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How to Buy a House in China: What Are the Legal Steps?

source:www.enghunan.gov.cn release date:2014/09/02 hits:541

The processes in China are very different to many western countries and legal systems. Please remember that we aren’t property agents, so we are writing this from our own experience. However, we have also spoken with some experienced property agents along the way who have helped fill in some of the gaps. Since we could go on and on, and our editor has us aiming for clarity and brevity, we will take you through the steps in a rough chronological order with our comments and tips.
What are the main transaction steps?

1: Sign a contract and pay a signing depositd, a “show you are serious” amount of say RMB10,000.

2:The contract is registered at the Realty Transaction Department in your area. A Property Purchasing Registration Form and a Property Selling Registration Form will have to be completed and filed with the Property Ownership Certificate. Once this has been fulfilled, the Realty Transaction Department will give the vendor and investor a date for the official Realty Transfer Notice to be given. Usually in about a month.

3:At this visit, a pin code is provided establishing that the seller owns the apartment and also that you are the only person in the process of buying this property. This pin code is important. Keep it safe. It can be checked online on the government transaction department’s website, although it is only in Chinese, so you may need a trusted Chinese friend or colleague to help. Only once you have confirmed do you move to the next step.

4: A deposit is paid, usually 30% of the contract price directly to the owner. There is no escrow account, but since you have your pin code, litigation and suing for breach of contract is fairly straightforward (we are told).

5: In some regions of China, you may need to organize approval to purchase. This includes checks on your residency status and a cursory check that you don’t own other properties.

6: Organize your mortgage–this will come with a minimum purchase of insurance (so budget for this) and also understand, that right now, many banks recently are insisting on 40% cash deposit for risk mitigation. We will handle mortgage application tips in a following post.

7: Return to the transaction centre with your agent, the seller, probably a representative of the bank, and possibly your lawyer. This is the big day and it can take time, so arrive early, say 9am or even before. Bring a book or an IPod since there can be long periods of waiting. You must be there to sign the documents; you can’t delegate this to a lawyer.

8: At the transaction centre you pay stamp duty and the seller pays any outstanding property tax. Title is transferred. We will try to clarify and specify taxes in a later post.

9: With the same group on the same day a visit to the property one last time to check all is in order and no damage in the interim, utility numbers are noted, before the bank organizes the final money transfer. Keys are handed over. Congratulations, you own a house in China!

What surprises first time buyers most of all, is the time required by you, the purchaser, to be present during the whole process. Count on it being three to four full days away from work, spread over several half days here and there.

The biggest tip we can offer before you get started, is that you should have someone who speaks fluent Chinese and who understands the property process with you, and most importantly that you trust. A lawyer would be ideal. This list alone won’t keep you safe, but the property purchase process is pretty straightforward once you understand the steps.
Next week, we look at property taxes and fees associated with buying a property in China. The 30% cash deposit for a mortgage to buy a property is just the beginning.

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