be obtained.

Article 77 Any owner may not alter the purpose of a premises from residence into business in violation of any law, regulation or management stipulation. In the event of such alteration made by an owner, the owner shall be subject to the consent of the interested owners, in addition to complying with the laws, regulations and management stipulations.


Article 78 Any decisions made by the owners' assembly or committee is binding on each owner.
　　Where the legitimate rights and interests of any owner have been infringed upon by any decision made by the owners' assembly or committee, the owner may request the People's Court to revoke the decision.

Article 79 Funds for maintaining a building and the affiliated facilities thereof shall be co-owned by the owners of the building. The funds may, upon the codetermination of the owners, be used for maintaining common areas such as elevators and water tanks. The details regarding the raising and use of maintenance funds shall be made known to the owners.


Article 80 In the event of an agreement on matters such as expense allocation and proceed distribution of a building or any of its affiliated facilities, such agreement shall apply; If there is no such agreement or such agreement is unclear, the matters shall be determined in accordance with the proportion of each owner's private areas to the total area of the building.

Article 81 The owners of a building may manage the building and affiliated facilities thereof by themselves or they may entrust a property management service or any other manager to conduct the management.
　　As regards a property management service enterprise or any other manager hired by a construction entity, the owners are entitled to the amendment thereof in accordance with the law.

Article 82 In accordance with the owners' wishes, the property management service or any other manager shall provide onsite management of the building and affiliated facilities thereof and accept the owners' supervision.

Article 83 The owners shall comply with the law, regulations and management stipulations.
　　Where any act infringes upon the legitimate rights and interests of other persons, such as the improper disposal of waste, discharging atmospheric pollutants and noise, breeding animals in violation of the related regulations, illegally building shelters, occupying passageways or refusing to pay property management fees, etc, the owners' assembly and the owners' committee has the right, in accordance with the relevant laws, regulations and management stipulations, to request the cessation of the infringing act, removal of harmful substances or impediments and may demand compensation for any losses. Where any owner's legitimate rights and interests are infringed upon, he may lodge an action to the People's Court in accordance with law.


　　Chapter VII Neighboring Relationships

Article 84 A neighboring rights holder of an immovable shall, in accordance with the principles of facilitating production and living, solidarity and mutual aid, fairness and equity, handle the neighboring relationship properly.

Article 85 Where the disposal of neighboring relationships is provided in any law or regulation, such provision shall apply; where there is no such provision, local customs shall apply.

Article 86 The rights holder of an immovable shall provide necessary convenience for the neighboring rights holders in terms of the use or drainage of water.
　　The neighboring right holders of an immovable shall rationally distribute the utilization of natural running water. The natural current direction shall be respected when draining natural running water.

Article 87 A rights holder of an immovable shall provide necessary convenience where a neighboring rights holder has to use the rights holder's land by virtue of passage or for any other reason.

Article 88 Where the rights holder of an immovable has to use a neighboring land or building by virtue of the construction or repairing of a building, or the laying of wires, cables, water pipes, heating pipelines or fuel gas pipelines, etc, necessary convenience shall be provided by the rights holder of such land or building.

Article 89 The construction of a building may not violate the relevant engineering construction standards of the State or block the ventilation, lighting or sunshine of any neighboring building.

Article 90 No rights holder of an immovable may dump solid waste or discharge such harmful substances as atmospheric pollutants, water pollutants, noise, light and magnetic radiation in violation of the related provisions of the State.

Article 91 The rights holder of an immovable may not endanger the safety of any neighboring immovable when excavating land, constructing a building, laying a pipeline or installing equipment.

Article 92 Where the rights holder of an immovable has to use a neighboring immovable for the purpose of using water, drainage, passage or laying pipelines, etc, he shall make efforts to avoid causing damages to the rights holder of the neighboring immovable; in case any damage is caused, commensurate compensation shall be made.

　　Chapter VIII Co-ownership

Article 93 An immovable or movable may be co-owned by two or more entities or individuals. Co-ownership includes divided co-ownership and joint co-ownership.

Article 94 A divided co-owner of a co-owned immovable or movable is, on the basis of his proportion, entitled to the ownership of such immovable or movable.

Article 95 A joint co-owner of a co-owned immovable or movable is, on a common basis, entitled to the ownership of such immovable or movable.

Article 96 In the event of an agreement by Co-owners on the management of the co-owned immovable or movable such agreement shall apply. If there is no agreement or such agreement is unclear, all co-owners shall have the right and obligation of management.

Article 97 As regards the disposal or major repair of a co-owned immovable or movable, unless otherwise stipulated by the co-owners, the consent of at least two thirds of the divided co-owners or all joint co-owners shall be obtained.

Article 98 In the event of an agreement on management expenses or any other liabilities of a co-owned immovable or movable, such agreement shall apply. If there is no agreement or such agreement is unclear, expenses shall be assumed by the divided co-owners in accordance with their respective shares or commonly assumed by all joint co-owners.

Article 99 Where the co-owners of a co-owned immovable or movable have agreed not to partition the immovable or movable so as to maintain the relationship of co-ownership, such agreement shall apply. However, where any co-owner has certain significant reasons for partitioning the immovable or movable, the partition may be requested. Where there is no agreement or such agreement is unclear, a divided co-owner may request the partition at any time, and a joint co-owner may request the partition when the basis for co-ownership no longer exists or there are certain significant reasons for the partition. Compensation shall be made if damages to any other person are caused by the partition.


Article 100 Co-owners of a co-owned immovable or movable may decide through negotiation the method of partition. Where no agreement is reached, if the property may be partitioned without impairing its value, such immovable or movable may be partitioned. Where it is difficult to partition the immovable or movable or its value would be impaired by the partition, the immovable or movable shall be cashed, auctioned or sold and the proceeds therefrom shall be divided.
　　Where there is any flaw in an immovable or movable obtained from the partition by the co-owners, the other co-owners shall share the loss.

Article 101 A divided co-owner may transfer his share of a co-owned immovable or movable. The other divided co-owners shall be entitled to preemptive rights of purchase on equal footing.

