Viewpoint... Study on the effectiveness of the land transfer fee return agreement.
Published:
2023-11-28
In the process of attracting investment for land development, local governments set up clauses such as returning land transfer fees to attract development companies to invest in construction. In practice, due to policy changes, market environment changes and other factors, the government may not return the land transfer fee according to the agreement. The effectiveness of the land transfer fee return agreement has become a key issue in dealing with such legal disputes.
Abstract
In the process of attracting investment for land development, local governments set up clauses such as returning land transfer fees to attract development companies to invest in construction. In practice, due to policy changes, market environment changes and other factors, the government may not return the land transfer fee according to the agreement. The effectiveness of the land transfer fee return agreement has become a key issue in dealing with such legal disputes.
Characteristics of 1. land transfer fee return agreement
In China, the right to use state-owned land mainly flows out through government bidding, auction, listing or agreement transfer. In order to encourage development enterprises to fully develop local land, some governments will formulate a series of preferential policies to attract social capital to invest in local land development and construction, and the return of land transfer fees has become one of the preferential measures adopted in some areas.
The land transfer fee return agreement mainly has the following characteristics. First, the main body of the signing is generally the main body of the government and the investment enterprise, among which the main body of the government also includes the subdistrict offices, management committees and other dispatched agencies under the jurisdiction of the government. Second, the content of the agreement usually stipulates that after the development enterprise obtains the right to use the construction land and pays the land transfer fee in the bidding, auction and listing procedure, the government will return the land transfer fee paid by the investment enterprise. Third, in the form of land transfer fee return, there are such as incentive fees, compensation fees, subsidies and other names, in essence, the land transfer fees collected by government departments are still directed to return to development enterprises. Fourth, in the way of returning the land transfer fee, there are various ways such as full return by the government, proportional return or premium return (referring to the difference between the land price agreed in the return agreement and the actual payment price), which are often agreed in the return agreement.
2. Invalid Determination of the Effectiveness of the Agreement on the Return of Land Transfer Funds
Judging from past judicial decisions, most land transfer fee return agreements have been found to be invalid. Combined with judicial precedents, the author combed out the main reasons for the invalidity of the land transfer fee.
The (I) is invalid because it violates the mandatory provisions of laws and administrative regulations.
The second paragraph of Article 347 of the Civil Code stipulates: "If there are two or more intended land users of the same land, such as industrial, commercial, tourism, entertainment and commercial housing, it shall be sold by means of public bidding, auction, etc." Article 54 of the "Land Management Law" stipulates: "The use of state-owned land by construction units shall be obtained by means of paid use such as transfer." Article 55 stipulates: "A construction unit that obtains the right to use state-owned land by means of paid use such as transfer shall, in accordance with the standards and methods prescribed by the State Council, pay the land use fee and other paid land use fees and other fees before using the land." Article 19 of the Law on the Administration of Urban Real Estate stipulates: "All the fees for the transfer of land use rights shall be turned over to the finance and included in the budget for the construction of urban infrastructure and land development. The specific measures for the payment and use of the fees for the transfer of land use rights shall be prescribed by the State Council."
According to the above provisions, state-owned land should be sold by public bidding. In the case involving the land transfer fee return agreement, the government and the investment enterprise have determined the land use right holder through the agreement, and even preliminarily formulated the land development framework agreement. Even if the subsequent procedures of public bidding are still carried out in form, the principle of public bidding of land use right has been violated in essence. Secondly, the land transfer fee should have been turned over to the finance, but the land transfer fee return agreement returned the land transfer fee to the investment enterprise in the agreed form, which caused the loss of state-owned assets and disrupted the order of land transfer fee revenue and expenditure. Finally, after the land transfer fee is turned over to the finance, it should be used for urban infrastructure construction and land development in accordance with relevant laws and policies. If it is directly returned to the investment enterprise, there is no guarantee that it can use the fund for urban infrastructure construction, which actually harms the interests of the state and society.
The above reasons are also reflected in the judicial decision. For example, in the case of (2019) Supreme Court Minzhong No. 1942, the court held that although the transfer of land use right involved in the case was carried out by bidding, the three parties in this case determined the land price as a lower price through prior contract agreement, and returned the difference between the price and the price of public bidding to the bidder of land use right in the name of "public facilities construction cost" as a local policy preference, this behavior of the three parties is an act of circumventing the provisions of the second paragraph of Article 137 of the the People's Republic of China property Law, which essentially violates the mandatory provisions of this article that the right to the use of state-owned construction land should be obtained through public bidding, and harms the interests of the state. Therefore, according to the fifth paragraph of Article 52 of the the People's Republic of China Contract Law, Article 3 of the Supplementary Agreement shall be deemed invalid for violating the mandatory provisions of the law. The Supreme Court upheld the decision of the court of first instance.
Another example is (2020) in the case of Supreme People's Congress No. 149, the county government and a company agreed in the cooperation letter that according to the principle of benefit sharing, the county government will sell about 800 mu of surrounding operating land at 400000 yuan/mu. If the listing price is exceeded, the county government and a company will share it at a ratio of 3:7. The court held that "the agreement is obviously inconsistent with the legal scope of application of land transfer income, and the agreement is in conflict with the spirit of the above-mentioned legal provisions (I. e. Article 19 of the the People's Republic of China urban real estate management law, Article 55 of the the People's Republic of China land management law, and Article 13 of the administrative measures for income and expenditure of the transfer of state-owned land use right)." This kind of disguised reduction and exemption of land transfer fees and misappropriation of land proceeds obviously harms the national interest and social public interest, so it is invalid.
