One thing we haven’t written about recently is the fact that we receive a rather consistent stream of queries regarding the sale of real estate by foreigners in China. While transactions and transfers of real estate are indeed heavily regulated by the government, this does not in any way mean that foreigners cannot sell real estate here.
Despite slight potential complications due to nationality and location, DaWo Law Firm has still successfully represented many foreigners in real estate matters, and we thought it would be useful to create the following brief introduction to certain aspects of the sale process.
1. Overseas/Domestic Notarization of POA, and Possible Overseas Certifications Needed
If the owner of the real estate cannot be present for some reason, such as being overseas or being outside Shanghai, the owner may authorize a lawyer to handle all relevant matters through a notarized/certified Power of Attorney.
The requirements for notarization and certification are different on a regional basis. DaWo maintains many long-term partnerships with notary offices and law firms in various regions in China as well as abroad.
2. Signing an Intermediation Contract
An intermediation contract is an agreement among the buyer, the seller, and the real estate agency. The main purpose of the intermediation contract is to restrain the agency, but the contract may also include important clauses regarding the responsibilities (e.g. deposit) of both the buyer and the seller. Pending valid authorization, a lawyer can sign the intermediation contract on behalf of a client. More importantly, a lawyer can review the responsibility clauses in the intermediation contract and advise the client on major risks.
3. Is there a mortgage or loan attached to the real estate?
Arrangements must be made with the appropriate domestic bank in China. Pending valid authorization, a lawyer can sign relevant bank documents on behalf of a client.
4. Possible Change of Real Estate Certificate Needed
If the original real estate certificate does not indicate direct ownership by the foreigner, the certificate must be changed to list the foreign national as the owner on the basis of an effective legal relationship (such as marriage or kinship). Only after the completion of such change will the foreign national have the right to sell real estate and receive payment.
In principle, government authorities require the presence of both the foreign national and the listed owner for this process; otherwise, authorities cannot verify its authenticity. However, based on our experience, we have still been able to complete this change process on behalf of foreign clients with appropriate authorization.
5. Certification of Passport
Passport numbers will change following renewals. For the Chinese government, verification of foreigner’s identity is solely depended on their passport number. As such, once a change of passport number occurs, the authorities can no longer verify the identity of foreigner. Therefore, the authorities require a document certifying that multiple passport numbers belong to the same foreign national. Based on our experience, such certifications should be obtained through the relevant embassies/consulates and designated translation service providers.
6. Signing the Online Formal Sales Contract on Government-Designated Website
Similarly, this process in principle must be completed on site with the relevant parties physically present. Again, our lawyers have successfully completed the process on behalf of foreign clients with appropriate authorization.
7. Transfer of real estate Ownership
After signing an online formal sales contract, the buyer and the seller must produce all of the mandatory documents and complete the transfer of ownership on site at the Exchange Center. Although physical presence is required in principle, again, our lawyers can complete the process on behalf of clients with appropriate authorization.
This process will involve tax matters. All taxation matters must be handled and finished by the real estate agencies at the Exchange Center. Only after full payment of taxes may the transfer of ownership be processed.
After the real estate certificate is transferred to the buyer, the sale process of the real estate property is considered complete.
8. Purchase and Remittance of Foreign Exchange with RMB Acquired from Domestic Sale of Real estate for Non-Chinese Residents
Chinese laws regarding foreign exchange explicitly state that purchase and remittance of foreign exchange are allowed for the payment received by foreign nationals corresponding to their ownership percentage of the real estate. Although the handling of foreign exchange is not included in the “procedure of selling real estate”, if there is indeed a need, you can still designate your attorney to complete this step on your behalf, with appropriate authorization, along with the other selling matters. However, whether an attorney can complete the process on behalf of a client depends on the requirements of the local Administration of Foreign Exchange and the local banks.
Shanghai DaWo Law Firm has extensive, successful experience with these matters, and a seasoned international team. If you have further questions about selling (or purchasing) real estate here, please feel free to contact us by phone or by email below.