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The vagaries of lease and company registration can throw up some interesting points of instruction. The example I have in mind concerns a new office building being constructed in Huangpu District. The case involved a prospective Tenant wishing to rent an office approximately 3-months before moving in, while using the lease immediately, to help register their Shanghai company.
The office in question is one where the developer has sold off the individual units to private landlords. With units ranging from 45-170sqm the building offered high quality office accommodation in small unit sizes. Quoting rents are around RMB4.5/sqm with the additional benefit of separate air conditioning controls which allow for 24-hour use - should the hard working require it. For the client in question, finding a new building, offering small units and unlimited air conditioning was an attractive option.
However, like many companies new to Shanghai, the client was in the process of establishing their foreign owned entity. As many readers will know, part of the requisite documents for establishing such a entity, is an office lease of at least 1-years duration. Actually, the other document which needs to accompany the lease, although logical, is less focused on. That is a copy of the ownership title.
With our case, the office building was almost completed. However, because it was not fully completed the small landlord had not yet completed payment for the unit or received their ownership title. On closer inspection the various layers of title to a building were revealed through a rather tortuous process of investigation, which we were obliged to take the client through.
For such buildings, first constructed by a developer and then sold-on to smaller investors, there are actually two ownership titles. The first being the developers' title (大产权证 - Senior Chan Quan Zheng). Once this document has been obtained, the landlord/developer is in a position to complete the sale of the units to individual investors. On sale of the unit to the individual investors, a new ownership title is created for each unit (小产权证 - Small Chuan Quan Zheng).
However, before either of the above titles can be obtained, both parties need a long list of documents. In the case of the developer, there are five principal documents required:
- 土地使用证；(Land Use Right Certificate)
- 建设用地规划许可证；(Construction Land Planning Permit)
- 建设工程规划许可证； (Construction Project Planning Permit)
- 竣工验收单；(Construction Completion and Verification Sheet)
- 当地派出所出具的门牌号码证明；(A Letter Issued by Local Police Bureau for the Address of the Building)
In the case of the small landlord, the documents required are as follows:
- 购买合同 (Purchase agreement between the Developer and the private landlord)
- 全额付款证明；(Document to support payment by the private landlord)
- 房屋交付使用证明；(A letter issued by the private landlord to evidence the ready-to-use status of the office space)
Once the above our obtained, first the developer and latterly the small investor, qualify to obtain their ownership titles. Each is a key step in the process to ownership. And, for those landlords who have purchased and paid for (the majority) of their property, there is still a way to go prior to full legal ownership.
For foreign companies attempting the contract leases in nearly completed buildings, the message should be clear. If you need the lease to register your company, be wary. Not on account of ownership (as this is verifiable via the purchase contract between developer and small landlord). But on account of the documents to support that ownership in the eyes of the registration authority. If the ownership titles have not yet been issued, the 8 documents listed above are the minimum required to be submitted along with the lease. In reality, it is unlikely all these documents will be available, making acceptance of the lease a real problem.
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