(II) is invalid due to malicious collusion to damage the legitimate rights and interests of others
As the main body of the transfer of land use rights, the government naturally has a more and more comprehensive understanding of land prices, area development policies and other information. In the process of pre-terminating and signing land transfer fee return agreements with investment companies, there is a transfer of relevant information To investment companies to increase the possibility of investment companies to obtain land use rights, so that specific companies have an advantageous position in land bidding. This actually damages the bidding opportunities of other bidders through information difference, and may even exclude other bidders. For example, in the case of (2018) Supreme Law Minshen No. 2879, the Supreme Law held that the two parties excluded other bidders by agreeing to return the land transfer fee before the auction of the land use right of the land involved, which violated the auction of the land use right. The principle of fairness and openness should be followed. Moreover, the subject matter of the return of the agreement directly points to the land transfer fee, which harms the national interest and belongs to the situation stipulated in item (II) of Article 52 of the the People's Republic of China contract Law. The court of first instance found that the above agreement was invalid in accordance with the law and was not improper.
3. the Validity of the Agreement on the Return of Land Transfer Funds
In judicial practice, the agreement on the return of land transfer fees is not uniformly determined to be invalid, and a few judgments are valid for multiple reasons.
There is a view that the land transfer fee return agreement is a special policy formulated by the local area for attracting investment. It is the implementation of the investment promotion policy. It does not give the parties to the contract an improper advantage that is obviously superior to other market competitors, and does not violate laws and regulations. Mandatory provisions of administrative regulations. For example, in the case of (2017) Supreme Court Minzhong No. 352, the court held that the Framework Agreement belongs to the implementation of the investment promotion policy by the management committee. The main content of the agreement is that a company agrees to invest and develop real estate projects in the demonstration zone. The management committee directly or indirectly gives certain policy preferences or business convenience and other related issues. Although the provisions on the treatment of the reserve price and premium in the Framework Agreement have the intention to control the company's investment costs, they are the commitment of the Yunlong Management Committee to provide policy concessions within the scope of its authority and do not violate the prohibition of the law. Moreover, the "Framework Agreement" has clearly stipulated the method of obtaining the state-owned land use right of the project. The company must strictly follow the legal procedures for the transfer of state-owned land use rights, and the land department will transfer the land and obtain the project land through the land market "bidding, auction and listing. Therefore, the Administrative Committee's appeal that the "Framework Agreement" violates the relevant provisions on the transfer of state-owned land should be invalid, and there is no corresponding factual and legal basis.
Another view is that the return of land transfer fees is a preferential policy given to developers by the government based on the behavior of attracting investment, which does not harm the interests of the state and society. In the case of (2017) Supreme Fa Minshen No. 3974, the court held that the town government introduced a group not only to solve the problem of shortage of funds for the demolition of the land involved in the case, but also to expect the investment and construction of the group to promote regional economic development and increase tax revenue. In this context, the "Supplementary Agreement (I)" stipulates that 850000 yuan/mu into the recruitment, auction, hanging procedures, by the municipal government in the form of transfer fees returned to the town government ...... For more than 850000 yuan/mu part of the deduction of 20% of the municipal government's overall planning, the township income transfer fee 80% full return. The agreement also reflects the town government's expectation of the land market price at that time and the land transfer fee that can be collected after the land auction. In fact, the auction price is higher than 850000 yuan/mu, which meets the performance conditions estimated by the agreement. Based on the above circumstances, after the land auction involved in the case was completed, the town government did not fulfill the obligation to return funds stipulated in the agreement, but claimed that the agreement was invalid on the grounds of harming national interests and social public interests and should not be supported. Therefore, the original judgment found that the (I) Supplementary Agreement was legal and valid, and the applicable law was not improper. It is the performance of the government's exercise of administrative powers within the scope of its powers, and the return of land transfer premium has not caused damage to national interests.
Combined with the above, in the case that most land transfer fee return agreements are deemed invalid, the special impact of local investment promotion policies on the validity of land transfer fee return agreements cannot be ignored. It is undeniable that China has a vast territory, and some areas have empty land resources but lack capital investment due to historical or economic reasons. The government tries to attract enterprises to invest in construction by returning land transfer fees. On the one hand, it reduces the development cost of enterprises, on the other hand, it is also conducive to the long-term development of land. Based on the consideration of economic development, such behavior of the government seems reasonable. Therefore, in judicial practice, some courts will make a decision that the return agreement is valid.
4. Summary
On the whole, the land transfer fee return agreement is based on the principle of invalidity, with the exception of validity. The invalidity of the land transfer fee return agreement mainly lies in the fact that the government and enterprises have reached an agreement on the follow-up investment before performing the bidding procedures, which may be found by the court as prior consultation and in violation of the relevant laws on bidding. leading to the loss of state-owned assets, which in turn harms the interests of the state and society. More importantly, under the background that both the central policy and the law stipulate "two lines of revenue and expenditure", directly agreeing to return the land transfer fee involves the risk of violating the policy.
Moreover, the minutes of the 23rd judges' meeting of the Civil Division of the Supreme Court in 2021 held that the land transfer fee return agreement was invalid because it violated the mandatory provisions of the law and harmed the national interest. The main point of view is that the return agreement does not adopt the method of public bidding for the transfer of state-owned land use rights, and the land transfer fees should be strictly managed in accordance with the "two lines of revenue and expenditure", and the land transfer income should not be reduced or reduced in various names. After the minutes of the meeting, there has been a clearer decision on the validity of the land transfer fee return agreement. Therefore, from the perspective of risk prevention, both the government and the investor should try to avoid signing land transfer fee return agreement under the current legal framework.
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