Validity of Lease Contracts for Sports Stadiums on Allotted Land
Source: Beijing DOCVIT Law Firm Time: 2019-03-13 17:41:55 Author: The Sports Business Team
Abstract: In recent years, sports industry and sports consumption have become an important driving force to promote economic growth, so there will often be leasing of sports venues on the allocated land. Relevant laws and regulations have made provisions on the lease of allocated land use rights and above-ground buildings, but the effect of the lease contract signed in violation of the laws and regulations is not specified. The Sports Business Team of Beijing Docvit Law Firm will introduce the connotation, characteristics and restrictive provisions of the allocated land, and will analyzes the validity of lease contracts for sports stadiums on allotted land in combination with judicial cases.
Ⅰ. Connotation and characteristics of allotted land
According to Article 23 of the Law of the People's Republic of China on Administration of Urban Real Estate, “Allocation of land use right shall refer to the hand-over of a plot of land to a land user for use upon approval by a People's Government of county level and above pursuant to the law and payment of compensation and resettlement expenses or the hand-over of land use right to a land user for free. Unless otherwise stipulated by the laws and administrative regulations, there is no restriction on land use term if the land use right is obtained by way of allocation pursuant to the provisions of this Law.”
Therefore, the allocated land generally has the following characteristics
(1) Administrative act: only with the approval of a People's Government of county level and above can the right to the use of the land be provided by means of allocation.
(2) Public welfare: the allocated land only applies to public welfare, non-profit projects, military or state key projects, etc. If an enterprise is reformed, the land use right is transferred or the land use is changed, it shall be paid for use.
(3) Non-reimbursable: users of the allocated land may obtain the land use right free of charge or only need to pay compensation, resettlement and other fees.
(4) Unlimited duration: apart from laws and administrative regulations, there is no expiration date.
Ⅱ. Restrictive provisions for the allocated land leases
According to Article 44 and 45 of the Provisional Regulations of the People's Republic of China concerning the Grant and Assignment of the Right to Use State Land in Urban Areas, “Except where Article 45 hereof applies, allocated land use rights may not be assigned, leased or mortgaged. Upon approval by the land administration and real estate administration departments of the municipal or county People's Government, allocated land use rights and the title to the structures on and other attachments to the land may be assigned, leased or mortgaged, if the following conditions are satisfied: (1) the land user is a company, enterprise, other economic organisation or individual; (2) a certificate to use State land has been obtained; (3) certification of lawful title to the structures on and other attachments to the land is possessed; (4) a contract for the grant of the right to use land has been entered into in accordance with Chapter II hereof and the fee for the grant of the right to use land has been paid retrospectively to the local municipal or county People's Government by direct payment or by payment through offset against the proceeds from the assignment, lease or mortgage.”
Ⅲ. Validity of lease contracts for sports stadiums on allotted land
According to the restrictive provisions for the allocated land leases, the leasing of the allocated land use rights shall be subject to the approval of the land administrative departments of the relevant governments, and those who rent the land without approval shall be subject to administrative punishment. But the effect of the lease contract signed in violation of the approval is not specified.
The land used for non-profit sports facilities is usually allocated land. And in recent years, sports industry and sports consumption have become an important driving force to promote economic growth, so there will often be leasing of sports venues on the allocated land. As to the validity of this kind of contract, some court decide that it is valid and the others decide that it is invalid.
The following is an analysis of the Civil Judgment of the Supreme Court of the People's Republic of China [(2011) Min Ti Zi No. 61]
On November 14, 1995, the Sports Center signed a Lease Contract with Liancheng Company, which agreed that Liancheng Company would rent 4,224 square meters of space from the Sports Center. The above-mentioned space is allocated land. On July 22, 1996, the Sports Center signed a Supplementary Contract with Liancheng Company. On July 9, 1997, Liancheng Company, Huayi Company and the Sports Center signed the Assignment Agreement, which agreed that Huayi Company was assigned all the rights and obligations of Liancheng Company in the Lease Contract and Supplementary Contract.
On December 9, 2004, Liancheng Company and Huayi Company filed a lawsuit to Xiamen Intermediate People's Court, requesting to confirm that the Lease Contract, Supplementary Contract and Assignment Agreement are invalid. Then Liancheng Company and Huayi Company disobeid the decisions of both Xiamen Intermediate People's Court and Fujian High People's Court's, applied to the Supreme Court of the People's Republic of China for retrial.
The Supreme Court decided after the hearing, the dispute involved in this case should be characterized as a land lease contract dispute. Judging from the contents of the Lease Contract and Supplementary Contract, Liancheng Company leased the land which the Sports Center enjoyed the right of use within a certain period of time and paid rent year by year according to the land area. Then, Liancheng Company would build and operate on the site, and after the expiry of the lease period, the above-ground buildings would be owned by the Sports Centre.
According to Article 45 of the Provisional Regulations of the People's Republic of China concerning the Grant and Assignment of the Right to Use State Land in Urban Areas, the lease of the right to use state-owned land obtained by means of allocation shall be submitted to the relevant government land administration department for approval. The Lease Contract, Supplementary Contract and Assignment Agreement in this case had not been approved by the relevant government departments. The above-mentioned contracts, signed in 1995, 1996 and 1997 respectively, shall be subject to the relevant provisions of the Law of the PRC on Economic Contracts Involving Foreign Interest. According to Article 9, Paragraph 1, “A contract that violates the law of the People's Republic of China or the public interest is null and void.” So the Lease Contract, Supplementary Contract and Assignment Agreement in this case should be found null and void because of violating the provisions of the mainland law.
