Published on and written by Cyril Jarnias
China’s real estate market, a colossal and constantly evolving sector, is attracting growing interest from both domestic and foreign investors. By understanding the nuances of real estate contracts and the accompanying guarantees, stakeholders can navigate this complex environment with greater confidence.
Rigorous laws combined with unique economic dynamics require particular attention to contractual stipulations and safety mechanisms, essential elements for preventing disputes and protecting investments.
This article aims to demystify these legal aspects, offering a valuable guide for those wishing to venture into the fascinating and potentially lucrative world of Chinese real estate.
Real Estate Law in China: Understanding Purchase Contracts
Common Types of Real Estate Purchase Contracts in China:
- Pre-sale Contract (Off-plan, 预售合同): The most commonly used for new properties, it commits the buyer to purchase a property still under construction.
- Standard Sale Contract (现房买卖合同): For properties already built and registered with the land registry.
- Special Commercial Contracts: Used for commercial spaces or offices, with specific clauses regarding usage.
| Contract Type | Primary Usage | Distinctive Features |
|---|---|---|
| Pre-sale (off-plan) | New housing | Purchase before delivery, increased risks |
| Standard Sale | Existing properties | Less risky, immediate delivery |
| Special Commercial Contracts | Commercial/office spaces | Usage restrictions and adapted taxation |
General Structure of a Real Estate Purchase Contract in China:
A standard contract systematically includes:
- Precise description of the property (official address, cadastral number)
- Total price, payment terms and schedule
- Clauses related to delivery: deadline/delays/penalties
- Developer/seller guarantees
- Contingency clauses (obtaining bank loan…)
- Declarations regarding the property’s legal compliance
- Mutual obligations related to taxes/additional fees
- Dispute resolution procedure
Essential Clauses to Verify:
Clause on the transfer of land use rights, penalty clause for delay or failure to deliver, specific conditions regarding common areas/collective equipment.
Key Legal Questions for International Buyers:
- Foreigners can only acquire ONE residential property per person across the entire Chinese territory.
- Must justify at least one year of continuous residence with a Z/X/J1 visa.
- High mandatory down payment: generally between 30% and 50% depending on the city.
This always concerns only the right of use (“leasehold”) limited in time—maximum 70 years—and not full ownership (“freehold”).
Repatriation of funds after resale is strictly capped (~50,000 USD/year).
Additional restrictions may exist locally according to municipal policies.
Procedural Steps When Purchasing Real Estate in China:
- Preliminary verification that the foreigner meets all administrative conditions.
- Negotiation then signing of the preliminary contract (“意向书”).
- Initial payment/deposit blocked in a notarized escrow account.
- Signing of the final contract (“商品房买卖合同”) before a Chinese notary.
- Registration with local land/mortgage authorities (Real Estate Registration Center)—this step conditions the final validity of the transfer.
- Actual handover of keys/physical delivery after full payment.
After completion:
The transfer must be registered under penalty of invalidity towards third parties.
Case Law Examples & Common Anecdotes Regarding Disputes:
Many disputes concern non-completion or substantial delays in delivery by the developer—particularly during “off-plan” sales. Often cited:
– Absence/serious delay in obtaining necessary official certificates (incomplete ownership)
– Unauthorized modifications made to the initial project without written agreement
In some recent cases related to mass bankruptcies among certain major developers since 2022–2024, several buyers were forced to collectively pursue civil or even criminal liability to obtain either reimbursement or actual completion.
Several high-profile cases in recent years show that even with a signed contract, the real risk mainly concerns:
- Actual completion vs bankruptcy/failing developer;
- Post-signature arbitrary modifications;
- The actual difficulty in enforcing a local court decision against certain powerful local operators.
Recent Legislative/Regulatory Changes Impacting These Contracts:
Since May 2024–2025:
Historic reduction in the minimum down payment required by Chinese individuals for purchasing their first residential property—officially lowered to just 15%. This measure primarily targets the domestic market but could indirectly facilitate some secondary transactions involving foreigners selling their single authorized existing property.
| Recent Measure | Potential Impact |
|---|---|
| Reduced minimum down payment | Partial market fluidity in secondary market |
| End of floor loan rates | More flexible access to financing |
Furthermore, the State has strengthened its anti-speculation measures and closely controls through local quotas/foreign holders to “avoid any massive outflow” from this segment deemed highly strategic economically and socially.
