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(Adopted at the Third Session of the Thirteenth National People’s Congress on
May 28, 2020)
This Law is formulated in accordance with the Constitution of the People’s Republic of China for the purposes of protecting the lawful rights and interests of the persons of the civil law, regulating civil-law relations, maintaining social and economic order, meet the needs for developing socialism with Chinese characteristics, and carrying forward the core socialist values.
The civil law regulates personal and proprietary relationships among the persons of the civil law, namely, natural persons, legal persons, and unincorporated organizations that are equal in status.
The personal rights, proprietary rights, and other lawful rights and interests of the persons of the civil law are protected by law and free from infringement by any organization or individual.
All persons of the civil law are equal in legal status when conducting civil activities.
When conducting a civil activity, a person of the civil law shall, in compliance with the principle of voluntariness, create, alter, or terminate a civil juristic relationship according to his own will.
When conducting a civil activity, a person of the civil law shall, in compliance with the principle of fairness, reasonably clarify the rights and obligations of each party.
When conducting a civil activity, a person of the civil law shall, in compliance with the principle of good faith, uphold honesty and honor commitments.
When conducting a civil activity, no person of the civil law shall violate the law, or offend public order or good morals.
When conducting a civil activity, a person of the civil law shall act in a manner that facilitates conservation of resources and protection of the ecological environment.
Civil disputes shall be resolved in accordance with law. Where the law does not specify, custom may be applied, provided that public order and good morals may not be offended.
Where there are other laws providing special provisions regulating civil-law
relations, such provisions shall be followed.
The laws of the People’s Republic of China shall apply to the civil activities taking place within the territory of the People’s Republic of China, except as otherwise provided by law.
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A natural person shall, from the time of birth until the time of death, have the capacity for enjoying civil-law rights, and may enjoy civil-law rights and assume civil-law duties in accordance with law.
All natural persons are equal in their capacity for enjoying civil-law rights.
The time of birth and time of death of a natural person are determined by the time recorded on his birth or death certificate as applied, or, if there is no birth or death certificate, by the time recorded in the natural person’s household registration or other valid identity certificate. If there is sufficient evidence overturning the time recorded in the aforementioned documents, the time that is established by such evidence shall prevail.
A fetus is deemed as having the capacity for enjoying civil-law rights in estate succession, acceptance of gift, and other situations where protection of a fetus’ interests is involved. However, a stillborn fetus does not have such capacity ab initio.
A natural person aged 18 or above is an adult. A natural person under the age of 18 is a minor.
An adult has full capacity for performing civil juristic acts and may independently perform civil juristic acts. A minor aged 16 or above whose main source of support is the income from his own labor is deemed as a person with full capacity for performing civil juristic acts.
A minor aged 8 or above has limited capacity for performing civil juristic acts, and may perform a civil juristic act through or upon consent or ratification of his legal representative, provided that such a minor may independently perform a civil juristic act that is purely beneficial to him or that is appropriate to his age and intelligence.
A minor under the age of 8 has no capacity for performing civil juristic acts, and may perform a civil juristic act only through his legal representative.
An adult unable to comprehend his own conduct has no capacity for performing civil juristic acts, and may perform a civil juristic act only through his legal representative.
The preceding paragraph is applicable to a minor aged 8 or above who is unable to comprehend his own conduct.
An adult unable to fully comprehend his own conduct has limited capacity for performing civil juristic acts, and may perform a civil juristic act through or upon consent or ratification of his legal representative, provided that such an adult may independently perform a civil juristic act that is purely beneficial to him or that is appropriate to his intelligence and mental status.
The guardian of a person who has no or limited capacity for performing civil juristic acts is the legal representative of the person.
Where an adult is unable to comprehend or fully comprehend his conduct, any interested person of such an adult or a relevant organization may request the people’s court to declare that the said adult be identified as a person with no or limited capacity for performing civil juristic acts.
Where a person has been identified by a people’s court as a person with no or limited capacity for performing civil juristic acts, the people’s court may, upon request of the person, an interested person thereof, or a relevant organization, and based on the recovery of his intelligence and mental health, declare that the said person becomes a person with limited or full capacity for performing civil juristic acts.
A relevant organization referred to in this Article includes a residents’ committee, a villagers’ committee, a school, a medical institution, the women’s federation, the disabled person’s federation, a legally established organization for senior people, the civil affairs department, and the like.
The domicile of a natural person is the residence recorded in the household or other valid identification registration system; if a natural person’s habitual residence is different from his domicile, the habitual residence is deemed as his domicile.
Parents have the duty to raise, educate, and protect their minor children. Adult children have the duty to support, assist, and protect their parents.
The parents of a minor are his guardians.
Where the parents of a minor are deceased or incompetent to be his guardians, the following persons, if competent, shall act as his guardians in the following order:
(1)
his paternal grandparents and maternal grandparents;
(2)
his elder brothers and sisters; or
(3)
any other individual or organization that is willing to act as his guardian, provided that consent must be obtained from the residents’ committee, the villagers’ committee, or the civil affairs department in the place where the minor’s domicile is located.
For an adult who has no or limited capacity for performing civil juristic acts, the following persons, if competent, shall act as his guardians in the following order:
(2)
his parents and his children;
(3)
any other close relatives of him; or
(4)
any other individual or organization that is willing to act as his guardian, provided that consent must be obtained from the residents’ committee, the villagers’ committee, or the civil affairs department in the place where the adult’s domicile is located.
A parent who is the guardian of his child may, in his will, designate a succeeding
guardian for his child.
A guardian may be determined through agreement among the persons who are legally qualified to be guardians. The true will of the ward shall be respected in determining the guardian through agreement.
Where a dispute arises over the determination of a guardian, the guardian shall be appointed by the residents’ committee, the villagers’ committee, or the civil affairs department in the place where the ward’s domicile is located, and a party not satisfied with such an appointment may request the people’s court to appoint a guardian; the relevant parties may also directly request the people’s court to make such an appointment.
When appointing a guardian, the residents’ committee, the villagers’ committee, the civil affairs department, or the people’s court shall respect the true will of the ward and appoint a guardian in the best interest of the ward from among the legally qualified persons.
Where the personal, proprietary, and other lawful rights and interests of a ward are not under any protection before a guardian is appointed in accordance with the first paragraph of this Article, the residents’ committee, the villager’s committee, a relevant organization designated by law, or the civil affairs department in the place where the ward’s domicile is located shall act as a temporary guardian.
Once appointed, a guardian shall not be replaced without authorization; where a guardian has been replaced without authorization, the responsibility of the originally appointed guardian is not discharged.
Where there is no person legally qualified as a guardian, the civil affairs department shall act as the guardian, and the residents’ committee or villagers’ committee in the place where the ward’s domicile is located may also act as the guardian if they are competent in performing the duties of guardian.
An adult with full capacity for performing civil juristic acts may, in anticipation of incapacity in the future, consult his close relatives, or other individuals or organizations willing to be his guardian, and appoint in writing a guardian for himself, who shall perform the duties of guardian when the adult loses all or part of the capacity for performing civil juristic acts.
The duties of a guardian are to represent the ward to perform civil juristic acts and to protect the personal, proprietary, and other lawful rights and interests of the ward.
A guardian’s rights arising from performance of his duties as required by law are protected by law.
A guardian who fails to perform his duties or infringes upon the lawful rights or interests of the ward shall bear legal liability.
Where a guardian is temporarily unable to perform his duties owing to an emergency such as an unexpected incident, thus leaving the ward in an unattended situation, the residents’ committee, the villagers’ committee, or the civil affairs department in the place where the ward’s domicile is located shall make arrangement as a temporary measure to provide necessary life care for the ward.
A guardian shall perform his duties in the best interest of the ward. A guardian shall not dispose of the ward’s property unless it is for protecting the interests of the ward.
When performing his duties and making decisions relating to a minor’s interests, a guardian of a minor shall respect the true will of the minor based on the latter’s age and intelligence.
When performing his duties, a guardian of an adult shall respect the true will of the adult to the greatest extent possible, and ensure and aid the ward in performing civil juristic acts appropriate to his intelligence and mental status. The guardian shall not interfere with the matters that the ward is capable of independently managing.
Where a guardian has performed any of the following acts, the people’s court shall, upon request of a relevant individual or organization, disqualify the guardian, adopt necessary temporary measures, and appoint a new guardian in the best interest of the ward in accordance with law:
(1)
engaging in any acts which severely harm the physical or mental health of the ward;
(2)
failing to perform the duties of guardian, or being unable to perform such duties but refusing to delegate all or part of the duties to others, thus placing the ward in a desperate situation; or
(3)
engaging in other acts which severely infringe upon the lawful rights and interests of the ward.
The relevant individual and organization referred to in this Article include any other person legally qualified to be a guardian, the residents’ committee, the villagers’ committee, a school, a medical institution, the women’s federation, the disabled persons’ federation, a child protection organization, a legally established organization for senior people, the civil affairs department, and the like.
Where the aforementioned individual and organization other than the civil affairs department, as stated in the preceding paragraph, fail to request the people’s court to disqualify the guardian in a timely manner, the civil affairs department shall initiate such a request to the people’s court.
A parent, child, or spouse legally obligated to pay for his ward’s support shall
continue to perform such obligations after being disqualified as a guardian by the people’s court.
Where a ward’s parent or child, who has been disqualified as a guardian by the people’s court for reasons other than having committed an intentional crime against the ward, and who has truly repented and mended his ways, applies to the people’s court for being reinstated, the people’s court may, upon considering the actual situation and upon the satisfaction of the prerequisite that the true will of the ward is respected, reinstate the guardian, and the guardianship between the ward and the guardian subsequently appointed by the people’s court after the disqualification of the original guardian shall thus be terminated simultaneously.
A guardianship is terminated under any of the following circumstances:
(1)
the ward has obtained or regained full capacity for performing civil juristic acts;
(2)
the guardian has become incompetent to be a guardian;
(3)
the ward or the guardian deceases; or
(4)
Any other circumstance in which the people’s court determines to terminate the guardianship.
Where a ward is still in need of a guardian after the termination of the guardianship, a new guardian shall be appointed in accordance with law.
If a natural person’s whereabouts have been unknown for two years, an interested person may request the people’s court to declare the natural person as a missing person.
The period of time during which a natural person’s whereabouts is unknown shall be counted from the date when the natural person has not been heard of ever since. If a person is missing during a war, the time of his whereabouts becoming unknown shall be counted from the date the war is ended or from the date as determined by the relevant authority.
A missing person’s property shall be placed in the custody of his spouse, adult children, parents, or any other persons willing to take such custody.
Where a dispute arises over the custody of a missing person’s property, or the persons provided in the preceding paragraph are unavailable or incompetent for such a purpose, the property shall be placed in the custody of a person appointed by the people’s court.
A custodian shall properly manage the missing person’s property and safeguard his proprietary interests.
The taxes, debts, and other due payment obligations owed by a missing person, if any, shall be paid by the custodian out of the missing person’s property.
A custodian who, intentionally or due to gross negligence, causes damage to the property of the missing person shall be liable for compensation.
Where a custodian fails to perform his duties of custodian, infringes upon the proprietary rights or interests of the missing person, or if the custodian becomes incompetent to be a custodian, an interested person of the missing person may request the people’s court to replace the custodian.
A custodian may, with just cause, request the people’s court to appoint a new custodian to replace himself.
Where the people’s court appoints a new custodian, the new custodian is entitled to request the former custodian to deliver the relevant property and a property management report in a timely manner.
Where a missing person reappears, the people’s court shall, upon request of the said person or an interested person thereof, revoke the declaration of his being missing.
A missing person who reappears is entitled to request the custodian to deliver the relevant property and a property management report in a timely manner.
An interested person may request the people’s court to make a declaration of the death of a natural person under either of the following circumstances:
(1)
the natural person’s whereabouts have been unknown for four years; or
(2)
the natural person’s whereabouts have been unknown for two years as a result of an accident.
The two-year requirement for a natural person to be declared dead does not apply where the person’s whereabouts have been unknown as a result of an accident and if a relevant authority certifies that it is impossible for the said natural person to still be
alive.
Where an interested person requests the people’s court to declare the death of a natural person, while another interested person requests to declare the person being missing, the people’s court shall declare that the person is dead if the conditions for declaration of death as prescribed in this Code are satisfied.
For a person declared dead, the date when the people’s court makes a judgment declaring his death is deemed as the date of his death; for a person declared dead because his whereabouts is unknown as a result of an accident, the date of the occurrence of the accident is deemed as the date of his death.
The declaration of the death of a natural person who is still alive does not affect the effects of the civil juristic acts performed by the person during the period the death declaration is effective.
Where a person declared dead reappears, the people’s court shall, upon request of the person or an interested person thereof, revoke the declaration of his death.
