Minor property in China - living outside the law

Lauren Hilgers

After more than ten years of political wrangling and seven readings in the National People’s Congress, a new property law took effect this October. The law was considered revolutionary by many in China. Scholars and legislators have protested it throughout its development, arguing that the new law overturns the basic tenants of socialism to which China, despite its booming cities and rampant exports, still cleaves.

The property rights law has been heralded for giving Chinese property owners greater security. While land-use rights are still separate from actual ownership of land, which technically belongs to the government, the new property law ensures that, for residential buildings, land-use rights are automatically renewed without charge. A registration system for establishing and transferring real property rights was also created to help enable the buying and selling of land-use rights, a practice legalized in 1988.

In some ways, however, the law remains tentative. It provides that rural land contracting and operation rights—i.e. the right to use rural land for agricultural purposes—and urban land rights can be used for profit, including the transfer or sale of land-use rights. It does not, however, do the same for rural residential property. Rural homeowners, on the other hand, have the right only to possess and use their land. The law also stipulates that the transfer of land designated for agriculture purposes to land designated for commercial purposes be limited (Arable land is collectively owned and rented to farmers on a 30-year basis, unless legally transferred—a possible but difficult process). In many areas on the outskirts of China's cities, still designated as rural, this state of affairs has given rise to a growing practice in China’s property market that continues operating in legal vacuum—minor property rights.

The term "minor property rights" describes the legal entitlements of those who purchase housing rights on land that is not legally transferable, either because it is designated for agricultural uses alone, or is classified as rural residential property. As housing prices skyrocketed in big cities like Beijing, localities on the rural outskirts discovered they could make more money selling their home sites or, as is more often the case, space on their collective land, to developers and prospective homebuyers. Unregulated by the law, developers of minor property avoid the taxes levied on other residential developments and are sold at relatively low price. For Beijing residents or migrants driven out of the center of the city by rising prices, so-called "minor property" is generally much cheaper, although it comes with no official registration or proof of ownership.

In China, property developments are typically built on land that is first taken by the government and then sold to a developer. I have friends on the outskirts of Shanghai whose old houses have been marked for eventual destruction by the government. They either get relocated or compensated for the property, and theoretically the land-use rights to the area their houses are sitting now will be sold to a property developer and rebuilt. This practice, however, is a frequent cause of protest when residents feel they are not properly compensated for their property – the most visually striking example being the Chongqing “Nail House.”

Minor property, on the other hand, has never been legally transferred from farmland or rural residential property to land available to be commercially bought and sold for housing. While the schemes are sometimes executed by individual peasants, they are more often to the benefit of the local cadres or officials who manage collective land. The China Daily recently profiled one minor property development outside of Beijing. Construction at a village on the outskirts of the city was originally approved as a renovation project for local villagers. The committee in charge of the collective land, however, changed the plans to include additional residential units, available for sale as minor property.

Some well-known Chinese scholars argue that minor property should be legalized, giving individual peasants widened opportunity to benefit from their land rights. Legalizing the process, however, could simply leave rural residents more open to exploitation from local officials who have control of collective land.

The government has issued advisories against the purchase of such housing, warning that “these types of housing have no security of title; [buyers] do not have rights such as ownership, transfer, disposition, or profits. Moreover, it is impossible to undertake procedures for transfer of the title to the housing.” Reports, however, estimate that up to 20% of Beijing’s housing market consists of these types of minor property developments. Ever hopeful, many "owners" of minor property argue the government will be unable to challenge claims now that the market for minor property has grown so large. However, if the government cracks down on the practice many will find themselves in homes they have no legal claim over. They will be unable to sell their property and unable to claim compensation if the government decides to take their land for another use.
Posted 12:11 AM by Lauren Hilgers [link]