Viewpoint | Ways and conditions for the transfer of construction in progress
Published:
2022-09-21
In practice, the transfer of construction in progress mainly includes the overall asset transfer of construction in progress (hereinafter referred to as "asset transfer") and the equity transfer of the project company established specifically for the development and construction of the project (hereinafter referred to as "equity transfer"). Asset transfer refers to the transfer mode in which the right holder transfers the undeveloped and completed construction in progress projects, including land use rights, construction in progress and related ancillary facilities, to the transferee as a whole and receives the transfer price. Equity transfer means that the right holder transfers the equity of the project company to the transferee for the purpose of transferring the project under construction. According to Article 39 of the "the People's Republic of China City Real Estate Management Law": "If the land use right is obtained by way of transfer, the following conditions shall be met when the real estate is transferred: (1) All the land use right transfer fees have been paid in accordance with the transfer contract. And obtain the land use right certificate; (II) investment and development in accordance with the transfer contract, which belongs to a housing construction project, more than 25% of the total development investment is completed, which belongs to a piece of land, the formation of industrial land or other construction land conditions. If the house has been built at the time of the transfer of real estate, it shall also hold a certificate of ownership of the house." It can be seen that in the transfer of assets, not only the procedures should be legal and complete, but also the amount of investment should reach 25% of the total investment. How do 1. understand that the amount of investment has reached 25% of the total investment? Referring to the provisions of Article 1, Article 2, Article 4, Article 6 and Article 16 of the Project Composition of Total Investment Expenses of Construction Projects (Draft for Comments) issued by the Ministry of Housing and Urban-Rural Development, the total investment of construction projects refers to the total estimated or actual investment expenses during the construction period to complete the construction of the project and meet the use requirements or production conditions, including project cost (such as construction cost, equipment purchase cost and installation cost, land use fee and other compensation fees, construction management fee, survey and design fee and other construction expenses, reserve fee), value-added tax, fund raising fee (such as loan interest, bond interest, loan evaluation fee, foreign loan handling fee and commitment fee, exchange gain and loss, bond issuance fee and other debt interest expense or financing fee) and working capital. Among the documents that can be inquired through public channels, only the ''Pilot Implementation Plan for Improving the Transfer, Lease, and Mortgage of the Secondary Market of Construction Land Use Rights in Xi'an, Shaanxi Province'' approved by the former Ministry of Land and Resources has been approved for the construction of housing construction projects. It has reached the identification standard of more than 25% of the total development investment, that is, one of the following conditions should be met: (1) For the land transferred by net land, the construction of the project has been fully started and has reached positive or negative zero; (2) Or the completed above-ground building area is not less than 1/3 of the total building area (excluding underground); (3) Or the audit (evaluation) report issued by a professionally qualified audit (evaluation) agency provided by the transferor that the amount of development investment (excluding land transfer fees) has reached more than 25%. Does the transfer of 2. equity also require an investment amount of 25% of the total investment? The former Ministry of Land and Resources once replied that the use of land use rights as capital contribution is a form of land use right transfer, and it should also meet Article 39 of the "the People's Republic of China Real Estate Management Law" that "25% of the total development investment can be completed". The restrictive provisions of the transfer are generally not accepted for property rights change applications that do not meet the prescribed conditions. However, according to the case of equity transfer disputes between Fu Xueling, Sha Modi and Zhou Yingqi, Yingkou Hengqi Real Estate Development Co., Ltd., the Supreme People's Court found in the (2016) Supreme Court Civil Judgment No. 222 that the transfer of 100 of the shares of the company holding the land use right should not be included in the review scope of land management laws and regulations because the subject of the equity transfer has not changed. Since the current law does not have the effect of mandatory provisions prohibiting the transfer of land use rights in the form of the transfer of equity in real estate project companies, the equity transfer agreement should be considered valid. Therefore, the transfer of 100 per cent of the real estate company's equity transfer contract, most courts will cite the view of the Supreme Law that it is essentially a transfer of equity, not a transfer of land use rights, under the provisions of the Company Law, the act is legal and valid. However, considering that in practice, some courts will consider that this behavior constitutes the crime of illegal transfer and reselling of land use rights, entrepreneurs should also prevent corresponding criminal legal risks, and should try their best to ensure compliance with relevant laws and regulations on the transfer of land use rights before implementing relevant behaviors. Conditions, or try to obtain the consent of the local government.