The marital relationship with a person declared dead ceases to exist from the date the declaration of his death is made. Where the declaration of death is revoked, the aforementioned marital relationship shall be automatically resumed from the date the declaration of death is revoked, except where the spouse has married to someone else or states in writing to the marriage registration authority the unwillingness to resume the marriage.
Where a child of a person declared dead has been legally adopted by others during the period when the declaration of death is effective, the person declared dead shall not, after the declaration of his death is revoked, claim that the adoption is invalid on the ground that his child is adopted without his consent.
Where a declaration of the death of a person is revoked, the person is entitled to request those who have obtained his property under Book VI of this Code to return the property, or make appropriate compensation if the property cannot be returned.
Where an interested person conceals the true information and causes a natural person to be declared dead so as to obtain the latter’s property, the interested person shall, in addition to returning the wrongfully obtained property, make compensation for any loss thus caused.
A natural person who operates an industrial or commercial business may register it, in accordance with law, as an individual-run industrial and commercial household. An industrial and commercial household may have a trade name.
Members of a rural economic collective who, in accordance with law, have been granted an original contract to operate a parcel of rural land and engages in the operation of the land on a household basis are rural-land contractual management households.
The debts of an individual-run industrial and commercial household shall be paid from the assets of the individual who operates the business in his own name or from the individual’s family assets if the business is operated in the name of the household, or, if it is impossible to determine whether the business is operated in the name of the individual or in the name of the individual’s household, from the individual’s family assets.
The debts of a rural-land contractual management household shall be paid from the assets of the household that is engaged in the operation on the contracted rural land, or from the portion of the assets of the family members who actually engage in such operation.
A legal person is an organization that has the capacity for enjoying civil-law rights and the capacity for performing civil juristic acts, and that independently enjoys civil-law rights and assumes civil-law obligations in accordance with law.
A legal person shall be established in accordance with law.
A legal person shall have its own name, governance structure, domicile, and assets or funds. The specific conditions and procedures for the establishment of a legal person shall be in accordance with laws and administrative regulations.
Where there are laws or administrative regulations providing that the establishment of a legal person shall be subject to the approval of a relevant authority, such provisions shall be followed.
A legal person’s capacity for enjoying civil-law rights and capacity for performing civil juristic acts are acquired when the legal person is established, and cease when the legal person is terminated.
A legal person independently assumes civil liability to the extent of all of its assets.
The person with the responsibility of representing a legal person in conducting civil activities in accordance with law or the legal person’s articles of
association is the legal representative of the legal person.
The legal consequences of the civil activities conducted by the legal representative in the legal person’s name shall be assumed by the legal person.
Any restrictions on the legal representative’s power to represent the legal person which is stipulated in the articles of association or imposed by the governing body of the legal person shall not be asserted against a bona fide third person.
Where a legal representative of a legal person causes damage to others while performing his responsibilities, the civil liability thus incurred shall be assumed by the legal person.
After assuming the aforementioned civil liability, the legal person has the right to indemnification, in accordance with law or its articles of association, against its legal representative who is at fault.
The domicile of a legal person is the place where its principal administrative office is located. Where a legal person is required by law to be registered, the place of
its principal administrative office shall be registered as its domicile.
Where there is any change in any matter that has been registered during the term of existence of a legal person, the legal person shall apply to the registration authority for modification of its registration in accordance with law.
The actual situation of a legal person, which is inconsistent with what is recorded upon registration, shall not be asserted against a bona fide third person.
The registration authority shall, in accordance with law, post in a timely manner a public notice of the information recorded by a legal person upon registration.
In case of a merger between or among legal persons, the rights and obligations of such legal persons shall be enjoyed and assumed by the surviving legal person.
In case of a division of a legal person, the rights and obligations of the legal person shall be enjoyed and assumed jointly and severally by the legal persons established after division, unless otherwise agreed by its creditors and debtors.
If any of the following causes exists, a legal person is terminated after it has
completed liquidation and de-registration in accordance with law:
(1)
the legal person is dissolved;
(2)
the legal person is declared bankrupt; or
(3)
another cause as provided by law exists.
Where there are laws or administrative regulations providing that the termination of a legal person shall be subject to the approval of the relevant authority, such provisions shall be followed.
A legal person is dissolved under any of the following circumstances:
(1)
the term stipulated in its articles of association expires, or any other cause for dissolution as is stipulated in the articles of association exists;
(2)
the governing body of the legal person makes a resolution to dissolve the legal person;
(3)
the legal person has to be dissolved because of a merger or division;
(4)
the legal person’s business license or registration certificate is legally withdrawn, or the legal person has received an order of closure or been dissolved; or
(5)
another circumstance as provided by law exists.
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Where a legal person is dissolved for reasons other than a merger or division, a liquidation committee shall be formed in a timely manner by the persons with the duty of liquidation to liquidate the legal person.
Unless otherwise provided by laws or administrative regulations, members of the legal person’s executive or decision-making body such as the directors or councilors, are the persons with the duty to liquidate the legal person.
The persons with the duty to liquidate the legal person who fail to perform their duties in time and cause damage to others shall bear civil liability; the competent authority or an interested person may request the people’s court to appoint the relevant persons to form a liquidation committee to liquidate the legal person.
The procedure for liquidating a legal person and the authorities of a liquidation committee shall be in compliance with the provisions of relevant laws; in the absence of such a provision, the relevant rules provided in corporate laws shall be applied mutatis mutandis.
During the period of liquidation, a legal person continues to exist but may not engage in any activity unrelated to the liquidation.
Unless otherwise provided by law, upon completion of liquidation, any residual assets of a liquidated legal person shall be distributed in accordance with its articles of association or the resolution made by its governing body.
A legal person is terminated after liquidation and de-registration is completed; a legal person that is not required by law to be registered ceases to exist upon completion of the liquidation.
A legal person declared bankrupt is terminated upon completion of the bankruptcy liquidation and de-registration in accordance with law.
A legal person may establish branches in accordance with law. Where there are laws or administrative regulations providing that such a branch shall be registered, such provisions shall be followed.
Where a branch of a legal person engages in civil activities in its own name, the civil liability thus incurred shall be assumed by the legal person; the civil liability may be paid first from the assets managed by the branch, and any deficiency shall be satisfied by the legal person.
The legal consequences of the civil activities conducted by an incorporator for the purpose of establishing a legal person shall be assumed by the legal person; or, in the event that no legal person is successfully established, by the incorporator, or the
incorporators jointly and severally if there are two or more of them. Where an incorporator engages in civil activities in his own name for the purpose of establishing a legal person and thus incurs civil liability, a third person creditor may elect to request either the legal person or the incorporator to bear the liability.
A for-profit legal person is a legal person established for the purpose of making profits and distributing the profits among its shareholders and other capital contributors.
For-profit legal persons include limited liability companies, join stock companies limited by shares, and other enterprises that have the legal person status.
A for-profit legal person is established upon registration in accordance with law.
The registration authority shall issue a business license to a legally established for-profit legal person. The date of issuance of the business license is the date of establishment of the for-profit legal person.
To establish a for-profit legal person, there shall be articles of association formulated in accordance with law.
A for-profit legal person shall establish a governing body.
The governing body has the authority to revise the articles of association of the legal person, elect or replace members of the executive or supervisory body, and perform other responsibilities stipulated in the articles of association.
A for-profit legal person shall establish an executive body.
The executive body has the authority to convene meetings of the governing body, decide on business and investment plans, establish internal management structure, and perform other responsibilities stipulated in the articles of association of the legal person.
Where the executive body of a legal person is the board of directors or the executive director, the legal representative shall be the chairman of the board of directors, the executive director, or the manager, as is stipulated in the articles of association. Where there is no board of directors or executive director established, the person with principal responsibilities as stipulated in the articles of association shall be the executive body and the legal representative of the legal person.
Where a for-profit legal person establishes a supervisory body such as a board of supervisors or a supervisor, the supervisory body has, in accordance with law, the authority to inspect the financial matters of the legal person, supervise the performance of duty by the members of the executive body and the senior management officers of the legal person, and perform other responsibilities stipulated in the articles of association.
A capital contributor of a for-profit legal person shall not abuse his rights as such to harm the interests of the legal person or any other capital contributor. A capital contributor abusing such rights and causing harm to the legal person or any other capital contributor shall bear civil liability in accordance with law.
A capital contributor of a for-profit legal person shall not abuse the legal person’s independent status and his own limited liability status to harm the interests of the legal person’s creditors. A capital contributor abusing the legal person’s independent status or its own limited liability status to evade repayment of debts and thus severely harming the interests of the legal person’s creditors shall be jointly and severally liable for the legal person’s obligations.
The controlling capital contributors, actual controllers, directors, supervisors, and senior management officers of a for-profit legal person shall not harm the legal person’s interests by taking advantage of any affiliated relations, and shall compensate for any loss thus caused to the legal person.
A capital contributor of a for-profit legal person may request the people’s court to revoke a resolution which is made at a meeting of the governing body or executive body of the legal person if the procedure for convening the meeting or the voting method thereof is in violation of the laws, administrative regulations, or the legal person’s articles of association, or, if the content of the resolution violates the articles of association, provided that any civil juristic relationship already formed between the legal person and a bona fide third person based on such a resolution shall not be affected.
A for-profit legal person shall, when engaging in operational activities, observe commercial ethics, maintain the security of transactions, subject itself to the supervision of the government and the public, and assume social responsibilities.
A non-profit legal person is a legal person established for public welfare or other non-profit purposes which shall not distribute any profit to its capital contributors, incorporators, or members.
Non-profit legal persons include public institutions, social organizations, foundations, social service institutions, and the like.
A public institution established for the purpose of providing public services to meet the needs for economic and social development attains the status of a public-institution legal person if it satisfies the requirements for being a legal person and is legally registered as such; where the law does not require such a public institution to be registered, it attains the status of a public-institution legal person from the date of its establishment.
Where a public-institution legal person establishes a council, the council is its decision-making body unless otherwise provided by law. The legal representative of a public-institution legal person is elected in accordance with the provisions of laws, administrative regulations, or the legal person’s articles of association.
A social organization established upon the common will of its members for a non-profit purpose, such as public welfare or the common interest of all members, attains the status of a social-organization legal person if it satisfies the requirements for being a legal person and is legally registered as such. Where the law does not require such a social organization to be registered, it attains the status of a social-organization legal person from the date of its establishment.
To establish a social-organization legal person, there shall be articles of association formulated in accordance with law.
A social-organization legal person shall establish a governing body such as a members’ assembly or a meeting of the members’ representatives.
A social-organization legal person shall establish an executive body such as a council. The chairman of the council, the president, or an individual with similar
responsibilities shall, in accordance with the articles of association, act as the legal representative of the legal person.
A foundation or a social service institution established with donated property for the purpose of public welfare attains the status of an endowed legal person if it meets the requirements for being a legal person and is legally registered as such.
A site legally established to hold religious activities may be registered as a legal person and attains the status of an endowed legal person if it meets the requirements for being a legal person. Where there are laws or administrative regulations providing for the religious sites, such provisions shall be followed.
To establish an endowed legal person, there shall be articles of association formulated in accordance with law.
An endowed legal person shall establish a decision-making body such as a council or any other form of democratic management body, and an executive body. The chairman of the council or an individual with similar responsibilities shall, in accordance with the articles of association, act as the legal representative of the legal person.
An endowed legal person shall establish a supervisory body such as a board of supervisors.
A donor has the right to inquire into and provide comments and suggestions on the expenditure and management of the property he has donated to an endowed legal person, and the endowed legal person shall respond honestly and in a timely manner.
Where a decision is made by the decision-making body, executive body, or the legal representative of an endowed legal person, if the decision-making procedure is in violation of the laws, administrative regulations, or the legal person’s articles of association, or, if the content of the decision violates the articles of association, a donor or any other interested person, or the competent authority may request the people’s court to revoke the decision, provided that any civil juristic relationship already formed between the endowed legal person and a bona fide third person based on such a decision shall not be affected.
When a non-profit legal person established for the purpose of public welfare terminates, it shall not distribute the residual assets among its capital contributors, incorporators, or members. The residual assets shall continue to be used for the purpose of public welfare, as is stipulated in the articles of association or the resolution made by the governing body; where it is not possible to dispose of such residual assets in accordance with the articles of association or the resolution made by the governing body, the competent authority shall take the charge transferring the assets to another legal person with the same or similar purposes and then make a public notice.
For the purposes of this Section, State-organ legal persons, rural economic collective legal persons, urban and rural cooperative economic organization legal persons, and primary-level self-governing organization legal persons are special types of legal persons.
A State organ with independent budgets or a legally chartered institution assuming administrative functions is qualified as a State-organ legal person from the date of its establishment and may engage in civil activities that are necessary for the performance of its responsibilities.
