Property ownership is provided through the exchange of a land use right certificate corresponding to the related land. Unfortunately, there is not a central administration system keeping a central registry, and you have to check locally at the land bureau. At the same bureau it is possible to check whether the property’s owner is entitled to sell you the rights. We strongly advise that you ask the land bureau to search for any mortgages, loans or other encumbrances attached to the property.
Once there is change of ownership, both parties should go together to the land bureau to submit documents for the ownership transfer procedures. The bureau also defines the exact borders of the property.
The first table provides a summary of the steps required for an individual buying or selling property, either new from a developer or on the second-hand market.
We discuss financing issues later, but in most cases an individual would need to put down around 30-40% of the purchase price as cash, with the rest funded by a mortgage.
Due diligence is important, as ever in China, like in all other markets - the principle of caveat emptor (“let the buyer beware”) applies here. If you wish to invest in a foreign market, you should pay close attention to examining and understanding the true condition of the property, and/or seek the assistance of a real estate professional before purchasing. There are international real estate agencies and expert valuers in China who can assist you to judge whether the purchase price of a property is fair, and whether it is structurally sound. The more due diligence, the better, as taking legal action if something goes wrong is much more difficult than in countries with more developed rule of law.
You will also need to understand the tax implications of buying and selling, too. You get hit on both sides of the equation – for details of current tax rates and applicability see below. Rental is still very common in China, of course. Owners are free to choose their tenants, and there are no longer any restrictions on where foreign companies or individuals can rent property (apart from some next to sensitive government buildings). However, tenants should ensure the building they choose has the correct status, whether industrial (for factories), commercial (for offices and shops) or residential (for private homes).
