WHEN local governments at county level or above lease land-use rights for real estate development, according to the control quota set by government at provincial level or above, they must first draw up an annual plan showing the total area of land where land-use rights are to be leased. Under State Council regulations they must then report to the State Council or to the government at provincial level for approval. THE lease of land-use rights should be undertaken gradually and in a planned fashion by city and country governments. Plans for each piece of land for lease, its use, the period of use and other conditions should be drawn up by the Land Administration Department of the city or county government together with the Urban Planning Department, the Construction Department and the Real Estate Management Department. According to State Council regulations, the plan should then be reported to the appropriate government for approval, and on approval, be implemented by the Land Administration Department of the city or county government. Within autonomous areas, the limits of authority of the county's government and relevant departments in administering the regulations in the proceeding paragraph, are decided by the government of the autonomous cities. LEASE of land-use rights may be by means of auction, tender or through mutual negotiation. Land for commercial, travel, entertainment and luxury residential use must, whenever possible, be leased by auction or tender. Where auction or tender are not possible, the mutual negotiation method may be used. However, the price of land-use rights leased by mutual negotiation may not be less than the lowest price set by government regulations. IF land users need to change the land-use in the land-use rights lease contract, approval must be obtained from the lessor and the Urban Planning Administration Department of the city or country government. A land-use rights lease alteration agreement or a new land-use rights lease alteration agreement or a new land-use rights lease contract should be signed and the premium for the lease of land-use rights should be adjusted accordingly. IF land users need to continue using the land after the term agreed in the land-use rights lease contract, an application for an extension should be made at least one year before the end of the term. Except where it is in the public interest to revoke the plot of land, this application should be approved. For those granted an extension, a new land-use rights lease contract should be signed and a land-use rights lease premium paid according to regulations. WHERE land-use rights are obtained by lease, the following conditions should be satisfied when transferring real estate: (1) The total lease premium, as agreed in the lease contract, must already have been paid for the land-use rights and the land-use right certificate must also already have been obtained. (2) Development and investment should proceed as agreed in the lease contract. For building construction projects, at least 25 per cent of the total development investment should be spent. For large-scale land development, conditions should be created enabling industrial land-use or land-use for other construction purposes. REAL ESTATE AS SECURITY ON A LOAN (MORTGAGE) THE mortgage of real estate refers to the act of a mortgagor, without transferring ownership of his property, providing it to the person with mortgage rights as security on a loan. Where the mortgagor does not repay the loan, the person with mortgage rights has priority in receiving compensation from the proceeds of the auction of the mortgaged property. LEGALLY obtained property ownership rights as well as land-use rights on land occupied by that property, can be mortgaged. Land-use rights obtained by lease can be mortgaged. REAL estate developments should strictly follow the urban plan. On the principle of combining economic, social and environmental considerations, developments should be comprehensively planned, with rational, overall layouts and consideration for providing full facilities including infrastructure. REAL estate developments from which land-use rights were obtained by the lease method must adhere to the land-use agreed in the land-use rights lease contract, and start development within the time limit agreed in the contract. If one year after the time limit agreed in the contract the development has still not started, a land ''set-aside'' fee equivalent to 20 per cent of the land-use rights premium may be levied. If development has not started two years after the time limit, the land-use rights can be revoked without compensation. However, cases where delay to the development's start is caused by factors beyond control, by the actions of government or government authorities, or by necessary preparation work, are excepted. If land users need to continue using the land after the term agreed in the land use rights lease contract, an application for an extension should be made at least one year before the end of the term. Except where it is in the public interest to revoke the plot of land, this application should be approved.