Mainland law of the land can cost earth

PUBLISHED : Wednesday, 23 June, 1993, 12:00am
UPDATED : Wednesday, 23 June, 1993, 12:00am

CONVEYANCING rules and property laws in China are so different from those in Hongkong that buying is fraught with problems, according to a Hongkong solicitor.

Ignorance on the part of the over-enthusiastic Hongkong buyer often results in huge sums of money being handed over to mainland developers without even a receipt being offered.

Solicitor David Chan, a partner of Deacons experienced in conveyancing in China, said: ''In China, the system is completely different.

''There are no restrictions on who you can meet in Hongkong and it is rare to find secrecy in companies, but, in China, there is no access to public information.

''They have codified law with very narrow construction of the words, but no common law and no back-up on case law.

''When title or rights are disputed, there is a panel of three judges, appointed by the local Chinese authority, who could be a military officer or a graduate fresh from law school.'' Mr Chan said they were often inexperienced in commercial transactions, but a case could then go to arbitration.

There were several types of land sales, the main one being state owned.

''This is the most reliable, because the state grants rights to the developer and there is no need to pay compensation to existing residents,'' Mr Chan said.

''Also with clean title you don't have to pay extra when it comes to registering your title with the local authorities.'' Another is collectively owned land.

A collective has it for a specific purpose, and the state may take over this land and grant it to a developer, and, in that case, he has to pay compensation to the residents.

''But there is a trap here - the collective will also want a fee from the developer.'' The developer would proceed with the construction on the basis of a collectively owned land use certificate. That is fine until the end-user wanted his land registry document, said Mr Chan.

''He discovers from the records his land is lodged as being non-state-owned and someone, either the developer or end-user, has to pay the government again to get the deeds amended.

There was also allotted land. That was when the government gave land to an organisation for a specific purpose at no fee.

''They don't have the right of transfer, and can't change the use without government permission, but are often so ignorant they don't know this,'' said Mr Chan.

''You have to see original documents,'' he stressed.

''With allottable land, the end-user often finds himself paying for the land, and for the change of use, on top of everything else.'' Buying land was a legal minefield, even for someone experienced in China conveyancing, Mr Chan said.

''It requires an old China hand to go there and touch the documentation. You can actually tell if it is genuine if you know the type of paper they use.'' Forgeries and promised paperwork which did not materialise were major problems, and someone could never rely on something unless they had actually seen the paperwork.

''Documents may exist, but getting to see them is another story, since photocopying is uncommon and often the other party will demand a large sum of money just to let the Hongkong buyer or his legal representative see it,'' Mr Chan said.

In China knowledge was money, and people often demanded money up front, before they would show a lawyer title deeds.

''Sometimes, I see the paperwork and am horrified. The use could be wrong and they have an old site map. And I have to delicately back out of the deal without causing offence or parting with my client's money,'' said Mr Chan.

Nothing could be taken for granted, even the years of use the buyer was acquiring.

''Residential is usually 70 years, but can vary down to 50; for commercial it can be 50 or as little as 30.

''With a joint venture, the period of ownership can be extended, provided the Ministry of Foreign Relations and Trade approves.

''Hongkong lawyers are the bridge, advising the clients, and identifying the points for local Chinese lawyers,'' Mr Chan said.