Article 102 For creditor's right or liabilities generated from a co-owned immovable or movable, a co-owner shall hold joint or divided creditor's right or undertake joint or divided liabilities in terms of an external relationship, unless otherwise prescribed by any law or the third party is aware of the fact that the co-owner does not have the relationship of joint or divided creditor's right or liabilities. In terms of an internal relationship among the co-owners, unless otherwise stipulated, a divided co-owner shall hold the creditor's right or undertake liabilities on the basis of his own share, while joint co-owners shall enjoy the creditor's right or undertake liabilities on a common basis. Where any divided co-owner overpays his share of the liabilities, he has the right to recover the overpaid amount from the other co-owners.

Article 103 Where there is no agreement on whether the co-owned immovable or movable is under divided co-ownership or joint co-ownership or such agreement is unclear, it shall be considered as a divided co-ownership unless there is a family relationship among the co-owners.

Article 104 A divided co-owner's share of an immovable or movable shall be determined according to his amount of capital contribution in case of no agreement or unclear agreement. Where it is impossible to determine the amount of capital contribution, each divided co-owner shall enjoy an equal share.

Article 105 Where two or more entities or individuals co-own the usufruct rights or collateral rights of an immovable or movable, the provisions in this Chapter shall apply as reference.

　　Chapter IX Special Provisions on Acquiring Ownership

Article 106 Where a person without the disposal right of an immovable or movable transfers the immovable or movable to an assignee, the owner is entitled to the recovery of the immovable or movable. Unless otherwise prescribed by law, the assignee shall obtain the ownership of the immovable or movable if all of the following conditions are met:
　　1. The assignee accepts the immovable or movable in good faith;
　　2. The immovable or movable at transferred at a reasonable price; and
　　3. The transferred immovable or movable for which registration is required by law has been registered. Where registration is not required, the immovable or movable has been delivered to the assignee.
　　Where an assignee obtains the ownership of an immovable or movable in accordance with the preceding paragraph, the original owner may request the person without disposal rights of the immovable or movable to compensate for his losses.
　　In case a related party obtains any other form of real rights in good faith, the preceding two paragraphs shall apply as reference.


Article 107 An owner or any other rights holder has the right to recover a lost property. Where the lost property is possessed by any other person through transfer, the owner has the right to request the person without disposal rights to compensate for damages, or, request the assignee to return the original property within two years of the date the owner becomes aware of or should be aware of the assignee. Where the assignee purchases the lost property through auction or from a qualified operator, the rights holder shall, when requesting the return of the original property, pay the assignee the amount the assignee paid for purchasing the property. After paying the amount to the assignee, the owner has the right to recover said amount from the person without disposal rights of the property.

Article 108 After a bona fide assignee obtains a movable, the original rights on the movable shall be terminated, unless the bona fide assignee becomes aware of or should be aware of the rights when the transfer is made.

Article 109 A lost property which has been found shall be returned to the rights holder. The finder shall inform the rights holder to claim the property or hand it over to the related departments such as the public security department in a timely manner.

Article 110 After receiving a lost property, the related department shall notify the rights holder to claim the property in a timely manner. Where the identity of the rights holder is not known, the related department shall publish an announcement regarding the lost property in a timely manner.

Article 111 The person who finds the property shall take proper care of the property before it is handed over to the related department. The related department shall also take proper care of the property before the rights holder claims it. A person causing damage to the property deliberately or due to gross negligence shall assume civil liabilities.

Article 112 The rights holder of the property, when claiming a lost property, shall pay the finder or the related department the expenses incurred from the safekeeping of the property.
　　Where a rights holder has offered a reward for finding the property, he shall fulfill his obligation of granting the reward when claiming the property.
　　Where the person who finds the property misappropriates the property, he shall be deprived of the right to claim payment for expenses incurred form safekeeping the property or demand the rights holder to grant a reward.

Article 113 Where a found property fails to be claimed within six months of the date a claiming announcement is published, its ownership shall be passed to the State.

Article 114 In case that a drift item, an item buried underground or a hidden item is found, the relevant provisions on the finding of a lost property shall apply as reference. Where it is otherwise prescribed in law such as the Law of the People's Republic of China on the Protection of Cultural Relics, such provisions shall prevail.

Article 115 Unless otherwise stipulated by the parties concerned, the auxiliary properties shall be transferred together with the principal property.

Article 116 The owner shall be entitled to natural fruits of the property. Where there are both an owner and a usufruct rights holder, the usufruct rights holder shall be entitled to the natural fruits of the property. Where it is otherwise agreed by the parties concerned, such agreement shall prevail.
　　In the event of an agreement on statutory fruits, the parties concerned shall obtain statutory fruits in accordance with the agreements. Where there is no agreement or such agreement is unclear, statutory fruits shall be obtained in light of trading practices.

　　Part III Usufruct Rights

　　Chapter X General Provisions on Usufruct Rights

Article 117 A usufruct rights holder is entitled to the possession, utilization and benefit of the immovable or movable owned by others in accordance with the law.

Article 118 For natural resources that are owned by the State or owned by the State but used by a collective or owned by a collective as prescribed by law, an entity or individual may possess, use and seek profit from them in accordance with the law.

Article 119 Unless otherwise prescribed by the law, the State implements the system of paid use of natural resources.

Article 120 When exercising his rights, a usufruct rights holder shall comply with the provisions regarding the protection and reasonable exploration and utilization of resources as provided for by law. When the usufruct rights holder exercises his rights, the owner shall not intervene.

Article 121 Where the usufruct rights are terminated or affected due to expropriation or requisition, the usufruct rights holder is entitled to claim compensations in accordance with Articles 42 and 44 hereof.

Article 122 The legally obtained right to use sea territories is protected by law.

Article 123 Mineral prospecting rights, mining rights, water drawing rights and the right to use water territories or tidal flats for breeding or fishery, are protected by law.

