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From my understanding, when someone purchases a house or condominium in China, they typically receive a 70-year lease for the land on which the house or condominium is located. The land is still owned by the Chinese state or other public entities. When the lease expires, how does the lease renewal work and how is its cost determined?

When the lease on the land on which one's house is located expires, how does the renewal work and how is its cost determined?

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    I wish there were a good place to learn and ask questions about China in English, but sadly, there isn't any that I'm aware of.
    – Flux
    Nov 5, 2020 at 16:51
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    SE has members from all over the world. China doesn't make this off-topic. And rental / real estate questions are generally on topic as well. I'm not seeing this as off-topic. Dec 6, 2020 at 12:27
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    Ok. Thx. There is a gray area I struggle with. Any tax question, for example, might be accused of being a legal question. In this case, I'm just going on record, as a member, that I believe this to be on topic. Meaning - I'll let the wisdom of the crowd proceed to decide and vote accordingly. Dec 6, 2020 at 14:15
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    @RonJohn most topics on this site are inherently legal questions. literally every 401k question is a legal question, 401(k) is the literal name of the legal subsection of federal law. just because the answer isn't time tested and on a dozen websites already doesn't mean this site can only serve to regurgitate answers and everything else has to be off topic
    – CQM
    Dec 6, 2020 at 18:00
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    @RonJohn I've had plenty of incompetent or misdirected accountants and lawyers. Steering them in directions they didn't consider can absolutely be done by getting user-generated freely available answers online.
    – CQM
    Dec 6, 2020 at 20:03

1 Answer 1

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A real estate can be divided into two parts, the land and the building. You have permanent and perpetual right on the building of your own.

In China, there are two kinds of lands, one of which is called State-owned land (SoL for short), the rest is called Collectively-owned land (CoL for short).

SoL is owned by the whole population of China and managed by the local government, while CoL is owned collectively by local communities and managed by local authorities, such as a villager committee. The land cannot be owned by individuals and/or corporations.

To build on SoL you need to EITHER purchase the Land Use Right (LUR for short) from the local government,OR ask the local government allocate some land for you. LUR of the leased land expires sooner or latter. Although the allocated land does not expire, the allocator could withdraw LUR any time.

To build on CoL, if you are not a member of the local community, you need to ask the local government to purchase it from the local authority and make it SoL first. However, if you are a member of the local community, you don't need to obtain LUR from anybody, hence there is no such thing as 70-year expiration.

SoL used for residences, LUR of which is automatically renewed, but the residents are bound to pay for the renewal of LUR. SoL used for other purposes, LUR of which is NOT automatically renewed. The local government can stop leasing the land to you. The cost varies across the nation in China. You need to make contact with the local government to get more details.


Update:

The maximal expiration of LUR varies according to the usage of the land: The maximal expiration of LUR

It means that the local government/council could legislate shorter expiration of LUR.


Update 2:

The local council/government (from province-level to city-level) legislates how the cost to obtain LUR of SoL should be calculated, whether the cost of the renewal should be discounted.

I did some research on Baidu, there are a few formulae to calculate the cost to obtain LUR of SoL for residential purpose:

  1. Cost = Land_Area × 5 × Fee_Rate_per_year_per_area × Plot_Ratio [source]
  2. Cost = Land_Area × Baseline_Land_Price × 10% × Actual_Plot_Ratio ÷ (Average_Plot_Ratio × 1.5) [source]

Where, Land Area is measured by square meter; Plot Ratio is the ratio of a building's total floor area (gross floor area) to the size of the piece of land upon which it is built; Fee Rate (per year per area) is the key in this formula, which varies, as is mentioned above, across the country.


Update 3:

The baseline land price of residential SoL in two famous cities IMHO:

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Beware that the baseline land price is not the cost to obtain SoL LUR, but a factor in the calculation in some cities, as demonstrated in Update 2.


Reference:

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  • Thank you very much! "The residents are bound to pay for the renewal of LUR" -> how is its cost determined? Dec 6, 2020 at 8:43
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    @FranckDernoncourt The law published by the National People's Congress of China does not specify how much the renewal of LUR should be. China is a gigantic country so the level of development varies across China. It's obvious that the cost of the renewal of LUR in Tibet won't be the same as that in Shanghai, which is why I said "You need to make contact with the local government to get more details." at last. Dec 6, 2020 at 12:34
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    @FranckDernoncourt I don't know whether these formulae are correct, but I'll ask the government of my town tomorrow for you. Dec 6, 2020 at 14:23
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    There is a website in Chinese showcasing the cost to obtain SoL LUR, but TL;DR. I'm not gonna translate it, but I think it might be a good idea to put it here as a minor reference in case someone wants to take a look at it. Dec 6, 2020 at 15:37
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    Well, it turned out the county I live in uses a different formula to calculate the cost to obtain/renew SoL LUR. In fact, each county has its own policy on the calculation. So if you do want to know how much the cost is, you need to inquire the local government for furthur details. Dec 9, 2020 at 14:44

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