A land use right is distinct and separate from land ownership.

You would hardly expect otherwise in a country where all land is owned by the state or by ‘collectives’ (usually in cases involving the countryside). There is no private ownership of land.

A land use right is distinct and separate from land ownership. Similar to leasehold, the land use right is a property right enjoyed by private parties and protected by law. It is enforceable. However, compared with leasehold, it has significant restrictions and limitations, particularly when it comes to the use of the land (see below).

However, companies, organisations and individuals can own the buildings and structures over the land. So, how can they do this without owning the land itself? The answer is that they can buy or be granted ‘land use rights’.

a-land-use-right-is-distinct-and-separate-from-land-ownership

In addition, having a land use right does not include with it the right to use the natural resources, minerals or treasure under the land.

Generally, there are three types of land use rights that apply in the case of land use in cities: ‘granted’, ‘allocated’ and ‘tenant’ land use rights. They are different in how long they last, how they can be acquired and how much they can be acquired for, and how they can be marketed.

Granted land use right. This is the most common way to acquire a land use right from the state. In return for a fixed fee, the state, as the owner of the land and represented by the local land administration authority, can grant companies, organisations or individuals within or outside the territory of the PRC the exclusive right to use the land for a defined period. The maximum period of the GLUR depends upon the proposed use of the land:

  • Forty years for commercial, tourism and entertainment use;
  • Fifty years for industry, education, science, technology, culture, health and sports use; and
  • Seventy years for residential use.

An application to extend the GLUR must be made no later than one year before its expiry. When the parties renew the contract, another fee becomes payable. In cases where the GLUR is not renewed, all buildings, fixtures, structures and improvements over the land are taken back by the state without payment of compensation.

How can a private party enter into a land use right grant contract with the state? The possible ways include auction, tender or negotiation. However, the most common way is open competition, i.e. auction, tender or listing on the land use right exchange market. If the proposed project is for a commercial purpose, it is compulsory to go through the open competition.