In practice, the transfer of construction in progress mainly includes the overall asset transfer of construction in progress (hereinafter referred to as "asset transfer") and the equity transfer of the project company established specifically for the development and construction of the project (hereinafter referred to as "equity transfer"). Asset transfer refers to the transfer mode in which the right holder transfers the undeveloped and completed construction in progress projects, including land use rights, construction in progress and related ancillary facilities, to the transferee as a whole and receives the transfer price. Equity transfer means that the right holder transfers the equity of the project company to the transferee for the purpose of transferring the project under construction.
According to Article 39 of the "the People's Republic of China City Real Estate Management Law": "If the land use right is obtained by way of transfer, the following conditions shall be met when the real estate is transferred: (1) All the land use right transfer fees have been paid in accordance with the transfer contract. And obtain the land use right certificate; (II) investment and development in accordance with the transfer contract, which belongs to a housing construction project, more than 25% of the total development investment is completed, which belongs to a piece of land, the formation of industrial land or other construction land conditions. If the house has been built at the time of the transfer of real estate, it shall also hold a certificate of ownership of the house." It can be seen that in the transfer of assets, not only the procedures should be legal and complete, but also the amount of investment should reach 25% of the total investment.
How do 1. understand that the amount of investment has reached 25% of the total investment?
Referring to the provisions of Article 1, Article 2, Article 4, Article 6 and Article 16 of the Project Composition of Total Investment Expenses of Construction Projects (Draft for Comments) issued by the Ministry of Housing and Urban-Rural Development, the total investment of construction projects refers to the total estimated or actual investment expenses during the construction period to complete the construction of the project and meet the use requirements or production conditions, including project cost (such as construction cost, equipment purchase cost and installation cost, land use fee and other compensation fees, construction management fee, survey and design fee and other construction expenses, reserve fee), value-added tax, fund raising fee (such as loan interest, bond interest, loan evaluation fee, foreign loan handling fee and commitment fee, exchange gain and loss, bond issuance fee and other debt interest expense or financing fee) and working capital.
Among the documents that can be inquired through public channels, only the ''Pilot Implementation Plan for Improving the Transfer, Lease, and Mortgage of the Secondary Market of Construction Land Use Rights in Xi'an, Shaanxi Province'' approved by the former Ministry of Land and Resources has been approved for the construction of housing construction projects. It has reached the identification standard of more than 25% of the total development investment, that is, one of the following conditions should be met:
(1) For the land transferred by net land, the construction of the project has been fully started and has reached positive or negative zero;
(2) Or the completed above-ground building area is not less than 1/3 of the total building area (excluding underground);
(3) Or the audit (evaluation) report issued by a professionally qualified audit (evaluation) agency provided by the transferor that the amount of development investment (excluding land transfer fees) has reached more than 25%.
Does the transfer of 2. equity also require an investment amount of 25% of the total investment?
The former Ministry of Land and Resources once replied that the use of land use rights as capital contribution is a form of land use right transfer, and it should also meet Article 39 of the "the People's Republic of China Real Estate Management Law" that "25% of the total development investment can be completed". The restrictive provisions of the transfer are generally not accepted for property rights change applications that do not meet the prescribed conditions.
However, according to the case of equity transfer disputes between Fu Xueling, Sha Modi and Zhou Yingqi, Yingkou Hengqi Real Estate Development Co., Ltd., the Supreme People's Court found in the (2016) Supreme Court Civil Judgment No. 222 that the transfer of 100 of the shares of the company holding the land use right should not be included in the review scope of land management laws and regulations because the subject of the equity transfer has not changed. Since the current law does not have the effect of mandatory provisions prohibiting the transfer of land use rights in the form of the transfer of equity in real estate project companies, the equity transfer agreement should be considered valid.
Therefore, the transfer of 100 per cent of the real estate company's equity transfer contract, most courts will cite the view of the Supreme Law that it is essentially a transfer of equity, not a transfer of land use rights, under the provisions of the Company Law, the act is legal and valid. However, considering that in practice, some courts will consider that this behavior constitutes the crime of illegal transfer and reselling of land use rights, entrepreneurs should also prevent corresponding criminal legal risks, and should try their best to ensure compliance with relevant laws and regulations on the transfer of land use rights before implementing relevant behaviors. Conditions, or try to obtain the consent of the local government.
Key words:
Related News
Zhongcheng Qingtai Jinan Region
Address: Floor 55-57, Jinan China Resources Center, 11111 Jingshi Road, Lixia District, Jinan City, Shandong Province