　　Chapter XI Land Contractual Operating Rights

Article 124 A dual operation system, under which centralized operation and decentralized operation are combined on the basis of household contract operation, is implemented by rural collective economic organizations.
　　Cultivated land, woodland, grassland, and other lands for agricultural use that are owned by rural collectives or are owned by the State but used by rural collectives, shall be used under the system of land contract operation.

Article 125 A holder of land contractual operating rights has the right to possess, use and seek profit from the cultivated land, woodland or grassland, etc. under the contract operation thereof, and is entitled to the engagement in agricultural production activities such as planting, forestry, stockbreeding, etc.

Article 126 The contractual term for cultivated land shall be 30 years. The contractual term for grassland shall be 30 to 50 years. The contractual term for woodland shall be 30 to 70 years. The contractual term for special forestland may be extended, upon approval of the forestry administrative department under the State Council.
　　After the contractual term as referred to in the preceding paragraph has expired, the holder of land contractual operating rights may extend the contract according to the relevant provisions of the State.

Article 127 Land contractual operating rights shall be established when the contract of land contractual operating rights comes into effect.
　　The local people's government at the county level or above shall issue a certificate of land contractual operating rights, a forestry rights certificate or a grassland use rights certificate to the holder of land contractual operating rights, and maintain a register so as to confirm such rights.

Article 128 The holder of land contractual operating rights has the right, in accordance with provisions of the Law of the People's Republic of China on Land Contract in Rural Areas, to circulate his right by way of subcontract, exchange or transfer, etc. The circulated term may not exceed the remaining period on the original contract. Any contracted land may not be used for non-agricultural development without approval.

Article 129 Where the land contractual operating rights are circulated by means of exchange or transfer, and the parties concerned require the registration of such circulation, an application for the alteration of registration shall be filed with the local people's government at the county level or above. Without such registration, the parties concerned shall not challenge any bona fide third party.

Article 130 The party awarding the contract may not adjust the contracted land within the contract period.
　　Where it is necessary to adjust the contracted cultivated land or grassland due to special circumstances such as natural disasters that have caused serious damage to the contracted land, an adjustment may be carried out in accordance with the legal provisions of the Law of the People's Republic of China on Land Contract in Rural Areas and other related laws.

Article 131 The party awarding the contract shall recover the contracted land within the contract period. Where it is otherwise provided for in the Law of the People's Republic of China on Land Contract in Rural Areas or any other law, such provision shall prevail.

Article 132 In the event of a requisition of contracted land, the holder of land contractual operating rights is entitled to the corresponding compensations in accordance with Paragraph 2 of Article 42 hereof.

Article 133 The land contractual operating rights of barren land or other rural land that is contracted through an invitation to tender, auction, or open negotiation, etc, may be circulated by means of transfer, equity contribution, or mortgage, etc. in accordance with the legal provisions of the Law of the People's Republic of China on Land Contract in Rural Areas and other related laws as well the related regulations of the State Council.

Article 134 Where contract operations are conducted over any State-owned rural land, the related provisions hereof shall apply as reference.

　　Chapter XII Construction Land Use Rights

Article 135 The holder of construction land use rights has the right to possess, use and seek benefit from land owned by the State, and shall be entitled to the use of the land to construct buildings, constructions and auxiliary facilities thereof.

Article 136 Construction land use rights may be created separately to cover use of land surface, above or under the ground. The newly established construction land use right shall not infringe upon any existing usufruct rights.

Article 137 Construction land use rights may be created through transfer or allotment, etc.
　　Invitation to tender, auction or any other public bidding method shall be adopted for the transfer of land used for the purpose of industry, business, entertainment or commercial housing, etc. and land with two or more intended users.
　　The creation of construction land use rights through allotment is stringently restricted. Where allotment is adopted, the provisions on land use in the laws and administrative regulations shall be observed.

Article 138 Where construction land use rights are created through invitation to tender, auction or agreement, etc., the parties concerned shall enter into a written contract regarding the transfer of such rights.
　　A contract on the transfer of construction land use rights shall generally contain the following items:
　　1. Name and address of the parties concerned;
　　2. Boundaries and area, etc. of the land;
　　3. Area to be occupied by buildings, constructions and auxiliary facilities thereof;
　　4. Purpose of use;
　　5. Period of use;
　　6. Amount of transfer fees and other fees and the payment methods; and
　　7. Dispute settlement method.

Article 139 In order to establish construction land use rights, registration shall be completed with the registrar. Construction land use rights shall be established at the time of registration. A construction land use rights certificate shall be issued to the holder of construction land use rights by the registrar.

Article 140 A holder of construction land use rights shall reasonably use the land and may not alter the purpose of land use. Where the purpose of land use needs to be altered, the approval of the relevant administrative department shall be obtained.

Article 141 A holder of construction land use rights shall pay transfer fees and other fees according to the legal provisions and the contract.

Article 142 The holder of construction land use right is entitled to the ownership of the buildings, constructions and auxiliary facilities thereof constructed by the holder, unless any contrary evidence proves otherwise.

Article 143 Unless otherwise prescribed by laws, the holder of construction land use rights has the right to transfer, exchange, use as equity contributions, endow or mortgage the construction land use rights.

Article 144 The parties concerned shall enter into a written contract for transfer, exchange, use as equity contributions, endowment, or mortgage of construction land use rights. The parties concerned may agree on the contractual period to the extent of not exceeding the remaining term of the construction land use rights.

Article 145 Alteration registration formalities shall be completed with the registrar for transfer, exchange, use as equity contribution, endowment, or mortgage of construction land use rights.

Article 146 In the event of transfer, exchange, use as equity contribution, endowment, or mortgage of construction land use rights, the buildings, constructions and auxiliary facilities thereof attached to the land shall be disposed of concurrently.

Article 147 In the event of transfer, exchange, use as equity contribution, endowment, or mortgage of the buildings, constructions and auxiliary facilities thereof, the construction land use rights of the land occupied by the buildings, constructions and auxiliary facilities thereof shall be disposed of concurrently.

Article 148 Where it is necessary to recover the land before the term of construction land use rights expires by virtue of public interests, compensations shall, in accordance with Article 42 hereof, be granted for buildings and other immovables on such land, and the corresponding land transfer fees shall be refunded.