V. Conclusion
There are legal risks (invalidity and administrative penalty) in signing the lease contracts for sports stadiums on allotted land without fulfilling the approval procedures. It is suggested that in the negotiation stage, the user of allocated land use rights should be required to communicate with the land administration department, to obtain the approval and to guarantee the effectiveness of the contracts.
Ⅰ. Connotation and characteristics of allotted land
According to Article 23 of the Law of the People's Republic of China on Administration of Urban Real Estate, “Allocation of land use right shall refer to the hand-over of a plot of land to a land user for use upon approval by a People's Government of county level and above pursuant to the law and payment of compensation and resettlement expenses or the hand-over of land use right to a land user for free. Unless otherwise stipulated by the laws and administrative regulations, there is no restriction on land use term if the land use right is obtained by way of allocation pursuant to the provisions of this Law.”
Therefore, the allocated land generally has the following characteristics
(1) Administrative act: only with the approval of a People's Government of county level and above can the right to the use of the land be provided by means of allocation.
(2) Public welfare: the allocated land only applies to public welfare, non-profit projects, military or state key projects, etc. If an enterprise is reformed, the land use right is transferred or the land use is changed, it shall be paid for use.
(3) Non-reimbursable: users of the allocated land may obtain the land use right free of charge or only need to pay compensation, resettlement and other fees.
(4) Unlimited duration: apart from laws and administrative regulations, there is no expiration date.
Ⅱ. Restrictive provisions for the allocated land leases
According to Article 44 and 45 of the Provisional Regulations of the People's Republic of China concerning the Grant and Assignment of the Right to Use State Land in Urban Areas, “Except where Article 45 hereof applies, allocated land use rights may not be assigned, leased or mortgaged. Upon approval by the land administration and real estate administration departments of the municipal or county People's Government, allocated land use rights and the title to the structures on and other attachments to the land may be assigned, leased or mortgaged, if the following conditions are satisfied: (1) the land user is a company, enterprise, other economic organisation or individual; (2) a certificate to use State land has been obtained; (3) certification of lawful title to the structures on and other attachments to the land is possessed; (4) a contract for the grant of the right to use land has been entered into in accordance with Chapter II hereof and the fee for the grant of the right to use land has been paid retrospectively to the local municipal or county People's Government by direct payment or by payment through offset against the proceeds from the assignment, lease or mortgage.”
Ⅲ. Validity of lease contracts for sports stadiums on allotted land
According to the restrictive provisions for the allocated land leases, the leasing of the allocated land use rights shall be subject to the approval of the land administrative departments of the relevant governments, and those who rent the land without approval shall be subject to administrative punishment. But the effect of the lease contract signed in violation of the approval is not specified.
The land used for non-profit sports facilities is usually allocated land. And in recent years, sports industry and sports consumption have become an important driving force to promote economic growth, so there will often be leasing of sports venues on the allocated land. As to the validity of this kind of contract, some court decide that it is valid and the others decide that it is invalid.
The following is an analysis of the Civil Judgment of the Supreme Court of the People's Republic of China [(2011) Min Ti Zi No. 61]
On November 14, 1995, the Sports Center signed a Lease Contract with Liancheng Company, which agreed that Liancheng Company would rent 4,224 square meters of space from the Sports Center. The above-mentioned space is allocated land. On July 22, 1996, the Sports Center signed a Supplementary Contract with Liancheng Company. On July 9, 1997, Liancheng Company, Huayi Company and the Sports Center signed the Assignment Agreement, which agreed that Huayi Company was assigned all the rights and obligations of Liancheng Company in the Lease Contract and Supplementary Contract.
On December 9, 2004, Liancheng Company and Huayi Company filed a lawsuit to Xiamen Intermediate People's Court, requesting to confirm that the Lease Contract, Supplementary Contract and Assignment Agreement are invalid. Then Liancheng Company and Huayi Company disobeid the decisions of both Xiamen Intermediate People's Court and Fujian High People's Court's, applied to the Supreme Court of the People's Republic of China for retrial.
The Supreme Court decided after the hearing, the dispute involved in this case should be characterized as a land lease contract dispute. Judging from the contents of the Lease Contract and Supplementary Contract, Liancheng Company leased the land which the Sports Center enjoyed the right of use within a certain period of time and paid rent year by year according to the land area. Then, Liancheng Company would build and operate on the site, and after the expiry of the lease period, the above-ground buildings would be owned by the Sports Centre.
According to Article 45 of the Provisional Regulations of the People's Republic of China concerning the Grant and Assignment of the Right to Use State Land in Urban Areas, the lease of the right to use state-owned land obtained by means of allocation shall be submitted to the relevant government land administration department for approval. The Lease Contract, Supplementary Contract and Assignment Agreement in this case had not been approved by the relevant government departments. The above-mentioned contracts, signed in 1995, 1996 and 1997 respectively, shall be subject to the relevant provisions of the Law of the PRC on Economic Contracts Involving Foreign Interest. According to Article 9, Paragraph 1, “A contract that violates the law of the People's Republic of China or the public interest is null and void.” So the Lease Contract, Supplementary Contract and Assignment Agreement in this case should be found null and void because of violating the provisions of the mainland law.
V. Conclusion
There are legal risks (invalidity and administrative penalty) in signing the lease contracts for sports stadiums on allotted land without fulfilling the approval procedures. It is suggested that in the negotiation stage, the user of allocated land use rights should be required to communicate with the land administration department, to obtain the approval and to guarantee the effectiveness of the contracts.
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