A State-organ legal person terminates when the State organ is closed, and its civil-law rights and obligations are enjoyed and assumed by the succeeding State-organ legal person; in the absence of a succeeding State organ, the said rights and obligations shall be enjoyed and assumed by the State-organ legal person that has made the decision to close it.
A rural economic collective attains the status of a legal person in accordance with law.
Where there are laws or administrative regulations providing for rural economic collectives, such provisions shall be followed.
An urban or rural economic cooperative attains the status of a legal person in accordance with law. Where there are laws or administrative regulations providing for urban and rural economic cooperatives, such provisions shall be followed.
An urban residents’ committee or a villagers’ committee, as a primary-level self-governing organization, attains the status of a legal person, and may engage in civil activities necessary for the performance of their responsibilities.
Where there is no village economic collective established, the villagers’
committee may, in accordance with law, perform the responsibilities of a village economic collective.
An unincorporated organization is an organization which does not have the legal person status but may engage in civil activities in its own name in accordance with law.
Unincorporated organizations include sole proprietorships, partnerships, professional service institutions that do not have the legal person status, and the like.
Unincorporated organizations shall be registered in accordance with law.
Where laws or administrative regulations provide that establishment of an unincorporated organization shall be subject to approval by the relevant authority, such provisions shall be followed.
Where an unincorporated organization becomes insolvent, its capital contributors or promotors shall assume unlimited liability for the debts of the organization, unless otherwise provided by law.
An unincorporated organization may designate one or more members to represent the organization to engage in civil activities.
An unincorporated organization shall be dissolved under any of the following circumstances:
(1)
where the term stipulated in its articles of association expires or any other cause for dissolution as is stipulated in the articles of association exists;
(2)
where its capital contributors or promotors decide to dissolve it; or
(3)
where dissolution is required under any other circumstances as provided by law.
Upon dissolution, an unincorporated organization shall be liquidated in accordance with law.
In addition to the provisions in this Chapter, the provisions in Section 1 of Chapter III of this Book shall be applied to unincorporated organizations mutatis mutandis.
The personal liberty and dignity of a natural person is protected by law.
A natural person enjoys the right to life, the right to corporeal integrity, the right to health, the right to name, the right to likeness, the right to reputation, the right to honor, the right to privacy, and the right to freedom of marriage.
A legal person or an unincorporated organization enjoys the right to entity name, the right to reputation, and the right to honor.
A natural person’s personal information is protected by law. Any organization or individual that needs to access other’s personal information must do so in accordance with law and guarantee the safety of such information, and may not illegally collect, use, process, or transmit other’s personal information, or illegally trade, provide, or publicize such information.
The personal rights of a natural person arising from a marital or familial relationship are protected by law.
The proprietary rights of the persons of the civil law are equally protected by law.
Persons of the civil law enjoy real rights in accordance with law.
Real rights are the rights to directly and exclusively control a specific thing by the right holder in accordance with law, which consists of the ownership, right to usufruct, and security interests in the property.
Property consists of immovable and movable property. Where the law provides that a right shall be treated as property over which a real right lies, such provisions shall be followed.
The categories and content of the real rights are provided by law.
Where, for the purpose of public interests, an immovable or movable property is expropriated or requisitioned according to the scope of authority and the procedure provided by law, fair and reasonable compensation shall be paid.
Persons of the civil law have rights in personam in accordance with law.
A right in personam is the right of an obligee to request a specific obligor to do or not to do a certain act, as arising from a contract, a tortious act, a negotiorum gestio, or unjust enrichment, or otherwise arising by operation of law.
A contract formed in accordance with law is legally binding on the parties to the contract.
Where a person’s civil-law rights and interests are infringed upon due to a tortious act, the person is entitled to request the tortfeasor to bear tort liability.
A person who, without a statutory or contractual obligation, engages in management activities to prevent another person from suffering loss of interests, is entitled to request the said other person who receives benefit therefrom to reimburse the necessary expenses thus incurred.
Where a person obtains unjust interests at the expense of another person’s loss without a legal cause, the person thus harmed is entitled to request the enriched person to make restitution.
The persons of the civil law enjoy intellectual property rights in accordance with law.
Intellectual property rights are the exclusive rights enjoyed by the right holders
in accordance with law over the following subject matters:
(2)
inventions, new utility models, or designs;
(4)
geographical indications;
(6)
layout designs of integrated circuits;
(7)
new plant varieties; and
(8)
the other subject matters as provided by law.
A natural person has the right to succession in accordance with law.
Private property lawfully owned by a natural person may be transferred through inheritance in accordance with law.
The persons of the civil law enjoy shareholder rights and other investor rights in accordance with law.
The persons of the civil law enjoy other civil-law rights and interests as provided by law.
Where there are laws particularly providing for the protection of data and online virtual assets, such provisions shall be followed.
Where there are laws particularly providing for the protection of the civil-law rights of the minors, the elderly, the disabled, women, or the consumers, such provisions shall be followed.
Civil-law rights may be acquired through the performance of a civil juristic act, the occurrence of an act de facto, the occurrence of an event as prescribed by law, or by other means provided by law.
The persons of the civil law enjoy their civil-law rights according to their own will and in accordance with law free from any interference.
While exercising civil-law rights, the persons of the civil law shall perform their obligations which are provided by law and agreed with the other parties.
No person of the civil law shall abuse his civil-law rights and harm the interests of the state, the public interests, or the lawful rights and interests of others.
A civil juristic act is an act through which a person of the civil law, by expression of intent, creates, alters, or terminates a civil juristic relationship.
A civil juristic act may be accomplished through unanimous consent of two or more parties, or through one party’s unilateral expression of intent.
Where a legal person or an unincorporated organization makes a resolution in accordance with the procedure and voting method provided by law or stipulated in its articles of association, such a resolution is accomplished as a civil juristic act.
A civil juristic act may be done in writing, orally, or in any other form; where a specific form is required by laws or administrative regulations, or agreed by the parties, it shall be done in such a form.
Unless otherwise provided by law or agreed by the parties, a civil juristic act takes effect at the time it is accomplished.
A person that performs a civil juristic act may not change or revoke the act without authorization, unless doing so is in compliance with law or as consented to by the other party.
An expression of intent made in a real-time communication becomes effective from the time the person to whom the intent is expressed is aware of its content.
An expression of intent made in a form other than a real-time communication becomes effective from the time it reaches the person to whom the intent is expressed. Where such an expression of intent is made through an electronic data message and the person to whom the intent is expressed has designated a specific data-receiving system, it becomes effective from the time such a data message enters that system; where no data-receiving system is specifically designated, it becomes effective from the time the person to whom the intent is expressed knows or should have known that the data message has entered the system. Where the parties have agreed otherwise on the effective time of the expression of intent made in the form of an electronic data message, such an agreement shall prevail.
Where an expression of intent is not made to any specific person, it becomes effective when the expression is completed, unless otherwise provided by law.
An expression of intent made through public notice becomes effective upon the time the public notice is posted.
A person performing a civil juristic act may make an expression of intent either expressly or implicitly.
Silence is deemed as an expression of intent only when it is so provided by law, agreed by the parties, or accords with the course of dealing between the parties.
A person performing a civil juristic act may withdraw an expression of intent. The notice of withdrawal of the expression of intent shall reach the counterparty prior to or at the same time with the counterparty’s receipt of the expression of intent.
Where an expression of intent is made to another person, the meaning of the expression shall be interpreted according to the words and sentences used, with
reference to the relevant terms, the nature and purpose of the civil juristic act, the custom, and the principle of good faith.
Where an expression of intent is not made to any specific person, the true intent of the person performing a civil juristic act shall not be interpreted solely on the words and sentences used, but along with the relevant terms, the nature and purpose of the civil juristic act, custom, and the principle of good faith.
A civil juristic act is valid if the following conditions are satisfied:
(1)
the person performing the act has the required capacity for performing civil juristic acts;
(2)
the intent expressed by the person is true; and
(3)
the act does not violate any mandatory provisions of laws or administrative regulations, nor offend public order or good morals.
A civil juristic act performed by a person who has no capacity for performing civil juristic acts is void.
A civil juristic act, performed by a person with limited capacity for performing civil juristic acts that is purely beneficial to the person or is appropriate to the age, intelligence, or mental status of the person is valid; any other civil juristic act performed by such a person is valid if a consent or ratification is obtained from his legal representative.
A third person involved in the act performed by a person with limited capacity for performing civil juristic acts may request the legal representative of the latter to ratify the act within 30 days from receipt of the notification. Inaction of the legal representative is deemed as refusal of ratification. Before such an act is ratified, a bona fide third person is entitled to revoke the act. The Revocation shall be made by notice.
A civil juristic act performed by a person and another person based on a false expression of intent is void.
Where an expression of intent deliberately conceals a civil juristic act, the validity of the concealed act shall be determined in accordance with the relevant laws.
Where a civil juristic act is performed based on serious misunderstanding, the person who performs the act has the right to request the people’s court or an arbitration institution to revoke the act.
Where a party by fraudulent means induces the other party to perform a civil juristic act against the latter’s true intention, the defrauded party has the right to request the people’s court or an arbitration institution to revoke the act.
Where a party knows or should have known that a civil juristic act performed by the other party is based on a third person’s fraudulent act and is against the other party’s true intention, the defrauded party has the right to request the people’s court or an arbitration institution to revoke the civil juristic act.
Where a party performs a civil juristic act against its true intention owing to duress of the other party or a third person, the coerced party has the right to request the people’s court or an arbitration institution to revoke the civil juristic act.
In situations such as where one party takes advantage of the other party that is in a desperate situation or lacks the ability of making judgment, and as a result the civil juristic act thus performed is obviously unfair, the damaged party is entitled to request the people’s court or an arbitration institution to revoke the act.
A party’s right to revoke a civil juristic act is extinguished under any of the following circumstances:
(1)
the party has failed to exercise the right to revocation within one year from the date when it knows or should have known of the cause for revocation, or within 90 days from the date when the party who has performed the act with serious misunderstanding knows or should have known of the cause for revocation;
(2)
the party acting under duress has failed to exercise the right to revocation within one year from the date when the duress ceases; or
(3)
the party who becomes aware of the cause for revocation waives the right to revocation expressly or through its own conduct.
The right to revocation is extinguished if the party fails to exercise it within five years from the date when the civil juristic act has been performed.
A civil juristic act in violation of the mandatory provisions of laws or administrative regulations is void, unless such mandatory provisions do not lead to invalidity of such a civil juristic act.
A civil juristic act that offends the public order or good morals is void.
A civil juristic act is void if it is conducted through malicious collusion between a person who performs the act and a counterparty thereof and thus harms the lawful rights and interests of another person.
A void or revoked civil juristic act does not have any legal force ab initio.
If invalidation of a part of a civil juristic act does not affect the validity of the other part, the other part of the act remains valid.
Where a civil juristic act is void, revoked, or is determined to have no legal effect, the property thus obtained by a person as a result of the act shall be returned, or compensation be made based on the appraised value of the property if it is impossible or unnecessary to return the property. Unless otherwise provided by law, the loss thus incurred upon the other party shall be compensated by the party at fault, or, if both parties are at fault, by the parties proportionally.
A condition may be attached to a civil juristic act unless the nature of the act denies such an attachment. A civil juristic act subject to a condition precedent becomes effective when the condition is fulfilled. A civil juristic act subject to a condition subsequent becomes invalid when the condition is fulfilled.
Where a condition is attached to a civil juristic act, if a party, for the sake of its own interests, improperly obstructs the fulfillment of the condition, the condition is deemed as having been fulfilled; if a party improperly facilitates the fulfillment of the condition, the condition is deemed as not having been fulfilled.
A term may be attached to a civil juristic act, unless the nature of such act denies such an attachment. A civil juristic act subject to a term of effectiveness becomes effective when the term begins. A civil juristic act subject to a term of termination becomes ineffective upon expiration of the term.
A person of the civil law may perform a civil juristic act through his agent.
A civil juristic act shall not be performed through an agent if the act must be performed by the principal himself in accordance with law, as agreed by the parties, or based on the nature of the act.
A civil juristic act performed by an agent in the principal’s name within the scope of authority is binding on the principal.
Agency consists of agency by agreement and agency by operation of law.
An agent under agreement shall act in accordance with the principal’s authorization. An agent by operation of law shall act in accordance with law.
An agent who fails to perform or fully perform his duty and thus causes harm to the principal shall bear civil liability.
Where an agent maliciously collides with a third person, thus harming the lawful rights and interests of the principal, the agent and the third person shall bear joint and several liability.
In an agency by agreement, if authority is conferred in writing, it shall clearly state in the letter of authorization the name of the agent, the authorized matters, as well as the scope and duration of the authority, and it shall be signed or sealed by the principal.
Where two or more agents are authorized to deal with the same matter for the principal, the agents shall collectively exercise the authority unless otherwise agreed by the parties.