Article 149 Construction land use rights for residential property shall be renewed automatically upon expiry of term.
　　The renewal of construction land use rights for non-residential property shall be subject to the relevant legal provisions. In case of any agreement on the ownership of buildings and other immovables on the land, such agreement shall prevail. Where there is no agreement or such agreement is unclear, the ownership shall be determined in accordance with the law and administrative regulations.

Article 150 Where construction land use rights are terminated, the transferor shall undergo deregistration formalities in a timely manner, and the construction land use rights certificate shall be recalled by the registrar.

Article 151 Where collectively owned land is used as construction land, it shall be handled in accordance with the Land Administration Law of the People's Republic of China and other related laws.

　　Chapter XIII Residential Land Use Rights.

Article 152 The holder of residential land use rights has the right to possess and use land owned by a collective, and to construct residential properties and auxiliary facilities thereof.

Article 153 For the acquisition, exercise or transfer of residential land use rights, the Land Administration Law of the People's Republic of China and other related laws and provisions of the State shall apply.

Article 154 Residential land use rights shall be terminated when a residential site is destroyed due to natural disaster or other reasons. A new residential site shall be allocated to villagers affected by the loss of a residential site.

Article 155 In the event of transfer or termination of a registered residential land use right, the alteration or cancellation of the registration shall be made in a timely manner.

　　Chapter XIV Easements

Article 156 An easement holder shall, according to the contract, be entitled to the use of the immovable of another party in order to enhance the efficiency of his own immovable.
　　The term "immovable of another party" as referred to in the preceding paragraph shall be the subservient tenement, and the "easement holder's immovable" shall be the dominant tenement.

Article 157 For establishing an easement, the parties concerned shall enter into a written contract. An easement contract shall generally contain the following items:
　　1. Name and address of the related parties;
　　2. Location of the subservient tenement and dominant tenement;
　　3. Purpose and method of use;
　　4. Period of use;
　　5. Fees and payment method; and
　　6. Dispute settlement method.

Article 158 The easement shall be established when the easement contract comes into effect. Where the related parties require the registration of easement, they may apply to the registrar; without registration, the parties concerned shall not challenge any bona fide third party.

Article 159 The holder of subservient tenement shall allow an easement holder to use his land in accordance with the contract, and may not impede the easement holder from exercising his rights.

Article 160 An easement holder shall, according to the purpose and method of use as stipulated in the contract, utilize the subservient tenement, and minimize the restrictions on the real rights holder of the subservient tenement.

Article 161 The easement period shall be stipulated by the related parties to the extent of not exceeding the remaining term of usufruct rights such as land contractual operating rights or construction land use rights, etc.

Article 162 With regard to easements held or assumed by the owner of the land, where land contractual operating rights or residential land use rights are created, holders of such rights may continue to hold or assume the established easements.

Article 163 Where any usufruct rights such as land contractual operating rights, construction land use rights, residential land use rights, etc have been established, the land owner may not establish any easement without the consent of the usufruct rights holder.

Article 164 An easement may not be solely transferred. Where any usufruct rights such as land contractual operating rights, construction land use rights, residential land use rights, etc are transferred, the easement shall be transferred concurrently, unless otherwise stipulated by the contract.

Article 165 An easement may not be solely mortgaged. Where land contractual operating rights, construction land use rights, etc. are mortgaged, the easement shall be transferred at the time when the mortgage is realized.

Article 166 When the dominant tenement as well the as land contractual operating rights, construction land use rights or residential land use rights thereon are partially transferred, the transferee shall hold the easement where such easement is involved in the transferred property.

Article 167 When the subservient tenement as well as the land contractual operating rights or construction land use rights thereon are partially transferred, the easement shall be binding on the transferee if the easement is involved in the transferred property.

Article 168 The holder of the subservient tenement has the right to revoke the easement contract, and the easement shall be terminated, where an easement holder:
　　1. Misuses the easement in violation of law or the contract; or
　　2. Fails to pay fees for the use of the subservient tenement within a reasonable period upon expiration of the stipulated period for payment after twice being urged to do so.

Article 169 For alteration, transfer or elimination of the registered easement, the alteration or cancellation registration shall be completed in a timely manner.

　　Part IV Collateral Rights

　　Chapter XV General Provisions on Collateral Rights

Article 170 Where the obligor fails to pay a due debt or any circumstance for realizing collateral rights as stipulated by the parties concerned occurs, the holder of collateral rights shall be entitled to the preferential right to seek payments in respect of the secured property, unless otherwise provided for by law.

Article 171 In civil activities such as loans and sales, where security is required to ensure the realization of rights, an obligee may establish collateral rights in accordance with this Law or any other law.
　　Where a third party provides guarantee to the obligee for an obligor, counter-guarantee from the obligor may be required. Provisions hereof and other related laws shall apply to counter-guarantee.

Article 172 For the establishment of collateral rights, a contract of guarantee shall be entered into in accordance with this Law and other related laws. A contract of guarantee shall be subordinate to the principal contract. The contract of guarantee shall be deemed invalid when the principal contract becomes void, unless otherwise prescribed by the law.
　　Upon confirmation that the contract of guarantee is void, the obligor, the guarantor and the obligee in fault shall, in light of their respective faults, undertake the corresponding civil liabilities.

Article 173 The contract of guarantee shall cover the principal obligee's rights and interests, default fines, damages as well as expenses incurred from taking custody of the property for purposes of security and for realizing collateral rights. Where there is agreement between the related parties, such agreement shall prevail.

Article 174 Where the secured property is damaged, lost or expropriated during the guarantee period, the collateral rights holder may seek preferential payments in respect of the insurance money, damages or indemnities, etc. obtained as a result of the damage, loss or expropriation of the secured property. If the period for performing the secured obligee's rights has not expired, such insurance money, damages or indemnities, etc. may be submitted to a competent authority for safekeeping.