Finally, the forced generalization since mid-2023/March–April 2025 by certain major municipalities (Shanghai, Shenzhen) now requires all new residential real estate contracts—including those signed by foreigners—to include an express clause regarding risks related to unfinished/non-delivered status (so-called “pre-delivery” disputes).
These developments create as many opportunities as major new regulatory constraints that must be taken into account before any effective contractual commitment.
Good to Know:
In China, real estate purchase contracts mainly come in two primary forms: the preliminary sale contract and the final sale contract, with the former often used to reserve the property and establish purchase conditions. A typical contract includes crucial clauses like purchase price, payment details, property delivery, and penalties for non-compliance. International buyers must be aware of restrictions on foreign land ownership, including the requirement to have resided in China for at least one year before purchasing a property. The process generally involves signing the contract, placing a deposit, and registering the property with local authorities to finalize the purchase. Common disputes involve delivery delays or undisclosed property defects, illustrated by court cases where developers failed to meet construction deadlines. Furthermore, recent regulations aimed at cooling the real estate market could affect investor strategy, making legal consultation essential before any commitment.
Guarantees for Expatriates in Chinese Real Estate Law
Specific Guarantees for Expatriates in Chinese Real Estate Law
- Expatriates must justify a minimum stay of one year in China before being able to purchase real estate. This rule does not apply to Chinese residents who benefit from more flexible purchasing rights.
- Purchase by a foreigner is limited to properties for personal use only; classic rental or investment property is prohibited for foreigners.
- Properties accessible to expatriates are restricted to certain areas, often in major cities like Shanghai or Beijing. Some residential zones remain closed to non-Chinese buyers.
- Real estate acquisition only confers a right of use over the property (generally 70 years for residential), unlike the full ownership rights offered to local residents.
| Guarantee | Expatriate | Local Resident |
|---|---|---|
| Prior residence required | Yes (minimum 1 year) | No |
| Type of ownership | Personal use only | Free use |
| Accessible areas | Limited | Generally open |
| Acquired right | Right of use (70 years) | Full ownership |
Common Contractual Obligations
- Mandatory signing before a Chinese notary and certified translation of the contract if necessary
- Strict verification of land title and administrative approvals
- Payment of local taxes, processing fees, and registration with competent authorities
Legal Recourses Available in Case of Disputes
- Prior mediation encouraged by local authorities
- Filing with the competent People’s Court: possible recourse against the seller or real estate agency for hidden defects, non-compliance, or breach of contract
- Limited but existing possibility of international arbitration depending on the nature of the dispute and parties’ nationalities
Typical Examples of Guarantee Applications
Case 1:
An expatriate who purchased an apartment in Shanghai discovers the seller was not authorized to transfer their usage right. Recourse before the People’s Court resulted in full reimbursement with contractual penalties.
Case 2:
Dispute over the actual duration of the usage right recorded on the land title; local mediation then arbitration allowed for partial financial compensation.
Case 3:
Bank refusal related to foreign tax status when subscribing to borrower’s insurance; negotiation conducted through a specialized broker led to an adapted delegation.
Practical Tips for Expatriates Wishing to Invest in Chinese Real Estate
- Scrupulously verify your legal eligibility before any commitment (length of stay, visa type)
- Systematically use a bilingual lawyer specializing in local real estate law
- Prioritize transactions through recognized agencies registered with Chinese authorities
- Request all certified translations as well as official copies of legal documents
Good to Know:
In China, expatriates benefit from certain specific guarantees when purchasing or leasing real estate, although these protections differ from those reserved for local residents. Chinese laws require expatriates, before acquiring a property, to provide proof of residence in the country for at least one year and limit ownership to a single residential property per person. Contracts must specify the parties’ responsibilities and include clauses against unjustified rent increases or early terminations. In case of dispute, expatriates can turn to local courts or arbitration, often preferred for its speed. A typical example includes disputes over security deposits that can be resolved through mediations involving specialized lawyers. It is advisable to engage a local legal advisor to avoid contractual pitfalls and ensure all documents are compliant.
⚠️ Always verify the area where you wish to purchase—some are inaccessible to foreigners.