Where an agent knows or should have known that doing the authorized matter is in violation of law but still acts as authorized, or, if a principal knows or should have known that an act of the agent is in violation of law but raises no objection thereto, the principal and the agent shall bear joint and several liability.
An agent shall not, in the principal’s name, perform a civil juristic act with himself, unless it is consented to or ratified by the principal.
An agent who has been designated by two or more principals shall not in the name of one principal perform a civil juristic act with another principal whom he concurrently represents, unless it is consented to or ratified by both principals.
Where an agent needs to re-delegate his authority to a third person, he shall obtain consent or ratification from the principal.
If the re-delegation of authority to a third person is consented to or ratified by the principal, the principal may directly instruct the third person to do the authorized task, and the agent shall be liable only for the selection of such a third person and the instructions given to the third person by the agent himself.
If re-delegation of authority to a third person is not consented to or ratified by the principal, the agent shall be liable for the acts performed by the third person, unless the agent re-delegates his authority to a third person in an emergency situation in order to protect the interests of the principal.
A civil juristic act performed by a person for fulfilling his responsibilities assigned by a legal person or an unincorporated organization, within the scope of authority and in the name of the legal person or the unincorporated organization, is binding on the legal person or unincorporated organization.
Restrictions imposed by a legal person or an unincorporated organization on the scope of authority of a person who performs the responsibilities assigned by the legal person or unincorporated organization are not effective against a bona fide third person.
An act performed by a person without authority, beyond the authority, or after the authority is terminated is not effective against the principal who has not ratified it.
A counterparty may urge the principal to ratify such an act within 30 days after receipt of the notification. Inaction of the principal is deemed as a refusal of ratification. Before such an act is ratified, a bona fide counterparty has the right to revoke the act. Revocation shall be made by notice.
Where the aforementioned act is not ratified, a bona fide counterparty has the right to request the person who has performed the act to fulfill the obligations or compensate for the loss thus incurred, provided that the amount of compensation shall not exceed the amount of benefit the counterparty would have received had the principal ratified the act.
Where a counterparty knows or should have known that the person performing the act has no authority, the counterparty and the said person shall bear the liability in proportion to their fault.
An act performed by a person without authority, beyond the authority, or after the authority is terminated is effective if the counterparty has reasons to believe that the said person has authority.
An agency by agreement is terminated under any of the following circumstances:
(1)
the term of agency expires or the authorized tasks have been completed;
(2)
the principal revokes the agency or the agent resigns;
(3)
the agent loses his capacity for performing civil juristic acts;
(4)
the agent or the principal deceases; or
(5)
the legal person or unincorporated organization who is the agent or the principal is terminated.
An act performed by an agent under agreement after the principal deceases remains valid under any of the following circumstances:
(1)
the agent does not know or should not have known of the death of the principal;
(2)
the act is ratified by the heirs of the principal;
(3)
it is clearly stated in the letter of authorization that the agency ceases only upon completion of the authorized tasks; or
(4)
the agent has started the act before the principal deceases and continues to act in the interests of the heirs of the principal.
The preceding paragraph shall be applied mutatis mutandis where the principal who is a legal person or an unincorporated organization is terminated.
An agency by operation of law is terminated under any of the following circumstances:
(1)
the principal obtains or regains full capacity for performing civil juristic acts;
(2)
the agent loses the capacity for performing civil juristic acts;
(3)
the agent or the principal deceases; or
(4)
any other circumstance as provided by law exists.
The persons of the civil law shall perform civil-law obligations and bear civil
liability in accordance with law or the agreement of the parties.
Where two or more persons assume shared liability in accordance with law, each
33person shall bear the liability in proportion to their respective share of fault if such share can be determined, or in equal share if such share cannot be determined.
Where two or more persons assume joint and several liability in accordance with law, the right holder has the right to request some or all of them to bear the liability.
The persons subjected to joint and several liability shall each bear the liability in proportion to their respective share of fault, or in equal share if such share cannot be determined. A person who has assumed the liability more than his share of fault has the right to contribution against the other person(s) subjected to the joint and several liability.
Joint and several liability shall be either imposed by law or stipulated in the agreement of the parties.
The main forms of civil liability include:
(1)
cessation of the infringement;
(2)
removal of the nuisance;
(3)
elimination of the danger;
(6)
repair, redoing or replacement;
(7)
continuance of performance;
(8)
compensation for losses;
(9)
payment of liquidated damages;
(10)
elimination of adverse effects and rehabilitation of reputation; and
(11)
extension of apologies.
Where punitive damages are provided by law, such provisions shall be followed.
The forms of civil liability provided in this Article may be applied separately or concurrently.
A person who is unable to perform his civil-law obligations due to force majeure bears no civil liability, unless otherwise provided by law.“Force majeure” means objective conditions which are unforeseeable, unavoidable, and insurmountable.34
A person who causes harm to the tortfeasor out of a justifiable defense bears no civil liability.
A person who, when acting out of justifiable defense, exceeds the necessary limit and thus causes undue harm to the tortfeasor shall bear appropriate civil liability.
Where a person, when seeking to avoid a peril in response to an emergency, causes harm to others, the person who creates the peril shall bear civil liability.
Where the peril is caused by natural forces, the person who causes harm to others by seeking to avoid the peril bears no civil liability, provided that he may make appropriate compensation.
Where the measures adopted by a person seeking to avoid a peril in response to an emergency are improper or exceed the necessary limit and thus cause undue harm to others, the person shall bear appropriate civil liability.
Where a party is injured for protecting the civil-law rights and interests of another person, the tortfeasor shall bear civil liability, and the beneficiary may make appropriate compensation to the injured person. In the absence of a tortfeasor, or if the tortfeasor flees or is incapable of assuming civil liability, upon request of the injured person, the beneficiary shall make appropriate compensation.
A person who voluntarily engages in rescuing another person in an emergency situation and thus causes harm to the latter person bears no civil liability.
A person who infringes upon the name, likeness, reputation, or honor of a hero or a martyr and thus harms the social public interests shall bear civil liability.
Where a party’s breach of contract causes harm to the other party’s personal or proprietary rights and interests, the latter party may elect to request the former to bear liability either for breach of contract or for commission of tort.
Where a person of the civil law has to concurrently bear civil, administrative, and criminal liabilities as a result of the same act performed by him, the assumption of administrative or criminal liabilities by the person shall not affect the civil liability he should bear. If the assets of the person are insufficient to pay for all the liabilities, the civil liability shall be paid first.
35
The limitation period for a person to request the people’s court to protect his civil-law rights is three years, unless otherwise provided by law.
Unless otherwise provided by law, the limitation period begins from the date when the right holder knows or should have known that his right has been harmed and that who is the obligor. However, no protection to a right is to be granted by the people’s court if 20 years have lapsed since the date when the injury occurs, except that the people’s court may, upon request of the right holder, extend the limitation period under special circumstances.
Where the parties agree on payment of a debt by installment, the limitation period begins from the date when the last installment is due.
The limitation period for a person with no or limited capacity for performing civil juristic acts to bring a claim against his legal representative begins from the date when the agency by operation of law is terminated.
The limitation period for a minor to bring a sexual molestation claim against the offender begins from the date when the minor reaches the age of 18.
Expiration of the limitation period may be used by an obligor as a defense against a claim of non-performance.
An obligor who agrees to perform a prior obligation after the limitation period expires may not later on use the expiration of the limitation period as a defense, and an obligor who has voluntarily performed such a prior obligation may not later on demand for restitution.
The people’s court shall not apply the provisions on limitation periods on its own initiative.
The limitation period is suspended if, within the last six months of the limitation period, a right holder is unable to exercise the right to claim owing to the existence of one of the following obstacles:
36
(1)
where there is force majeure;
(2)
where the right holder with no or limited capacity for performing civil juristic acts has no legal representative, or his legal representative deceases or loses the capacity for performing civil juristic acts or the right to representation;
(3)
where no heir or administrator of estate has been determined after the opening of succession;
(4)
where the right holder is controlled by the obligor or another person; or
(5)
where there are other obstacles that cause the right holder unable to exercise the right to claim.
The limitation period shall expire six months after the date when the cause for suspension is removed.
A limitation period is interrupted under any of the following circumstances, and the limitation period shall run anew from the time of interruption or the time when the relevant proceeding is completed:
(1)
the right holder requests the obligor to perform the obligation;
(2)
the obligor agrees to perform the obligation;
(3)
the right holder initiates a lawsuit or arbitration proceeding against the obligor; or
(4)
there exists any other circumstance that has the same effect as initiating a lawsuit or arbitration proceeding by the right holder.
The limitation period does not apply to the following rights to claim:
(1)
a claim for cessation of the infringement, removal of the nuisance, or elimination of the danger;
(2)
a claim for return of property of a person who has a real right in an immovable or a registered movable property;
(3)
a claim for payment of child support or support for other family members; or
(4)
any other claims to which the limitation period is not applicable in accordance with law.
The time period, counting methods, and the grounds for suspension and interruption of the limitation period are provided by law, and any arrangement otherwise agreed by the parties is void.
An anticipatory waiver of one’s interests in the limitation period made by the
parties is void.
37
Any provisions of law regulating the limitation period for arbitration shall be followed; in the absence of such provisions, the provisions on limitation period for litigation provided herein shall be applied mutatis mutandis.
The time period within which a right holder may exercise certain rights, such as the right to revocation and the right to rescission, which are provided by law or agreed by the parties shall begin, unless otherwise provided by law, from the date when the right holder knows or should have known that he has such a right, and the provisions on the suspension, interruption, or extension of the limitation period shall not be applicable. Upon expiration of the time period, the right to revocation, the right to rescission, and the like rights are extinguished.
Time periods referred to in the civil law are counted by year, month, day, and hour according to the Gregorian calendar.
Where a time period is counted by year, month, and day, the day on which the time period begins shall not be counted in and the period runs from the following day.
Where a time period is counted by hour, the period begins to run from the hour as provided by law or agreed by the parties.
Where a time period is counted by year and month, the corresponding date of the due month is the last day of the time period; in the absence of such a corresponding date, the last day of that month is the last day of the time period.
Where the last day of a time period falls on a legal holiday, the day after the holiday is deemed as the last day of the period.
The last day shall end at 24:00 hours; where a business hour is applied, the last day shall end at the time the business is closed.
38
The counting of a time period shall be governed by the provisions of this Code, unless otherwise provided by law or agreed by the parties.
This Book regulates the civil-law relations arising from the attribution and utilization of things.
The State upholds and improves the fundamental socialist economic systems, such as the ownership system under which diverse forms of ownership co-develop with public ownership as the mainstay, the distribution system under which multiple forms of distribution co-exist with distribution according to work as the mainstay, as well as the system of socialist market economy.
The State consolidates and develops the public sector of the economy, and encourages, supports, and guides the development of the non-public sector of the economy.
The State implements a socialist market economy and protects the equal legal status and development rights of all market participants.
The real rights of the State, collectives, private individuals, and the other right
39holders are equally protected by law and free from infringement by any organization or individual.
The creation, alteration, alienation, or extinguishment of the real rights in immovable property shall be registered in accordance with law. The creation and alienation of real rights in movable property shall be subject to the delivery of the movable property in accordance with law.
The creation, alteration, alienation, or extinguishment of a real right in immovable property shall become effective upon registration in accordance with law, and shall not take effect without registration, unless otherwise provided by law.
Ownership registration is not required for natural resources that are owned by the State in accordance with law.
The registration of immovable property shall be handled by the registration authority at the place where the immovable property is located.
The State implements a unified registration system with respect to immovable property. The scope, authorities, and measures for the unified registration shall be specified by laws and administrative regulations.
When applying for registration of immoveable property, an applicant shall, in light of the different items to be registered, provide necessary materials such as the proof of real rights, metes and bounds, and area of the immovable property.
The registration authority shall perform the following responsibilities:
40
(1)
to examine the proof of real rights and other necessary materials provided by the applicant;
(2)
to inquire the relevant registration items of the applicant;
(3)
to register the relevant items truthfully and in a timely manner; and
(4)
to perform other responsibilities as provided by laws and administrative regulations.
Where further proof is required for the relevant information of the immovable property to be registered, the registration authority may require the applicant to provide supplementary materials, and may conduct onsite inspection where necessary.
A registration authority may not engage in the following acts:
(1)
to require an appraisal of the immovable property;
(2)
to carry out repeated registration in the name of annual inspection, and the like; or
(3)
to engage in other acts that exceed the scope of its responsibilities for registration.
The creation, alteration, alienation, or extinguishment of a real right of the immovable property that is required by law to be registered becomes effective at the time when it is recorded in the register of immovable property.
A contract concluded by the parties on the creation, alteration, alienation, or extinguishment of a real right becomes effective upon its formation, unless it is otherwise provided by law or agreed upon by the parties, and the validity of the contract is not affected by the fact that the real right is not registered.
