Legal Aspects of Real Estate Transactions in China

1) What legal documents are required for a real estate transaction?

Real estate transactions typically require legal documents such as the real estate purchase contract, Certificate of Ownership of the real estate, real estate transfer application form, identity documents of both parties (ID card, household register, marriage certificate, etc.), real estate assessment report (if a loan is needed), deed tax certificate, and land-use certificate.

2) Which official institutions are authorized to make real estate transactions?

The official institutions managing real estate transactions primarily include real estate administrative departments and land resource management departments, as well as potentially related departments such as taxation, commerce and industry.

3) What are the tax implications of buying and selling real estate?

The tax implications of buying and selling real estate include paying value-added tax (VAT), deed tax, personal income tax, and potentially land appreciation tax.

4) Are there any differences to consider if the purchaser of the real estate is a foreigner?

Foreigners who purchase real estate in China should have legal and valid passports and meet the purchase policy of foreigners in the city where the real estate is located. In some cities, foreigners may need to meet certain living years or other conditions to purchase houses.

Moreover, foreigners should go to the Foreign-Related Approval Office for approval when purchasing real estate in China.

5) What are the responsibilities of the seller in a real estate transaction?

The seller should be responsible for transferring property ownership, ensuring property quality, and complying with the contract. The seller should bear personal income tax, transaction fees and intermediary fees (if any).

6) What are the implications of property liens and encumbrances?

Property liens refer to the right of a debtee to occupy a debtor's real estate due to a contractual relationship, retain the house before the debt is paid off, and sell the retained house in accordance with the law when the due debt has not been paid off for a certain period of time, and receive priority compensation from the selling.

There is no clear definition of “encumbrances” in the Chinese legal system, but related rights burdens and restrictions are widely present in practice.  The restrictions are disclosed to the public to ensure transparency and security of transactions.

Author: Claire Zhao