Article 175 In case of guarantee provided by a third party, where the obligee allows the obligor to transfer all or part of its obligations without obtaining the written consent of the guarantor, the guarantor shall no longer undertake the corresponding guarantee liabilities.

Article 176 In the event of a secured obligee's rights involving both collateral and guarantor, where the obligor fails to pay a due debt or any circumstance for realizing collateral rights as agreed by the parties concerned occurs, the obligee shall realize obligee's rights as agreed. Where there is no agreement or such agreement is unclear, and the obligor provides collateral by itself, obligee's rights shall be realized first in respect of the collateral; and if the collateral is provided by a third party, the obligee may realize obligee's rights in respect of the collateral or require the guarantor to assume the guarantee liability. After undertaking the guarantee liability, the third party has the right to seek to recover payments from the obligor.


Article 177 Collateral rights may be terminated under any of the following circumstances:
　　1. The principal obligee's rights are terminated;
　　2. The collateral rights have been realized;
　　3. The obligee waives his collateral rights; or
　　4. Any other circumstance under which the collateral rights are to be terminated as provided for by law.

Article 178 Where any provision in the Security Law of the People's Republic of China conflicts with that hereof, the latter shall prevail.

　　Chapter XVI Mortgage Rights

　　Section 1 General Mortgage Rights

Article 179 Where an obligor or a third party mortgages his properties to the obligee without transferring the possession of such properties in order to ensure the payment of debts, if the obligor fails to pay due debts or any circumstance as agreed by the parties concerned for realizing the mortgage right occurs, the obligee has the right to seek preferential payments in respect of such properties.
　　The "obligor" or "third party" as referred to in the preceding paragraph shall be the mortgagor, the "obligee" shall be the mortgagee, while the "properties for security" shall be the mortgaged properties.

Article 180 A mortgage may be established on the following properties of which the obligor or third party has the right of disposal:
　　1. Buildings and other objects attached to the land;
　　2. Construction land use rights;
　　3. Land contractual operating rights of land such as barren land, etc. that is acquired through invitation to tender, auction and public consultation, etc.;
　　4. Manufacturing facilities, raw materials, semi-manufactured goods and finished products;
　　5. Buildings, vessels and aircraft under construction;
　　6. Means of communications and transportation; and
　　7. Other properties not prohibited from being mortgaged by any law or administrative regulation.
　　All the properties listed above may be mortgaged together by a mortgagor.


Article 181 An operator of an enterprise, individually owned business or agricultural manufacturing business may, upon the written agreement by the parties concerned, mortgage the manufacturing facilities, raw materials, semi-manufactured goods and finished products currently owned or to be owned in future. Where the obligor fails to pay his due debts or any circumstance as agreed by the parties concerned for realizing mortgage rights arises, the obligee has the right to seek preferential payments in respect of the movables existing at the time of the realization of mortgage rights.


Article 182 Where a building is mortgaged, construction land use rights within the area of this building shall be mortgaged concurrently. Where construction land use rights are mortgaged, all the buildings on such land shall be mortgaged concurrently.
　　Where a mortgagor fails to mortgage the properties in accordance with the provisions in the preceding paragraph, the properties not mortgaged shall be treated as having been mortgaged together.

Article 183 Construction land use rights of a township or village enterprise may not be solely mortgaged. Where a building such as factory of a township or village enterprise is mortgaged, the construction land use rights within the area of such building shall be mortgaged concurrently.

Article 184 The following properties may not be mortgaged:
　　1. Land ownership;
　　2. Cultivated land, residential sites, land set aside for private use, hilly land set aside for private use, etc, for which the land use right are owned by the collective, except those that may be mortgaged as prescribed by law;
　　3. Educational, medical and health and other public welfare facilities of institutions and social groups with the aim of benefiting the public such as schools, kindergartens, hospitals, etc;
　　4. Properties with unclear or controversial ownership or use rights;
　　5. Properties legally confiscated, seized or supervised over; or
　　6. Other properties that cannot be mortgaged as prescribed by law or administrative regulation.


Article 185 When establishing a mortgage right, the parties concerned shall enter into a written mortgage contract.
　　A mortgage contract shall generally contain the following items:
　　1. The categories and amounts of the secured obligee's rights;
　　2. Term for the obligor to pay debts;
　　3. The name, quantity, quality, condition, location, attribution of ownership or use rights of the mortgaged property; and
　　4. The scope of the guarantee.


Article 186 Prior to the expiration of the term for paying debts, the mortgagee and the mortgagor may not stipulate that the ownership of the mortgaged property shall be attributed to the obligee when the obligor fails to pay his due debts.


Article 187 Where properties as provided for in Items 1 to 3 or a building under construction as provided for in Item 5, Paragraph 1 of Article 180 hereof are mortgaged, the mortgage registration shall be processed, and the mortgage right shall be established as of the date of registration.


Article 188 Where properties as provided for in Item 4 or 6 or a vessel or aircraft under construction as provided for in Item 5, Paragraph 1 of Article 180 hereof are mortgaged, the mortgage right shall be established as of the date the mortgage contract comes into effect. If the mortgage has not been registered, the parties concerned may not challenge any bona fide third party.


Article 189 Where movables are mortgaged by an operator of an enterprise, individually owned business or agricultural manufacturing business as prescribed in Article 181 hereof, registration shall be handled at the administrative department for industry and commerce of the place where the mortgagor locates. The mortgage right shall be established as of the date the mortgage contract comes into effect. If the mortgage has not been registered, the parties concerned may not challenge any bona fide third party.
　　With regard to a mortgage as provided for in Article 181 hereof, the parties concerned may not challenge the buyer who has paid a reasonable price and obtained the mortgaged property in the ordinary course of business.

Article 190 Where a mortgaged property has been leased before a mortgage contract is entered into, the mortgage rights shall not impact the original leasehold relation. Where a mortgaged property is leased after the establishment of mortgage rights, the leasehold relation may not challenge the registered mortgage rights.