The register of immovable property is the basis for determining the attribution and contents of the real rights in immovable property.
The register of immovable property shall be kept by the registration authority.
The real right certificate for immovable property is a proof of a right holder’s entitlement to the real right in the immovable property. The items recorded in the real right certificate for immovable property shall be consistent with what are recorded in the register of immovable property; in case of inconsistency between the two, what is recorded in the register of immovable property shall prevail, unless there is evidence establishing a clear error in the register of immovable property.
41
A right holder or an interested person may apply for retrieving and making copies of the information of the registered immovable property, and the registration authority shall provide the information.
An interested person may not disclose or illegally use the registered information of a right holder’s immovable property.
A right holder or an interested person may apply for rectification of the registration if he believes that an item is incorrectly recorded in the register of immovable property. Where the right holder as recorded in the register of immovable property agrees in writing to make rectification, or where there is evidence establishing a clear error in the register, the registration authority shall rectify it.
Where the right holder as recorded in the register of immovable property does not agree to make rectification, an interested person may apply for registration of a demurrer.
Where the registration authority registers the demurrer but the applicant fails to file a lawsuit within 15 days from the date of such a registration, the registration of demurrer becomes ineffective. Where a demurrer is improperly registered and damage is thus caused to the right holder, the right holder may request the applicant to pay damages.
Where the parties enter into an agreement for the sale of a house or on any other real right in immovable property, they may apply for registration of a priority notice to a registration authority in accordance with the agreement so as to ensure the realization of the real right in the future. Where, after the priority notice is registered, the immovable property is disposed of without the consent of the right holder as registered in the priority notice, the disposition is not effective in terms of the real right.
Where, after the priority notice is registered, no application for registration of the real right of immovable property has been made within 90 days from the date on which the creditor’s claim extinguishes or the immovable property is eligible for registration, the registration of the priority notice becomes ineffective.
A party who provides false materials upon application for registration and thus causes damage to another person shall be liable for compensation.
Where damage is caused to another person due to a clerical error upon registration, the registration authority shall be liable for compensation. After having made such compensation, the registration authority has the right to indemnification against the person who has made the error.
The fee for the registration of immovable property shall be collected on a
42piece-by-piece basis and may not be collected in proportion to the area, size, or purchase price of the immovable property.
The creation or alienation of a real right in movable property shall take effect upon delivery, unless otherwise provided by law.
The creation, alteration, alienation, or extinguishment of the real rights in vessels, aircrafts, motor vehicles, and the like, that have not been registered is not effective against a bona fide third person.
Where a right holder is already in possession of a movable property before a real right in the movable property is created or alienated, the real right in the movable property becomes effective at the time when the civil juristic act is effected.
Where a third person is in possession of a movable property before a real right in the movable property is created or alienated, the person obligated to deliver the movable property may transfer his right to restitution against the third person as substitute for delivery.
Where, upon alienation of a real right in movable property, the parties agree that the transferor continues to be in possession of the movable property, the real right in the movable property becomes effective at the time when such an agreement enters into effect.
43
Where a real right is created, altered, alienated, or extinguished as a result of a legal document issued by the people’s court or an arbitration institution, or based on an expropriation decision made by the people’s government, the creation, alteration, alienation, or extinguishment of the real right becomes effective at the time when the legal document or expropriation decision enters into effect.
Where a real right is acquired through succession, the real right as inherited becomes effective at the time when the succession opens.
Where a real right is created or extinguished as a result of a de facto act such as lawful construction or demolition of a house, the creation or extinguishment of the real right becomes effective when the de facto act is accomplished.
Where disposition of a real right in immovable property as provided in this Section is required by law to be registered, the disposition of the real right, if not so registered, is not effective.
Where a real right is infringed upon, the right holder may have the problem solved by means of settlement, mediation, arbitration, litigation, and the like.
Where a dispute arises over the attribution or contents of a real right, an interested person may request for confirmation of the right.
Where an immovable or movable property is possessed by a person not entitled to do so, the right holder may request for restitution.
Where there is a nuisance or a potential nuisance against a real right, the right holder may request for removal of the nuisance or elimination of the danger.
44
Where an immovable or movable property is destructed or damaged, the right holder may request for the repair, redoing, replacement, or restoration to the original condition in accordance with law.
Where a real right is infringed upon and damage is thus caused, the right holder may, in accordance with law, request the infringing person to pay damages or bear other civil liabilities.
The forms of real right protection provided in this Chapter may be applied either separately or concurrently according to the circumstances of the infringement of a right.
An owner is entitled to possess, use, benefit from, and dispose of his own immovable or movable property in accordance with law.
An owner of immovable or movable property is entitled to create a right to usufruct and a security interest on his own immovable or movable property. A usufructuary or security interest holder, when exercising their rights, shall not harm the rights and interests of the owner.
Where an immovable or movable property is provided by law to be exclusively owned by the State, no organization or individual may acquire ownership of it.
For the need of the public interest, the collectively-owned land and the houses
45and other immovable property of an organization or individual may be expropriated within the scope of authority and pursuant to the procedures provided by law.
In the case of expropriation of collectively-owned land, land compensation fees, resettlement subsidies, and compensation fees for rural villagers’ dwellings and other ground attachments as well as young crops shall be paid in full in a timely manner in accordance with law, and social security premiums of the farmers whose land has been expropriated shall be arranged, their lives secured, and their lawful rights and interests safeguarded.
In the case of expropriation of houses or other immovable property of organizations or individuals, compensation for the expropriation shall be made in accordance with law in order to safeguard the lawful rights and interests of the person whose immovable property has been expropriated. In the case of expropriation of individuals’ dwelling houses, the housing conditions of such individuals shall also be guaranteed.
No organization or individual may embezzle, misappropriate, secretly distribute, intercept, default on the payment of the expropriation compensation fees, or the like.
The State provides special protection to cultivated land, strictly restricts the conversion of agricultural land into land used for construction purposes, and controls the overall volume of the land used for construction purposes. Collectively-owned land may not be expropriated exceeding the scope of authority or in violation of the procedures provided by law.
An immovable or movable property of an organization or individual may, in response to an emergency such as providing disaster relief and preventing and controlling pandemics, be requisitioned within the scope of authority and pursuant to the procedures provided by law. The requisitioned immovable or movable property shall be returned to the aforementioned organization or individual after use. Where the immovable or movable property of an organization or individual is requisitioned, or where it is destructed, damaged, or lost after being requisitioned, compensation shall be made.
Where a property is provided by law to be owned by the State, the property belongs to the State, namely, to the whole people.
46The ownership rights over the State-owned property shall be exercised by the State Council on behalf of the State, unless otherwise provided by law.
Mineral deposits, waters, and sea areas are owned by the State.
Uninhabited islands are owned by the State, and the State Council exercises the ownership rights over the uninhabited islands on behalf of the State.
Urban land is owned by the State. Land in rural and urban suburbs that is provided by law to be owned by the State is owned by the State.
Natural resources, such as forests, mountain ridges, grasslands, unreclaimed lands, and mudflats, other than those provided by law to be collectively-owned, are owned by the State．
The wild animal and plant resources that are provided by law to be owned by the State are owned by the State.
Radio-frequency spectrum resources are owned by the State.
The cultural relics that are provided by law to be owned by the State are owned by the State.
The assets for national defense are owned by the State.
Infrastructures such as railways, roads, electric power facilities, telecommunication facilities, as well as oil and gas pipelines that are provided by law to be owned by the State are owned by the State.
A State organ has the right to possess and use the immovable and movable property directly under its control and to dispose of such property in accordance with law and the relevant regulations made by the State Council.
A public institution established by the State has the right to possess and use the immovable and movable property directly under its control, and to benefit from and dispose of such property in accordance with law and the relevant regulations made by the State Council.
47
With respect to enterprises invested by the State, the State Council and the local people’s governments shall, on behalf of the State, perform the investor’s duties and enjoy the investor’s rights and interests respectively in accordance with laws and administrative regulations.
The State-owned property is protected by law, and no organization or individual may misappropriate, loot, secretly distribute, intercept, or destroy such property.
Institutions and their staff with the duties of administration and supervision over the State-owned property shall strengthen the administration and supervision of the State-owned property in accordance with law, strive to preserve and increase the value of such property and prevent any loss thereof; they shall assume legal liabilities in accordance with law if losses are caused to the State-owned property as a result of their abuse of powers or dereliction of duties.
A person, who causes losses to the State-owned property by transferring it at low prices, secretly distributing it in conspiracy with other persons, creating a security interest on it without authorization, or by other means in the course of enterprise restructuring, merger or division, affiliated transactions, and the like, in violation of the provisions on the administration of the State-owned property, shall bear legal liability in accordance with law.
The collectively-owned immovable and movable property include:
(1)
the land, forests, mountain ridges, grasslands, unreclaimed land and mudflats that are provided by law to be owned by collectives;
(2)
the buildings, production facilities, and farmland water conservancy facilities that are owned by collectives;
(3)
the educational, scientific, cultural, public health, sports, and other facilities that are owned by collectives; and
(4)
any other immovable and movable property that are owned by collectives.
The immovable and movable property of a farmer collective are collectively owned by the members of this collective.
The following matters shall be decided by the collective’s members in accordance with statutory procedures:
(1)
land contracting schemes, and the subcontracting of land to any organization or individual outside this collective;
(2)
adjustment to the contracted land among the persons who have the right to contractual management of land;
48
(3)
methods for the use and distribution of funds such as land compensation fees;
(4)
matters such as changes in the ownership of enterprises invested by the collective; and
(5)
other matters as provided by law.
With respect to the collectively-owned land, forests, mountain ridges, grasslands, unreclaimed land, mudflats, and the like, the ownership thereof shall be exercised in accordance with the following provisions:
(1)
where they are owned by the farmer collective of a village, the ownership shall be exercised collectively by the collective economic organization of the village or the villagers’ committee on behalf of the collective in accordance with law;
(2)
where they are owned by two or more farmer collectives within a village, the ownership shall be exercised by the respective collective economic organizations or the villagers’ groups on behalf of the collectives in accordance with law; and
(3)
where they are owned collectively by the farmer collective of a rural-town, the ownership shall be exercised by the economic organizations of the town on behalf of the collective.
With respect to the immovable and movable property owned by an urban-town collective, the collective is entitled to possess, use, benefit from, and dispose of such property in accordance with laws and administrative regulations.
Rural collective economic organizations, villagers’ committees, and villagers’ groups shall make the situation of the collectively-owned property known to the members of this collective in accordance with laws, administrative regulations, and their articles of association, as well as the local covenants. Members of the collective have the right to retrieve and make copies of the relevant materials.
The property owned by a collective is protected by law, and no organization or individual may misappropriate, loot, secretly distribute, or destruct such property.
Where a decision made by a rural collective economic organization, a villagers’ committee, or the person in charge thereof infringes upon the lawful rights and interests of a member of the collective, the infringed member may request the people’s court to revoke the decision.
A private individual has the right to own his lawful income, houses, articles for daily use, production tools, raw materials, as well as other immovable and movable property.
49
The property lawfully owned by a private individual is protected by law, and no organization or individual may misappropriate, loot, or destruct such property.
The State, collectives, and private individuals may establish companies with limited liabilities, joint stock companies limited by shares, or other enterprises through making capital contributions in accordance with law. Where the immovable or movable property of the State, collectives, and private individuals are invested in an enterprise, the investors are, in accordance with their agreement or in proportion to their investment, entitled to receive returns on the assets, make major decisions, and select business managers, and obligated to perform their duties.
A for-profit legal person has the right to possess, use, benefit from, and dispose of its immovable and movable property in accordance with laws, administrative regulations, and its articles of association.
The provisions of the relevant laws, administrative regulations, and articles of association shall apply to the rights of a legal person other than a for-profit legal person with respect to its immovable and movable property.
The immovable and movable property that is lawfully owned by a social-organization legal person or an endowed legal person is protected by law.
A unit owner has the ownership over an exclusive unit of a building, such as a dwelling space or a space used for operating businesses, and has the right to co-own and jointly manage the common space other than the unit.
A unit owner has the right to possess, use, benefit from, and dispose of his exclusive unit of a building. The unit owner may not, when exercising his rights, endanger the safety of the building or impair the lawful rights and interests of other unit owners.
50
A unit owner has rights and assumes duties with respect to the common space outside his exclusive unit of a building，and may not refuse to perform such duties on the ground that he has waived such rights.
While a unit owner transfers a dwelling space or the space used for business operations owned by him in a building, his rights to co-own and jointly manage the common space therein shall be transferred concomitantly.
Roads within the construction zone are co-owned by all unit owners, except for those that are part of the urban public roads. Green spaces within the construction zone are co-owned by all unit owners, except for those that are part of the urban public green spaces and those expressly indicated to be owned by private individuals.
