22 March 2021
To properly adjudicate disputes over in rem rights, the Supreme People’s Court formulated the Interpretation (I) on the Application of the in rem Rights Section of the Civil Code of the People’s Republic of China (the “Interpretation”) in accordance with the Civil Code of the People’s Republic of China, other relevant laws and regulations, as well as trial practice. The Interpretation is specifically highlighted below:
1. Clarification on scope
The court shall accept disputes in relation to ownership of real property, as well as those arising from matters in relation to the basis of real property rights registration, such as sale, purchase, gift, mortgage, except where the parties have applied to simultaneously resolve the above-mentioned civil disputes in administrative proceedings, and the people’s court has agreed to such consolidation. The court shall support a party’s claim to confirm that they are the actual rights holder to the real property in question if they have evidence showing that the information in the real property registration is inconsistent with the actual rights situation. If a party files a civil lawsuit to confirm that they are the holder of the in rem rights on grounds that the dissenting registration has lapsed for the reasons specified in Article 220, Paragraph 2 of the Civil Code, the civil lawsuit shall be accepted in accordance with law.
2. Agreement on rights among co-owners
In the event that the entity holding co-ownership rights change due to inheritance or bequest, the other co-owners may not claim a right of first refusal without prior agreement.
The period in which a right of refusal may be exercised shall be as agreed among the co-owners, if any. In case of no agreement or if the agreement is unclear, the matter will be determined based on the following: (1) the period stipulated in the notice sent by the assignor to the other co-owners containing the same terms and conditions; (2) if no period is stipulated in the notice, or if the period is less than 15 days after the delivery date of the notice, the period shall be 15 days; (3) if the assignor fails to notify, the period shall be 15 days after the day the other co-owners are or should be aware of the same finalized terms and conditions; and (4) if the assignor fails to notify, and it is not possible to determine if the other co-owners are or should be aware of the same finalized conditions, the period shall be six months after the day the co-ownership is transferred.
If a co-owner transfers his or her share to someone other than the other co-owners, and the other co-owners claim that they have the right of first refusal to such share under the same terms and conditions pursuant to law and judicial interpretations, such claim shall be upheld. If the other co-owners fail to claim a right of first refusal within the period stipulated under Article 11 of this Interpretation, or if they claim the right of first refusal but nevertheless request substantial changes to the terms and conditions, such as a reduction of the transfer price or an increase of the assignor’s burdens, or if they merely claim that the share transfer contract should be revoked or invalidated on the ground that their right of first refusal is being infringed, such claims shall not be upheld.
In the event that a co-owned share is transferred among co-owners, the other co-owners shall not claim a right of first refusal.
For further information, please contact:
Di Wu, Lee Tsai & Partners
lawtec@leetsai.com