⚠️ Never sign without independent legal validation—high risk related to the special “right of use” status.
💡 Play foreign banks against each other to obtain borrower’s insurance compatible with your tax situation.
Main Legal Aspects of Real Estate Transactions in China
Applicable Legislative Framework
The legal framework for real estate transactions in China is primarily based on the Property Law, which distinguishes between state ownership and collective ownership for land. Individuals or companies cannot directly acquire land ownership but benefit from Land Use Rights, transferred by the State for a determined period (generally 70 years for residential). This regime is complemented by local regulations, as well as specific texts governing the acquisition of real estate by foreigners and foreign companies.
Main Laws and Regulations:
- Property Law
- Opinion 171 (2006): limited access for foreigners
- National and local tax regulations
Commonly Used Real Estate Contract Types
- Sale Contract: transfer of land use rights and building. The transaction includes full payment before official registration.
- Lease/Rental Contract: great contractual freedom, duration generally between 6 months and 20 years. Possibility to use official templates provided locally.
- “Lease/Purchase” Contract (leasehold): less frequent, often linked to commercial or industrial real estate.
Simplified list of frequently used contracts:
- Sale Contract
- Rental Lease Contract
- Leasehold or long-term lease
Real Estate Registration Procedures
- Preliminary contract signing before a notary or authorized agent.
- Full payment of the agreed price.
- Obtaining necessary administrative certificates.
- Filing with the local Real Estate Registration Bureau for official transfer.
| Step | Description |
|---|---|
| Title verification | Legal background search |
| Contract signing | Formal commitment between parties |
| Payment | Complete payment before official transfer |
| Registration | Transfer with competent authority |
Required Legal Guarantees
To protect buyers/sellers:
- Official certificate proving absence of mortgage/liens on the property
- Legal obligation for the seller to guarantee the legal validity of the transferred title
- Right to compensation in case of hidden defects or false declarations
Synthetic list:
- Cadastral certificate free of charges or disputes
- Resolutory clause in case of payment/default delivery failure
Property Rights & Restrictions Concerning Foreigners
Foreign nationals are subject to several specific restrictions:
| Aspect | Main Restrictions |
|---|---|
| Residential purchase | Residence ≥1 year + residence permit required |
| Usage | Personal use only; rental investment prohibited |
| Local taxation | Local tax obligation according to municipalities |
Furthermore, in some Chinese cities, you must justify a minimum of one year continuous residence plus regular payment of local taxes before possible acquisition.
Tax Implications Related to Real Estate Transactions
Purchase/sale generates several tax obligations:
- Real estate transaction tax (“Deed tax”)
- Annual land tax if prolonged holding
- Capital gains tax upon resale: variable rate depending on holding period and seller status (individual/legal entity)
- VAT applicable in some commercial cases
The seller must settle all due taxes before final transfer to the new acquirer.
Recent Examples Influencing Chinese Real Estate Law
Several major decisions have marked this sector:
- Since 2016, regulatory tightening with strict control of mortgage credit to limit excessive speculation (“Housing is for living not speculation”).
- In August 2020: macro-prudential reform aimed at stabilizing the market against growing financial risks.
- Recent jurisprudence confirming increased protection against abusive eviction during urban expropriation – strengthened compensation in favor of private owners.
Current Regulatory Trends
Recent developments mainly concern:
- Strengthened control of developer debt via so-called “three red lines” rules
- Increased surveillance of foreign capital flows towards the urban real estate sector
- Promotion of affordable housing versus speculative investments
The general trend is towards strengthened regulation aiming for increased legal security while limiting financial volatility linked to the Chinese real estate market.
Good to Know:
In China, real estate transactions are governed by a complex legislative framework, including notably the Urban Land Administration Law and the Contract Law. Sale contracts and lease/purchase contracts are the most commonly used, requiring official registration with the local Real Estate Administration Bureau. Buyers and sellers must consider legal guarantees, such as compensation obligation clauses, to protect against potential disputes. Property rights are strictly controlled, with specific restrictions for foreigners, who may be limited to acquiring a single property for residential use. In tax terms, capital gains taxes may apply when reselling properties. Recent examples, like the Vanke case, illustrate court interpretation of property rights, while current trends show an orientation towards regulations aimed at stabilizing the market and limiting real estate speculation.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