Other public places, public facilities, and spaces used for property management service within the construction zone are co-owned by all unit owners.
The ownership of the parking spaces and garages planned for parking vehicles within the construction zone shall be agreed upon by the parties by way of selling, giving away as gifts, leasing, and the like.
The parking spaces for parking vehicles that occupy the roads or other spaces co-owned by all unit owners are co-owned by all unit owners.
The parking spaces and garages planned for parking vehicles within the construction zone shall first meet the needs of the unit owners.
The unit owners may establish the owners’ assembly and elect the members of the owners’ committee. The specific conditions of and procedures for the establishment of the owners’ assembly and the owners’ committee shall be in accordance with laws and regulations.
The relevant department of the local people’s government and the residents’ committee shall provide guidance to and assistance in the establishment of the owners’ assembly and the election of the members of the owners’ committee.
The following matters shall be jointly decided by the unit owners:
(1)
to formulate and amend the procedural rules of the owners’ assembly;
(2)
to formulate and amend the stipulations on management;
(3)
to elect or replace members of the owners’ committee;
(4)
to employ and remove the property management service enterprise or other managers;
51
(5)
to use maintenance funds for buildings and auxiliary facilities thereof;
(6)
to raise maintenance funds for buildings and auxiliary facilities thereof;
(7)
to renovate and reconstruct buildings and auxiliary facilities thereof;
(8)
to change the intended use of the co-owned space or making use of the co-owned space to engage in business activities; and
(9)
to handle other major matters relating to co-ownership and the right to joint management.
The quorum for matters subject to the unit owners’ joint decision shall be two thirds or more of the exclusive units both by area and by number of unit owners. Decisions of matters provided in Subparagraphs (6) through (8) shall be subject to the consent of the unit owners representing three quarters or more of the participating exclusive units both by area and by number of unit owners. Decisions of other matters provided in the preceding Paragraph shall be subject to the consent of the unit owners representing more than half of the participating exclusive units both by area and by number of unit owners.
No unit owner may turn a dwelling space into a space used for operating businesses in violation of laws, regulations, or the stipulations on management. A unit owner who intends to turn a dwelling space into a space used for operating businesses shall, in addition to abiding by laws, regulations, and the stipulations on management, obtain unanimous consent from all interested unit owners.
Decisions of the owners’ assembly or the owners’ committee are legally binding on unit owners.
Where a decision made by the owners’ assembly or the owners’ committee infringes upon the lawful rights and interests of a unit owner, the infringed owner may request the people’s court to revoke it.
The maintenance funds for buildings and their auxiliary facilities are co-owned by the unit owners. The funds may, upon joint decision of the unit owners, be used for the maintenance, renewal, and renovation of the co-owned spaces, such as elevators, roofs, exterior walls, and barrier-free facilities. Information on raising and using the maintenance funds for buildings and their auxiliary facilities shall be publicized on a regular basis.
Where a building and its auxiliary facilities need to be maintained in an emergency situation, the owners’ assembly or the owners’ committee may, in accordance with law, apply for the use of the maintenance funds for the building and its auxiliary facilities.
The income generated from the space co-owned by the unit owners that is
52received by the developer, the property management service enterprise, or other managers are co-owned by all unit owners after reasonable costs are deducted.
Where there is an agreement on matters such as allocation of expenses on and distribution of income gained from a building and its auxiliary facilities, such matters shall be determined in accordance with the agreement; where there is no agreement or the agreement is unclear, such matters shall be determined in proportion to the area of each unit owner’s exclusive unit to the total area.
The unit owners may either manage the buildings and the auxiliary facilities on their own, or entrust a property management service enterprise or another manager for such a purpose.
The unit owners have the right to replace, in accordance with law, the property management service enterprise or the other managers employed by the developer.
The property management service enterprise or otherwise a manager shall, as entrusted by the unit owners, manage the buildings and their auxiliary facilities within the construction zone in accordance with the provisions of Book Three of this Code relating to contracts for property management service, subject itself to the supervision of the unit owners, and respond to the unit owners’ inquiries about property management services in a timely manner.
The property management service enterprise or other managers shall carry out emergency measures and other management measures implemented by the government in accordance with law and actively cooperate in the performance of the relevant work.
The unit owners shall abide by laws, regulations, and the stipulations on management, and their relevant acts shall meet the requirements of conserving resources and protecting the ecological environment. With respect to the emergency measures and other management measures implemented by the government in accordance with law that are carried out by the property management service enterprise or other managers, the unit owners shall, in accordance with law, be cooperative.
With respect to an act impairing the lawful rights and interests of others, such as arbitrarily discarding garbage, discharging pollutants or noises, feeding and keeping animals in violation of the stipulations, constructing structures against rules and regulations, encroaching on passages, and refusing to pay property management fees, the owners’ assembly or the owners’ committee has the right to request the actor to discontinue such infringements, remove the nuisance, eliminate the danger, restore to the original condition, and compensate for the losses entailed.
Where a unit owner or an actor refuses to perform the relevant duties, the party concerned may make a report to, or lodge a complaint with the competent
53administrative department, which shall handle the case in accordance with law.
A unit owner has the right to request the developer, the property management service enterprise or other managers, and other unit owners to bear civil liability for any act done by them that infringes upon his lawful rights and interests.
The persons entitled to adjacent rights in immovable property shall properly deal with adjacent relationships in accordance with the principles of facilitation to production, convenience for daily lives, solidarity and mutual assistance, and fairness and reasonableness.
Where there are laws and regulations providing for adjacent relationships, those provisions shall be applied. Where there are no such provisions, local customs may be followed.
A person entitled to the real rights in immovable property shall provide a person entitled to an adjacent right the necessary convenience for the use of water or drainage.
The right to utilization of natural flowing water shall be reasonably allocated among the persons entitled to the adjacent rights of the immovable property. When discharging the water, the direction of the natural water flow shall be respected.
A person entitled to the real rights in immovable property shall provide necessary convenience to the persons entitled to an adjacent right who have to utilize his land for passage, and the like.
Where a person entitled to the real rights in immovable property has to utilize the adjacent land or building for constructing or maintaining a building, or for laying electrical wires, cables, or the pipelines for water, heating, gas, or the like, the person entitled to the real rights in the adjacent land or building shall provide the necessary
54convenience.
The construction of a building may not violate the relevant construction standards of the State or obstruct the ventilation, lighting, or sunlight of the adjacent buildings.
A person entitled to the real rights in immovable property may not, in violation of the regulations of the State, discard solid wastes or emit harmful substances such as atmospheric pollutants, water pollutants, soil pollutants, noises, light radiation, and electromagnetic radiation.
A person entitled to the real rights in immovable property may not endanger the safety of the adjacent immovable property when excavating land, constructing buildings, laying pipelines, installing facilities, or the like.
A person entitled to the real rights in immovable property who utilizes the adjacent immovable property for the purpose of using water, drainage, passage, laying pipelines, and the like, shall spare no effort to avoid causing damage to the person entitled to the real rights in the adjacent immovable property.
Immovable or movable property may be co-owned by two or more organizations or individuals. Co-ownership consists of co-ownership by shares and joint co-ownership.
Co-owners by shares have the ownership of the co-owned immovable or movable property according to their shares.
Joint co-owners jointly have the ownership of the co-owned immovable or movable property.
55
The co-owners shall manage the co-owned immovable or movable property in accordance with their agreement. Where there is no agreement or the agreement is unclear, each co-owner is entitled and obligated to manage it.
Unless otherwise agreed by the co-owners, any disposition of the co-owned immovable or movable property, or any major repair or change of the nature or intended use of the co-owned immovable or movable property shall be subject to the consent of the co-owners by shares whose shares account for two thirds or more of the total shares, or to the consent of all joint co-owners.
The management expenses of and other burdens on a thing co-owned by the co-owners shall be borne according to the agreement among the co-owners where there is such an agreement; where there is no agreement or the agreement is unclear, these expenses shall be borne by the co-owners by shares proportionally, and by the joint co-owners jointly.
Where the co-owners have agreed not to partition the co-owned immovable or movable property in order to maintain the co-ownership, the agreement shall be followed, provided that a co-owner may request partition if there is a compelling reason for partition. Where there is no agreement or the agreement is unclear, a co-owner by shares may request partition at any time, whereas a joint co-owner may request partition in case the basis for the joint ownership ceases to exist or there is a compelling reason for partition. Compensation shall be made if partition causes damage to the other co-owners.
The co-owners may determine through negotiation the way of partition of the co-owned thing. Where they fail to reach an agreement, and where the co-owned immovable or movable property is divisible and its value is not diminished upon division, partition in kind shall be effected; where it is difficult to divide the co-owned thing or where its value would be impaired upon division, partition shall be carried out through dividing the proceeds based on appraisal or obtained from auction or a sale of it.
Where the immovable or movable property acquired by a co-owner by means of partition is defective, the other co-owners shall share the losses.
A co-owner by shares may transfer the portion of shares he owned in the co-owned immovable or movable property. The other co-owners have the right of pre-emption to buy the shares under equivalent conditions.
Where a co-owner by shares transfers the portion of shares he owned in the
56co-owned immovable or movable property, he shall notify the other co-owners of the conditions of transfer in a timely manner. The other co-owners shall exercise their right of pre-emption within a reasonable period of time.
Where two or more co-owners assert their rights of pre-emption, they shall determine through negotiation the proportion of shares each may purchase; where no agreement is reached, they shall exercise their right of pre-emption in proportion to the shares they each own at the time of transfer.
In terms of external relations, the co-owners are jointly and severally entitled to claims and are jointly and severally obligated to perform obligations arising from the co-owned immovable or movable property, unless it is otherwise provided by law or where the third person is aware that the co-owners are not in a relationship of joint and several claims and obligations. In terms of internal relations, unless otherwise agreed by the co-owners, the co-owners by shares are entitled to claims and obligated to perform obligations in proportion to the shares they each own, and the joint co-owners are jointly entitled to claims and obligated to perform obligations. A co-owner by shares who has performed the obligation in excess of his shares has the right of contribution against the other co-owners.
Where there is no agreement among the co-owners or the agreement is unclear as to whether the co-owned immovable or movable property is under co-ownership by shares or under joint co-ownership, the immovable or movable property shall be deemed to be under co-ownership by shares, unless the co-owners are in a relationship such as familial relationship and the like.
The share of a co-owner by shares in the immovable or movable property shall be determined according to his capital contribution where there is no agreement or the agreement is unclear. Where it is impossible to determine the amount of capital contribution, each co-owner by shares shall be entitled to an equal share.
Where two or more organizations or individuals are jointly entitled to a right to usufruct or a security interest, the relevant provisions of this Chapter shall be applied mutatis mutandis.
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Where a person with no right to dispose of an immovable or movable property transfers it to another person, the owner has the right to recover it; unless otherwise provided by law, the transferee acquires the ownership of the immovable or movable property under the following circumstances:
(1)
the transferee is in good faith at the time when the immovable or movable property is transferred to him;
(2)
the transfer is made at a reasonable price; and
(3)
the transferred immovable or movable property has been registered as required by law, or has been delivered to the transferee where registration is not required.
Where a transferee acquires the ownership of the immovable or movable property in accordance with the provisions of the preceding paragraph, the original owner has the right to claim damages against the person who disposes of the property without a right.
Where a party acquires, in good faith, a real right other than ownership, the provisions of the preceding two paragraphs shall be applied mutatis mutandis.
An owner or any other right holder has the right to recover a lost thing. Where the lost thing is possessed by another person by way of transfer, the right holder has the right to claim damages against the person who disposes of the thing without the right to disposition, or to request the transferee to return the original thing within two years from the date on which the right holder knows or should have known of the transferee, provided that where the transferee has acquired the lost thing at auction or from a qualified business operator, the right holder shall, at the time of requesting the return of the original thing, reimburse the expenses that have been paid by the transferee. The right holder has, after having reimbursed the expenses paid by the transferee, the right to indemnification against the person who disposes of the thing without the right to disposition.
After a bona fide transferee acquires the movable property, the original rights in the movable property is extinguished, unless the bona fide transferee knows or should have known of such rights at the time of the transfer.
Where a lost thing is found, it shall be returned to its right holder. The finder shall, in a timely manner, notify its right holder or hand it over to the relevant departments such as the department for public security.
Where the relevant department receives a lost thing and knows who is its right
58holder, the department shall, in a timely manner, notify him to collect the lost thing; where the department does not know who is the right holder, it shall issue a lost-and-found notice in a timely manner.
A finder shall well keep a lost thing before it is delivered to the relevant department, and the relevant department shall well keep it before it is collected. A person who, intentionally or by gross negligence, causes the lost thing in his custody to be destructed, damaged, or lost shall bear civil liability.