Article 191 Where a mortgagor transfers the mortgaged property during the mortgage term with the consent of the mortgagee, the money generated from the transfer shall be used for the early repayment of debts to the mortgagee or be submitted to a competent authority for safekeeping. Any excess of proceeds from transfer over the amount of obligee's rights shall be attributed to the mortgagor, whilst any shortfall shall be settled by the obligor.
　　A mortgagor may not transfer the mortgaged property during the mortgage term without the mortgagee's consent, unless the mortgage right is terminated due to the transferee's settlement of the debts on behalf of the mortgagor.


Article 192 The mortgage right may not be solely transferred, or be used as a guarantee for other obligee's rights by separation from the obligee's rights. Where the obligee's rights are transferred, the mortgage right thereof shall be transferred concurrently, unless otherwise prescribed by the law or agreed by the parties concerned.

Article 193 Where any act of a mortgagor is sufficient to cause a reduction in value of the mortgaged property, the mortgagee has the right to require the mortgagor to cease such act. Where the value of the mortgaged property is reduced, the mortgagee has the right to demand the recovery of the value of the mortgaged property, or provide a security equal to the reduction in value. Where the mortgagor neither recovers the value nor provides any security, the mortgagee has the right to demand the early repayment of debts by the obligor.


Article 194 A mortgagee may abandon the mortgage rights or the sequence of receiving compensation in respect of mortgage rights. A mortgagee and a mortgagor may, through negotiations, alter the sequence of receiving compensation in respect of mortgage rights or the amount of secured obligee's rights, etc., provided that such alteration to mortgage rights may not adversely affect any other mortgagees without their written consent.
　　Where an obligor mortgages his own properties, and the mortgagee abandons the mortgage rights, the sequence of receiving compensation in respect of mortgage rights or alter the mortgage rights, the other guarantors shall be exempted from the guarantee liability, to the extent that the mortgagee has lost the right to seek preferential payments of compensation, unless any other guarantors undertake to continue to provide the guarantee.


Article 195 Where the obligor fails to pay his due debts or any circumstance as stipulated by the parties concerned for realizing mortgage rights arises, upon agreement with the mortgagor, the mortgagee may cash the mortgaged property or seek preferential payments from the proceeds of the auction or sale of the mortgaged property. Where the said agreement infringes upon the interests of any other obligee, the obligee may request, within one year after he becomes aware or should be aware of the cause for cancellation, the cancellation of such agreement by the People's Court.
　　Where no agreement on the means of realizing the mortgage right is reached by the mortgagee and the mortgagor, the mortgagee may request the People's Court to sell or auction the mortgaged property.
　　When cashing or selling the mortgaged property, its market price shall be referred to.


Article 196 Where a mortgage is created in accordance with Article 181 hereof, the mortgaged property shall be confirmed under any of the following circumstances:
　　1. Upon expiration of the term for paying debts, the obligee's rights have not been realized;
　　2. The mortgagor has been declared bankrupt or has been revoked;
　　3. Other circumstances as stipulated by the parties concerned for realizing the mortgage right; or
　　4. Any other circumstance seriously impacting the realization of the obligee's rights.

Article 197 When the obligor fails to pay his due debts or any circumstance as stipulated by the parties concerned for realizing the mortgage rights arises, and as a result of which the mortgaged property is seized by the People's Court in accordance with the law, the mortgagee has the right to collect natural or statutory fruits of the mortgaged property from the date of seizure, except where the mortgagee fails to notify the obligor who is liable to settle statutory fruits.
　　The "fruits" referred to in the preceding paragraph shall first be applied to offset expenses incurred in the collection of the fruits.

Article 198 Any excess of the proceed from cashing, auction or sale of mortgaged property over the amount of the obligee's rights shall be attributed to the mortgagor, whist any shortfall shall be settled by the obligor.

Article 199 Where a property is mortgaged to two or more obligees concurrently, the proceeds of the auction or sale of the mortgaged property shall be applied to paying debts in the following manner:
　　1. Where all the mortgage rights are registered, the proceeds shall be applied in accordance with the registration sequence; and where the sequence is the same, the proceeds shall be applied on the basis of the proportion of obligee's rights;
　　2. The registered mortgage rights shall be entitled to priority in receiving compensation from the proceeds as compared with any unregistered mortgage rights; and
　　3. Where no mortgage rights are registered, the payments shall be made on the basis of the proportion of obligee's rights.

Article 200 Any buildings newly constructed on the land after the mortgage of construction land use rights shall not belong to the mortgaged properties. In realizing the mortgage right, such newly-constructed buildings and the construction land use rights shall be disposed of concurrently, provided, however, that the mortgagee has no right to seek preferential payments from any proceeds of the disposal of these newly-constructed buildings.

Article 201 In case of mortgage of land contractual operating rights as provided for in Item 3, Paragraph 1 of Article 180 hereof or construction land use rights for lands occupied by a factory or any other building of a township or village enterprise as prescribed in Article 183 hereof, after such mortgage rights are realized, the nature of land ownership or land use may not be altered without completing the statutory procedures.

Article 202 A mortgagee shall exercise the mortgage rights within the term for litigation of the principal obligee's rights, otherwise such mortgage rights shall not be protected by the People's Court.

　　Section 2 Maximum Amount of Mortgage Rights

Article 203 Where an obligor or third party provide mortgaged properties for the obligee's rights that will arise consecutively within a certain period in order to ensure the payment of debts, if the obligor fails to pay his due debts or any circumstance as stipulated by the parties concerned for realizing mortgage rights occurs, the mortgagee has the right to seek preferential payments in respect of the secured properties to the extent of the maximum amount of obligee's rights.
　　An obligee's rights existing prior to the establishment of the maximum amount of mortgage rights may, with the consent of the parties concerned, be incorporated into the scope of obligee's rights under the maximum amount of mortgage security.

Article 204 Where part of an obligee's rights are transferred prior to the establishment of the maximum amount of mortgage security, the maximum amount of mortgage rights may not be transferred unless otherwise stipulated by the parties concerned.

Article 205 Prior to the confirmation of the obligee's rights under the maximum amount of mortgage security, upon agreement, the mortgagee and the mortgagor may alter the period for the confirmation of the obligee's rights, the scope of obligee's rights or the maximum amount of obligee's rights, to the extent that such alteration may not adversely affect any other mortgagee.

