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Legal Update

Ban on Hotels Projects Selling Condos in Beijing

19 July 2010
Mayer Brown JSM Legal Update

The Beijing Municipal Commission of Housing and Urban-Rural Development, the Beijing Municipal Commission of Development and Reform, the Beijing Municipal Commission of Urban Planning and the Beijing Municipal Bureau of Land and Resources have jointly issued a "Notice regarding the Strengthening of the Administration on the Sale of Hotel Projects (including hotel and holiday resort projects)" on 14 May 2010 to ban the division of the properties into condos for sale purposes by hotel and resort projects.

The Notice

The Beijing Municipal Commission of Housing and Urban-Rural Development, the Beijing Municipal Commission of Development and Reform, the Beijing Municipal Commission of Urban Planning and the Beijing Municipal Bureau of Land and Resources have jointly issued a "Notice regarding the Strengthening of the Administration on the Sale of Hotel Projects (including hotel and holiday resort projects)" (the "Notice") on 14 May 2010. This Notice is a local regulation which is valid in Beijing and became effective on 1st June. Some of the more important features of the Notice include:

  • After obtaining the approvals regarding the establishment of a new hotel project from the government authorities, a real estate developer should arrange design and construction work strictly according to the approved use purpose of the land - no changes to the use purpose of the land can be made and no division of the property may be made without the prior approval of the government authorities
  • For hotel projects which have obtained project approval after 31 May 2010, division of the property into condos for sale purpose will not be permitted
  • For hotel projects which have obtained project approval before 31 May 2010, if the developers make application for the division of the property into condos for sale purpose after 31 May 2010, the Beijing Municipal Commission of Housing and Urban-Rural Development, the Beijing Municipal Commission of Development and Reform, the Beijing Municipal Commission of Urban Planning and the Beijing Municipal Bureau of Land and Resources will meet and jointly issue a decision
  • For any hotel projects which have already obtained both the project approval and the approval regarding the division of the property into condos for sale purpose before 31 May 2010, stricter supervision will be imposed by the government authorities. In addition, the real estate developers are obliged to expressly disclose relevant information to the property buyers, including the tenure of the land use right, deed tax payment, property management fees, electricity and water fees, etc.

Major Purposes of the Notice

The purposes of the government in issuing the Notice are:

  • To regulate the activities of the real estate developers and impose strict supervision on the selling of condos by hotels
  • To protect the interests of property buyers - according to relevant PRC laws, the tenure of land use right for hotel projects is only 40 years (compared with a tenure of 70 years for normal residential projects); in addition, the standard of deed tax and prices for electricity and water for hotel projects are much higher than those for normal residential projects
  • To avoid hotels becoming residential properties

Next Steps of the Government

Officials at the Beijing Municipal Commission of Housing and Urban-Rural Development have suggested that government authorities in Beijing will subsequently issue a series of new regulations which will aim to impose limitations and restrictions on the conversion of other commercial projects into residential properties.

For inquiries related to this Legal Update, please contact:

Ian Lewis ( )

Learn more about our PRC offices and Real Estate practice.

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