The right holder of a lost thing shall, at the time of collecting it, pay to the finder or the relevant department the necessary expenses, such as the expense for safekeeping the lost thing.
Where a right holder has offered a reward for finding the lost thing, he shall, at the time of collecting the lost thing, perform his obligations as promised.
Where a finder misappropriates the lost thing, he is neither entitled to request reimbursement of expenses such as the expense for safekeeping the lost thing, nor entitled to request the right holder to perform the obligations as promised.
Where a lost thing has not been claimed by anybody within one year from the date the lost-and-found notice is publicized, the lost thing is to be escheated to the State.
Where a drifting thing is found or a thing buried underground or hidden is discovered, the provisions relating to the finding of lost things shall be applied mutatis mutandis, unless otherwise provided by law.
Where a principal thing is transferred, the accessary thereof shall be transferred concomitantly, unless otherwise agreed by the parties.
Unless otherwise agreed by the parties, the natural fruits of a thing shall be acquired by the owner of the thing, or by a usufructuary if there are both an owner and a usufructuary of the thing.
The legal proceeds of a thing shall be acquired as agreed by the parties if there is such an agreement, or, where there is no agreement or the agreement is unclear, in accordance with the course of dealing.
A thing, that is created as a result of processing, or combining or mixing with another thing or things, shall be owned as agreed if there is such an agreement, or in accordance with law if there is no agreement or the agreement is unclear, or, in the
59absence of any provisions in law, be determined in compliance with the principles of making full use of the thing and protecting the party without fault. Where damage is caused to another party owing to one party’s fault or owing to the determination of the attribution of the thing, indemnity or compensation shall be paid.
A usufructuary has the right to possess, use, and benefit from the immovable or movable property owned by another person in accordance with law.
Organizations and individuals may, in accordance with law, possess, use, and benefit from the natural resources owned by the State, the State-owned natural resources that are used by collectives, and the natural resources that are owned by collectives as provided by law.
The State implements a system of compensation for the use of natural resources, unless otherwise provided by law.
A usufructuary shall, when exercising his right, abide by the provisions of laws on the protection, rational exploitation, and utilization of resources and the protection of the ecological environment. The owner may not interfere with the exercise of such rights by the usufructuary.
Where a right to usufruct is extinguished or adversely affected due to expropriation or requisition of the immovable or movable property, the usufructuary has the right to compensation according to the provisions of Articles 243 and 245 of this Code.
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The right to use the sea areas that is acquired in accordance with law is protected by law.
The right to explore and mine minerals, to draw water, and to use waters and mudflats to engage in aquaculture or fishing that are acquired in accordance with law is protected by law.
Rural collective economic organizations shall adopt a two-tier management system, with household contractual management as the basis and integrated with the collective management.
A system of contractual management of land is adopted in accordance with law for cultivated land, forestland, grassland, and other land used for agricultural purposes which are owned by farmers collectively, or owned by the State and used by farmers collectively.
A person who has the right to contractual management of land is, in accordance with law, entitled to possess, use, and benefit from the cultivated land, forestland, and grassland contracted and managed by him, and to engage in agricultural production such as crop cultivation, forestry, and animal husbandry.
The term of a contract for cultivated land is 30 years. The term of a contract for grassland ranges from 30 to 50 years. The term of a contract for forestland ranges from 30 to 70 years.
Upon expiration of the term of contract as provided in the preceding paragraph, the person with the right to contractual management of land is entitled to renew the contract in accordance with the provisions of laws on rural land contracting.
A right to contractual management of land is created at the time when the contract on the right to contractual management of land enters into effect.
61The registration authority shall issue a certificate, such as a certificate of the right to contractual management of land, a certificate of the right to forestry, and the like, to the person entitled to the respective right to contractual management of land, and establish a register for this purpose to record and confirm such rights.
The persons with the rights to contractual management of land are entitled to exchange or transfer such rights in accordance with law. The contracted land may not be used for non-agricultural construction purposes without being approved in accordance with law.
Where the rights to contractual management of land are exchanged or transferred, the parties may apply to the registration authority for registration; without registration, such exchange or transfer may not be asserted against a bona fide third person.
Within the term of contract, the party offering the contract may not adjust the contracted land.
Under special circumstances such as severe deterioration on the contracted land caused by natural disasters, appropriate adjustments shall be made in accordance with the provisions of laws on rural land contracting where necessary.
Within the term of contract, the party offering the contract may not take back the contracted land, unless otherwise provided by law.
Where the contracted land is expropriated, the affected person with the right to contractual management of land is entitled to the corresponding compensation according to the provisions of Article 243 of this Code.
A person with the right to contractual management of land may decide on his own to transfer the right to management of land to others by leasing, contributing it as shares, or other means in accordance with law.
Within the time limit as agreed in the contract, the person with the right to management of land is entitled to possess the rural land, to carry out agricultural production and operation on his own, and to benefit therefrom.
The right to management of land which is transferred for a term of five years or longer is created when the contract for the transfer enters into force. The parties may apply to the registration authority for registration of the right to management of land; without registration, such a right may not be asserted against a bona fide third person.
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Where rural land is contracted by means including bidding, auction, or open negotiation, for which a title certificate is obtained through registration in accordance with law, the right to manage such land may, in accordance with law, be transferred by means of leasing, contributing it as shares, mortgaging, or by other means.
Where contractual management is adopted for the State-owned land that is used for agricultural purposes, the relevant provisions of this Book shall be applied mutatis mutandis.
With respect to the State-owned land zoned for construction purposes, a person with the right to use a lot of such land is entitled to possess, use, and benefit from the lot, and to use it to construct buildings, structures, and auxiliary facilities.
The right to use a lot of land for construction purposes may be created separately on the surface of, above, or below the lot of land.
The right to use a lot of land for construction purposes shall be created in conformity with the requirements for conservation of resources and protection of the ecological environment, and in compliance with the provisions of laws and administrative regulations on the planned use of the lot, and may not impair the rights to usufruct already created thereon.
The right to use a lot of land for construction purposes may be created by way of transfer or gratuitous grant.
The bidding, auction, or other means of public bidding shall be adopted in transferring a lot of land used for business purposes, such as for industrial, commercial, tourism, recreational, and commercial residential purposes, or where there are two or more intended users competing for the right to use the same lot of land .
The creation of a right to use a lot of land for construction purposes by way of
63gratuitous grant is strictly restricted.
Where a right to use a lot of land for construction purposes is created through bidding, auction, agreement, or other means of transfer, the parties shall enter into a contract in writing for the transfer of the right to use the lot of land for construction purposes.
A contract for the transfer of the right to use a lot of land for construction purposes generally contains the following clauses:
(1)
the name and address of each party;
(2)
the metes and bounds and area of the lot of land;
(3)
the space occupied by the buildings, structures, and the auxiliary facilities thereof;
(4)
the planned use and zoning conditions of the lot;
(5)
the term of the right to use the lot of land for construction purposes;
(6)
the transfer fee and other fees, and the mode of payment thereof; and
(7)
the means of dispute resolution.
To create a right to use a lot of land for construction purposes, application shall be filed with the registration authority for the registration of the right. The right to use a lot of land for construction purposes is created upon registration. The registration authority shall issue a title certificate to the person entitled to the right.
A person who has the right to use a lot of land for construction purposes shall make reasonable use of the lot and may not change its planned use. Where it is necessary to change the planned use of the lot, approval shall be obtained from the competent administrative department in accordance with law.
A person who has the right to use a lot of land for construction purposes shall pay the transfer fee and other fees in accordance with law and the contract.
The ownership of buildings, structures, and auxiliary facilities thereof constructed by a person with the right to use the lot of land for construction purposes belongs to the person, unless it is proved by evidence to the contrary.
Unless otherwise provided by law, the persons with a right to use a lot of land for construction purposes are entitled to transfer, exchange, offer as capital contribution, give away as a gift, or mortgage their rights.
64
Where a right to use a lot of land for construction purposes is transferred, exchanged, offered as capital contribution, given away as a gift, or mortgaged, the parties shall enter into a contract thereon in writing. The term of the use shall be agreed upon by the parties, provided that it may not exceed the remaining term of the right to use the lot of land for construction purposes.
Where a right to use a lot of land for construction purposes is transferred, exchanged, offered as capital contribution, or given away as a gift, an application for registration of the change shall be filed with the registration authority.
Where a right to use a lot of land for construction purposes is transferred, exchanged, offered as capital contribution, or given away as a gift, the buildings, structures, and auxiliary facilities thereof attached to the land shall be disposed of concomitantly.
Where a building or structure, and auxiliary facilities thereof are transferred, exchanged, offered as capital contribution, or given away as a gift, the right to use the lot of land for construction purposes in the lot of land occupied by the building, structure, and auxiliary facilities thereof shall be disposed of concomitantly.
Where a right to use a lot of land for construction purposes needs to be taken back prior to expiration of its term for public interest purposes, compensation shall be paid for the houses and other immovable property on the land according to the provisions of Article 243 of this Code, and the portion of the unused transfer fee shall be refunded.
The right to use a lot of land for construction of residential buildings is automatically renewed upon expiration of the term. The payment, reduction, or exemption of the renewal fees shall be dealt with in accordance with the provisions of laws and administrative regulations.
The renewal of the right to use a lot of land for construction of buildings other than residences, upon expiration of the term, shall be dealt with in accordance with the provisions of the laws. The ownership of the buildings and other immovable property on such lot of land shall be determined in accordance with the agreement, or, where there is no agreement or the agreement is unclear, in accordance with the provisions of laws and administrative regulations .
Where a right to use a lot of land for construction purposes is extinguished, the transferor of the right shall deregister the right in a timely manner. The registration authority shall withdraw the title certificate thereof.
65
The using of a lot of collectively-owned land for construction purposes shall be dealt with in accordance with the provisions of the laws on land administration.
A person who has the right to use a house site is entitled to possess and use the lot of land owned by the collective, and to utilize such lot of land to build a dwelling and auxiliary facilities in accordance with law.
The acquisition, exercise, and transfer of the right to use a house site are governed by the laws on land administration and the relevant regulations of the State.
Where a house site is destroyed due to natural disasters or for other reasons, the right to use the house site is extinguished. A new house site shall be allocated in accordance with law to the villagers who have lost their house site.
Where a registered right to use a house site is transferred or extinguished, registration of the change or deregistration of the right shall be made in a timely manner.
A person with a right of habitation is entitled to the right to usufruct of possessing and using another person’s dwelling as agreed in the contract, so as to meet his needs of habitation.
66
To create a right of habitation, the parties shall enter into a contract on such a right in writing.
A contract on a right of habitation generally contains the following clauses:
(1)
the name and address of each party;
(2)
the location of the dwelling;
(3)
the conditions and requirements for the habitation;
(4)
the duration of the right of habitation; and
(5)
the means of dispute resolution.
A right of habitation shall be created free of charge, unless otherwise agreed by the parties. To create a right of habitation, an application for the registration of the right shall be filed with the registration authority. The right of habitation is created upon registration.
A right of habitation may not be transferred or inherited. The dwelling in which a right of habitation is created may not be let on lease, unless otherwise agreed by the parties.
A right of habitation is extinguished if the term of the right expires, or if the person entitled to the right deceases. Where a right of habitation is extinguished, deregistration of the right shall be made in a timely manner.
Where a right of habitation is created by will, the relevant provisions of this Chapter shall be applied mutatis mutandis.
A person who has a right to easement is entitled to utilize the immovable property of another person as agreed in a contract so as to enhance the efficiency of his own immovable property.
67The immovable property of another person referred to in the preceding paragraph is the servient land, and the immovable property of the person entitled to the easement is the dominant land.
To create an easement, the parties shall enter into an easement contract in writing.
An easement contract generally contains the following clauses:
(1)
the name and address of each party;
(2)
the location of the servient land and the dominant land;
(3)
the purposes and methods of utilizing the servient land;
(4)
the duration of the easement;
(5)
the fees and the mode of payment; and
(6)
the means of dispute resolution.
An easement is created at the time the easement contract enters into effect. Where the parties request for registration, applications may be filed with the registration authority for the registration of the easement; without registration, such an easement may not be asserted against a bona fide third person.
A right holder of the immovable property served as the servient land shall allow the person entitled to an easement to utilize the immovable property as agreed in the contract and may not interfere with the exercise of the right to easement by such person.
A person entitled to an easement shall utilize the servient land in accordance with the purposes and methods of utilization as agreed in the contract, and minimize restrictions on the real rights of the right holder in the servient land.
The duration of an easement shall be agreed upon by the parties, provided that it may not exceed the remaining term of the right to usufruct, such as the right to contractual management of land or the right to use a lot of land for construction purposes.
Where an owner of a lot of land is entitled to or is encumbered with an easement, when a right to usufruct, such as a right to contractual management of land or a right to use a house site is created on the lot of land, the usufructuary shall continue to be entitled to or be encumbered with the easement thereon that has already been created.