Article 206 The obligee's rights of a mortgagee shall be confirmed under any of the following circumstances:
　　1. The stipulated period for the confirmation of the obligee's rights expires;
　　2. Where there is no agreement on the confirmation period or such agreement is unclear, the mortgagee or the mortgagor may request confirmation of the obligee's rights after two years from the date the maximum amount of mortgage rights is established;
　　3. New obligee's rights are unlikely to arise;
　　4. The mortgaged property is confiscated or seized;
　　5. The obligor or the mortgagor is declared bankrupt or is revoked; or
　　6. Any other circumstance as prescribed by any law for confirming the obligee's rights.

Article 207 In addition to the provisions in this Section, the maximum amount of mortgage rights shall be governed by the provisions on general mortgage rights as provided for in Section 1 of this Chapter.

　　Chapter XVII Pledge Rights

　　Section 1 Movable Pledge

Article 208 Where an obligor or a third party pledges his movables to an obligee for the security of the payment of debts, if the obligor fails to pay due debts or any circumstance for realizing pledge rights as stipulated by the parties occurs, the obligee has the right to seek preferential payments from the pledged movables.
　　The "debtor" or "third party" as referred to in the preceding paragraph shall be the pledgor, the "obligee" shall be the pledgee, and the "movables" as delivered shall be the pledged property.

Article 209 Movables that are prohibited from being pledged by any law or administrative regulation shall not be pledged.

Article 210 For establishing pledge rights, parties concerned shall enter into a written contract.
　　A pledge contract shall generally contain the following items:
　　1. The category and amount of the obligee's rights secured;
　　2. The term for the obligor to settle debts;
　　3. The name, quantity, quality and condition of the pledged property;
　　4. The scope of guarantee; and
　　5. The time of delivery of the pledged properties.


Article 211 Prior to the expiration of the term for paying debts, the pledgee and the pledgor may not stipulate that the ownership of pledged properties shall be attributed to the obligee when the obligor fails to pay due debts.

Article 212 Pledge rights shall be established as of the date the pledgee delivers the pledged properties.


Article 213 A pledgee is entitled to the fruits of the pledged properties unless otherwise stipulated in the contract.
　　The "fruits" referred to in the preceding paragraph shall first be applied to offset expenses incurred in the collection of the fruits.

Article 214 Where a pledgee arbitrarily uses or disposes of the pledged properties within the duration of the pledge right, without the consent of the pledgor, and as a result of which the pledgor are damaged, the pledgee shall assume the compensation liabilities.

Article 215 A pledgee shall be obliged to properly take care for the pledged properties; where the pledged properties are damaged or lost by virtue of improper safekeeping, the pledgee shall assume the compensation liabilities.
　　Where pledged properties are damaged or lost as a result of the pledgee's acts, the pledgor may require the pledgee to submit the pledged properties to a competent authority for safekeeping or request the early payment of debts and the return of the pledged property.

Article 216 Where any cause unattributable to the pledgee results in the destruction of the pledged properties or an obvious decrease in the value of the pledged property, which is sufficient to damage the pledgee's rights, the pledgee has the right to request the pledgor to provide a security correspondingly. Where the pledgor refuses to do so, the pledgee may sell or auction the pledged properties, and may, upon negotiation with the pledgor, seek early payments for the obligee's rights with the proceeds of the sale or auction, or submit such proceeds to a competent authority for safekeeping.

Article 217 Where a pledgee transfers the pledge within the duration of the pledge right without the consent of the pledgor, thus causing destruction or loss to the pledged properties, the pledgee shall make compensations to the pledgor.

Article 218 A pledgee may abandon the pledge right. Where an obligor pledges his own properties, and the pledgee abandons the pledge right, the other guarantors shall be exempted from the guarantee liability, the extent that the pledgee has lost the right to seek preferential payments of compensation, unless any other guarantors undertake to continue to provide the guarantee.

Article 219 Where the obligor has paid the debts or the pledgor has made early repayment for the secured obligee's rights, the pledgee shall return the pledged properties.
　　Where an obligor fails to pay his due debts or any circumstance for realizing the pledge right as stipulated by the parties concerned occurs, the pledgee may, upon negotiation with the pledgor, cash the pledge or seek preferential payments from the proceeds of the sale or auction of the pledged properties.
　　When cashing or selling the pledged properties, their market price shall be referred to.

Article 220 A pledgor may, upon expiration of the time limit for paying debts, request the pledgee to exercise the pledge right in a timely manner. If the pledgee fails to do so, the pledgor may request the People's Court to sell or auction the pledged properties.
　　Where a pledgor has requested the pledgee to exercise the pledge right in a timely manner, but damages are incurred due to a delay by the pledgee, the pledgee shall make compensations.

Article 221 Any excess of the proceeds of the cashing, auction or sale of the pledged properties over the amount of obligee's rights shall be attributed to the pledgor, and any shortfall shall be settled by the obligor.

Article 222 The pledgor and the pledgee may, upon negotiation, agree on the maximum amount of pledge rights.
　　In addition to the related provisions in this Section, the maximum amount of pledge rights shall be governed by the provisions on maximum amount of mortgage rights as prescribed in Section 2 of Chapter 16 hereof.

　　Section 2 Pledge of Rights

Article 223 The following rights of which an obligor or third party has the right of disposal may be pledged:
　　1. Draft, cheques, and cashier's cheques;
　　2. Bonds and deposit receipts;
　　3. Warehouse receipts and bills of lading;
　　4. Transferable fund units and equity;
　　5. Property right in intellectual property rights of transferable exclusive trademark rights, patent rights, copyrights, etc;
　　6. Accounts receivable; or
　　7. Other property rights that can be pledged as stipulated by any law or administrative regulation.

Article 224 The parties concerned shall draw up a written contract for the pledge of a draft, cheque, cashier's cheque, bond, deposit receipt, warehouse receipt or bill of lading. The pledge rights shall be established upon the delivery of the title certificate of the pledge to the pledgee. Where there is no title certificate, the pledge rights shall be established as of the date the related department processes the registration of the pledge.