68
Where a right to usufruct, such as a right to contractual management of land, a right to use a lot of land for construction purposes, and a right to use a house site, has already been created on a lot of land, the owner of the lot of land may not create an easement on the lot without the consent of the usufructuary.
An easement may not be transferred separately. Where a right to contractual management of land, a right to use a lot of land for construction purposes and the like rights are transferred, the easement shall be transferred concomitantly, unless otherwise agreed in the contract.
An easement may not be mortgaged separately. Where a right to contractual management of land, a right to use a lot of land for construction purposes, and the like rights are mortgaged, the easement shall be transferred concomitantly upon enforcement of the mortgage.
Where a right to easement is involved when the dominant land and a right to contractual management of land, a right to use a lot of land for construction purposes, and the like rights thereon are partially transferred, the transferee is simultaneously entitled to the easement.
Where a right to easement is involved when the servient land and a right to contractual management of land, a right to use a lot of land for construction purposes, and the like rights thereon are partially transferred, the easement is legally binding on the transferee.
Where a person entitled to an easement is under any of the following circumstances, the person who has the right to the servient land is entitled to rescind the easement contract to extinguish the easement:
(1)
abusing the right to easement in violation of the provisions of laws or the contract; or
(2)
in case of paid use of the servient land, failing to pay the relevant fees despite of receipt of two warning notices within a reasonable period of time after the payment is due according to the agreement.
Where a registered easement is altered, transferred, or extinguished, the registration of the change or deregistration shall be made in a timely manner.
69
Where a debtor fails to perform his obligations due, or any event upon which an security interest is to be enforced as agreed upon by the parties occurs, the person entitled to the security interest has priority to be paid from the collateral in accordance with law, unless otherwise provided by law.
Where a creditor needs to secure his claims in a civil activity such as lending, buying and selling, and the like, he may create a security interest in accordance with the provisions of this Code and other laws.
Where a third person provides security to the creditor for the debtor, the debtor may be requested to provide a counter-security. Counter-security shall be governed by the provisions of this Code and other laws.
To create a security interest, a security contract shall be entered into in accordance with the provisions of this Code and other laws. Security contracts include mortgage contracts, pledge contracts, and other contracts with a function of security. A security contract is a contract secondary to the principal contract with the principal claims and obligations. Where the principal contract is void, the security contract is also void, unless otherwise provided by law.
Where a security contract is determined to be void, if the debtor, the security provider, and the creditor are at fault, they shall each bear civil liability in proportion to their fault.
Unless otherwise agreed by the parties, the scope covered by a security interest includes the principal claim and its interests based on the principal contract, liquidated damages, compensatory damages, and the expenses arising from safekeeping the collateral and enforcing the security interests.
70
Where a collateral is destructed, damaged, or lost, or is expropriated during the secured period, the person entitled to a security interest has priority to be paid from the insurance payment, compensation, or indemnity received on the collateral. Where the collateral is destructed, damaged, or lost, or is expropriated prior to the due date of performance of the secured claim, the insurance payment, compensation, or indemnity may also be placed in escrow.
Where a third person provides security and the creditor allows the debtor to transfer all or part of the secured obligations without the third person’s written consent, the security provider is no longer liable for securing the part of the obligations so transferred.
Where a claim is secured by both a collateral and a surety, and the debtor fails to perform his obligations due or any event upon which a security interest is to be enforced as agreed upon by the parties occurs, the creditor shall enforce the claim in accordance with the agreement. Where there is no agreement or the agreement is unclear, if the collateral is provided by the debtor, the creditor shall first enforce the claim against the collateral, and if the collateral is provided by a third person, the creditor may elect to enforce the claim against the collateral or request the surety to assume liability. After the third person who provides security has assumed such liability, he has the right of indemnification against the debtor.
A security interest is extinguished under any of the following circumstances:
(1)
the claim under the principal contract is extinguished;
(2)
the security interest is enforced;
(3)
the creditor waives his security interest; or
(4)
there exists any other circumstance in which security interest is extinguished as provided by law.
71
Where a debtor or a third person, in order to secure the performance of an obligation, mortgages his property to the creditor without relinquishing the possession of the property, the creditor has priority to be paid from the collateral if the debtor fails to perform his obligation due or an event upon the occurrence of which the security interest in the collateral is to be enforced as agreed by the parties occurs.
The debtor or the third person as specified in the preceding paragraph is the mortgagor, the creditor is the mortgagee, and the collateral mortgaged to secure the claim is the mortgaged property.
The following property, which the debtor or a third person is entitled to dispose of, may be mortgaged:
(1)
buildings and other things attached to the land;
(2)
the right to use a lot of land for construction purposes;
(3)
the right to use the sea areas;
(4)
production equipment, raw materials, work in process, and finished products;
(5)
buildings, vessels, and aircraft under construction;
(6)
vehicles for transport; and
(7)
other property not prohibited by laws or administrative regulations from being mortgaged.
A mortgagor may mortgage the property listed in the preceding paragraph concurrently.
An enterprise, an individual-run industrial and commercial household, or an agricultural production operator may mortgage their production equipment, raw materials, work in process, and finished products that they currently own or thereafter acquired, and if the debtor fails to perform his obligations due or any event upon which a security interest in the mortgaged property is to be enforced as agreed by the parties occurs, the creditor has priority to be paid from the movable property determined at the time when the mortgaged property is ascertained.
Where a building is mortgaged, the right to use the lot of land in the area occupied by the building for construction purposes shall be mortgaged concomitantly.
72Where a right to use a lot of land for construction purposes is mortgaged, any building on the lot of land shall be mortgaged concomitantly.
Where a mortgagor fails to concomitantly mortgage the property as provided in the preceding paragraph, the unmortgaged property in question shall be deemed to be concomitantly mortgaged.
A right to use a lot of land for construction purposes of a township or village enterprise may not be mortgaged separately. Where a factory premise or any other building of a township or village enterprise is mortgaged, the right to use the lot of land in the area occupied by the building for construction purposes shall be concomitantly mortgaged.
The following property may not be mortgaged:
(2)
the right to use the land owned by a collective, such as house sites, land and hills retained for household use, unless it may be mortgaged as provided by law;
(3)
educational facilities, medical and health facilities, and other public welfare facilities of non-profit legal persons established for public welfare purposes, such as schools, kindergartens, and medical institutions;
(4)
property of which the ownership or right to the use is unclear or disputed;
(5)
property that has been seized, detained, or placed under custody in accordance with law; and
(6)
other property that may not be mortgaged as provided by laws or administrative regulations.
To create a mortgage, the parties shall enter into a mortgage contract in writing.
A mortgage contract generally contains the following terms:
(1)
the type and amount of the secured claim;
(2)
the term during which the debtor shall perform obligations;
(3)
such particulars as the name and quantity of the mortgaged property; and
(4)
the scope of the security interest covered.
Where, prior to the due date of performance of an obligation, the mortgagee reaches an agreement with the mortgagor under which the mortgaged property belongs to the creditor in the event that the debtor fails to perform the obligation due, the mortgagee, regardless, may only have priority to be paid from the mortgaged property in accordance with law.
73
To create a mortgage on the property as specified in Subparagraphs (1) through (3) of the first paragraph of Article 395, or on the building under construction as specified in Subparagraph (5) of the first paragraph of this Code, registration shall be made for the mortgage. The mortgage shall be created upon registration.
A mortgage on movable property shall be created at the time when the mortgage contract enters into effect; without registration, such a mortgage may not be asserted against a bona fide third person.
A mortgage on movable property may not be asserted against a buyer who has paid a reasonable purchase price and acquired the mortgaged property in the ordinary course of business.
Where a mortgaged property has been let to and possessed by another person prior to creation of the mortgage, the lease relationship shall not be affected by the mortgage.
A mortgagor may transfer the mortgaged property to another person during the term of the mortgage unless otherwise agreed by the parties. The transfer of the mortgaged property shall not affect the mortgage.
A mortgagor who transfers the mortgaged property to another person shall notify the mortgagee in a timely manner. The mortgagee may request the mortgagor to apply the proceeds of the transfer to pay off the obligation before it is due, or place such proceeds in escrow where he may establish that the transfer of the mortgaged property may impair his right to the mortgage. The portion of the proceeds obtained from the transfer in excess of the amount of the obligation owed shall belong to the mortgagor, while any deficiency shall be satisfied by the debtor.
A mortgage may not be transferred separately from the underlying claim or be used as security for another claim. Where a claim is transferred, the mortgage securing the claim shall be transferred concomitantly with it, unless otherwise provided by law or agreed by the parties.
Where an act of a mortgagor suffices to reduce the value of the mortgaged property, the mortgagee is entitled to request the mortgagor to refrain from performing such an act. Where the value of the mortgaged property is reduced, the mortgagee is entitled to request the mortgagor to restore its value or provide additional security to the extent of the reduced value. Where the mortgagor neither restores the original value of the mortgaged property, nor provides additional security therefor, the mortgagee is entitled to request the debtor to pay off the debt before it is
74due.
A mortgagee may waive his right to the mortgage, or waive his priority order in the line of the mortgagees. A mortgagee and the mortgagor may reach an agreement to change such things as the mortgagee’s priority order in the line of the mortgagees and the amount of the secured claim, provided that any change to the mortgage may not adversely affect the other mortgagees without their written consent.
Where a debtor creates a mortgage on his own property, and the mortgagee waives his right to the mortgage and his priority order in the line of mortgagees, or changes the mortgage, the other security providers shall be exempted from the security liability to the extent of the rights and interests of the mortgagee that are forfeited owing to the waiver of his priority to be paid from the mortgaged property, unless the other security providers are committed to still provide security.
Where a debtor fails to perform his obligation due or an event upon which a mortgage is to be enforced as agreed upon by the parties occurs, the mortgagee may, upon agreement with the mortgagor, have the priority right to appraise and accept the mortgaged property, or apply the proceeds obtained from auction or sale of the mortgaged property to satisfy his claim against the mortgagor. Where the agreement is detrimental to the interests of other creditors, the other creditors may request the people’s court to rescind the agreement.
Where a mortgagee and a mortgagor fail to reach an agreement on the methods of enforcing the mortgage, the mortgagee may request the people’s court to have the mortgaged property sold at auction or in a sale.
The appraisal or sale of the mortgaged property shall be based on the market price thereof.
Where a mortgage is created in accordance with the provisions of Article 396 of this Code, the mortgaged property shall be ascertained at the time when one of the following circumstances occurs:
(1)
the claim is not satisfied upon expiration of the term of performance of the obligation;
(2)
the mortgagor is declared bankrupt or dissolved;
(3)
an event upon which the mortgage is to be enforced as agreed upon by the parties occurs; or
(4)
any other circumstance that seriously affects the enforcement of the claim.
Where a debtor fails to perform his obligation due or an event upon the occurrence of which the mortgage is to be enforced as agreed upon by the parties occurs, resulting in the seizure of the mortgaged property by the people’s court in
75accordance with law, the mortgagee is entitled to collect the natural fruits or legal proceeds accrued from the mortgaged property as of the date of the seizure, unless the mortgagee fails to notify the person who is obligated to pay off the legal proceeds.
The fruits or proceeds as specified in the preceding paragraph shall first be applied to offset the expenses of collecting them.
Where the appraised value of a mortgaged property or the proceeds obtained from auction or sale of it is in excess of the amount of the obligation owed, the excessive portion shall belong to the mortgagor, while any deficiency shall be satisfied by the debtor.
Where a property is mortgaged to two or more creditors, the proceeds obtained from auction or sale of the mortgaged property shall be applied in accordance with the following provisions:
(1)
where the mortgages have all been registered, the order of payment is based on the priority in time of registration;
(2)
a registered mortgage has priority over an unregistered mortgage to be paid; and
(3)
where none of the mortgages are registered, payment shall be made on a pro rata basis against the claims.
The preceding paragraph shall be applied mutatis mutandis with regard to the
priority order of payment for other security interests that are registrable.
Where both a mortgage and a pledge are created on the same property, the priority order of payment with the proceeds obtained from auction or sale of the property shall be based on the priority in time of registration and delivery of the property.
Where a principal claim secured by a mortgage on movable property is the purchase price of the mortgaged property, and registration for the mortgage is made within 10 days after delivery of the property, the mortgagee has the priority to be paid over the other persons, other than a lienholder, who have security interests thereon in relation to the purchaser of the mortgaged property.
Where a right to use a lot of land for construction purposes is mortgaged, any newly added buildings on the lot of land are not part of the mortgaged property. Upon enforcement of the mortgage on the right to use the lot of land for construction purposes, the newly added buildings on such land shall be disposed of concomitantly with the right to use such land for construction purposes, provided that the mortgagee has no priority to be paid from the proceeds obtained from disposition of the newly
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