Article 225 Where the date of redemption or collection of the draft, cheque, cashier's cheque, bond, deposit receipt, warehouse receipt or bill of lading is prior to the due date of the principal obligee's rights, the pledgee may redeem or collect the goods, and may, upon negotiation with the pledgor, seek early payments with the redeemed money or the collected goods, or submit the said money or goods to a competent authority for safekeeping.

Article 226 The parties concerned shall enter into a written contract for the pledge of fund units or equity. Regarding the pledge of fund units or the equity that are registered in the securities depository and clearing institution, the pledge right shall be established as of date the securities depository and clearing institution processes the registration of the pledge. Regarding the pledge of other equities, the pledge right shall be established as of the date when the administrations for industry and commerce processes the registration of the pledge.
　　The pledged fund units or equity may not be transferred, unless otherwise agreed by negotiation between the pledgor and the pledgee. The pledgor shall made early repayment of the debt with the proceeds of the transfer of fund units or equity, or submit the proceeds to a competent authority for safekeeping.

Article 227 Regarding the pledge of property right in intellectual property right such as registered trademark rights, patent rights, copyrights, etc, the parties concerned shall enter into a written contract, and the pledge rights shall be established as of the date the related competent authority processes the registration of the pledge.
　　The pledgor may not transfer or permit the use of the pledged property right in the intellectual property rights, unless otherwise agreed by negotiation between the pledgor and the pledgee. The pledgor shall make early repayment of the debt with the proceeds from the transfer or permit the use of the pledged property right in the intellectual property right, or submit the proceeds to a competent authority for safekeeping.

Article 228 The parties concerned shall enter into a written contract for the pledge of accounts receivable. The pledge rights shall be established as of the date when the related credit rating institution processes the registration of the pledge.
　　Tthe pledged accounts receivable may not be transferred, unless otherwise agreed by negotiation between the pledgor and the pledge. The pledgor shall make early repayment of the debt with the proceeds from the transfer of accounts receivable, or submit the proceeds to a competent authority for safekeeping.


Article 229 In addition to the provisions prescribed in this Section, the pledge of rights shall be governed by the provisions in Section 1 of this Chapter on the pledge of movables.

　　Chapter XVIII Lien

Article 230 Where an obligor fails to pay off his due debts, the obligee may take lien of the movables that are lawfully possessed by the obligee, and has the right to seek preferential payments from such movables.
　　The "obligee" as referred to in the preceding Paragraph shall be the lienor, and the possessed movables shall be the property under lien.

Article 231 The movables taken as lien by the obligee and the obligee's rights shall fall into a same legal relationship, except for the lien between enterprises.

Article 232 Regarding movables the lien of which is prohibited by law or by agreements of the parties concerned, lien may not be taken of such movables.

Article 233 Where a property under lien is divisible, its value shall be equal to the amount of debts.

Article 234 A lienor shall assume the obligation to properly take care for the property under lien, and shall make compensations where the property under lien is damaged or lost by virtue of improper safekeeping.

Article 235 A lienor is entitled to the fruits generated from the property under lien. The "fruits" referred to in the preceding paragraph shall first be applied to offset expenses incurred in the collection of the fruits.

Article 236 A lienor shall, after a property is taken as lien, agree with the obligor on the period for the fulfillment of the obligee's rights. Where there is no agreement or such agreement is unclear, two months or more shall be afforded the obligor in order to fulfill the obligee's rights, except for fresh and perishable goods and other goods which are difficult to keep. Where the obligor fails to fulfill the debt within the specified period, the lienor may cash the property under lien upon negotiation with the obligor, or seek preferential payments from the proceeds of the sale or auction of the property under lien.
　　When the property under lien is cashed or sold, its market price should be referred to.

Article 237 An obligor may, upon the expiration of the period for fulfilling the obligee's rights, request the lienor to exercise the lien; and where the lienor fails to do so, the obligor may request the People's Court to sell or auction the property under lien.

Article 238 Any excess of the proceeds of the cashing, auctioned or sale of the property under lien over the amount of the obligee's rights shall belong to the obligor, and any shortfall shall be settled by the obligor.

Article 239 The lienor has the right to seek preferential payments where the mortgage rights or pledge rights are established on a same movable which is taken as lien.

Article 240 The lien shall terminate where a lienor losses possession of the property under lien or accepts the guarantee otherwise provided by the obligor.

　　Part V Possession

　　Chapter XIX Possession

Article 241 Where the possession arises out of a contractual relationship, the related stipulations in the contract shall apply to the use, proceeds and default liability of the immovable or movable concerned. The relevant legal provisions shall apply if there is no such stipulation in the contract or the stipulations are unclear.

Article 242 Where a possessor causes damage to the immovable or movable under his possession during use, the mala fide possessor shall make compensations.

Article 243 Where an immovable or movable is possessed by the possessor, the owner may request the possessor to return the original object and fruits thereof, provided that the maintenance expenses necessary for the bona fide possessor to keep such immovable or movable shall be paid by the owner.

Article 244 Where an immovable or movable under possession is damaged or lost, the possessor shall return the insurance fee, damages or indemnities for the said destruction or loss to the owner if the owner requires such compensation. A mala fide possessor shall make compensation where the damages to the owner are not fully compensated for.

Article 245 Where an immovable or movable under possession is impinged upon, the possessor has the right to request the return of the original property. Where any act impairs the possession, the possessor has the right to request the cessation of impairment or danger; where any damage is caused by virtue of impingement or interference, the possessor has the right to request compensation.
　　The claim by a possessor for the return of the original object shall terminate, if the possessor fails to exercise such right within one year as of the date of impingement.

　　Supplementary Provisions

Article 246 Before any law or administrative regulation prescribes the scope, agency and measures for uniform registration of immovables, local regulations may provide for related matters in accordance with the related provisions hereof.

Article 247 This Law shall take effect as of October 1, 2007.