Page 214 - 2021 White Paper
P. 214
1 White Paper on the Business Environment in China
is not limited to divorced women, babysitters and is fixed”53 rather than “priority of compensation
other disadvantaged or specific groups of people when the right to mortgage is fulfilled”54 as
under protection; rather, it is the right to reside in previously stated in the Law of Property Rights.
general, with features of investment, and can be Combining the four conditions for determination
applied to “housing for the elderly”. of a floating charge on property in the Civil Code,
Article 41155 provides that creditors shall focus on
Pursuant to the Civil Code, the right to reside the status of debt performance, mortgagor and
can only be established for a residence, but not for mortgaged property. In the event of determining
a house. Therefore, shops and other commercial mortgaged property, creditors shall promptly
housing cannot establish the right to reside. There confirm the scope and value of the mortgaged
are two ways of establishing the right to reside: property with the debtor and the mortgagor,
one is the right to reside passed on by a will, based and perform their rights to mortgage in a timely
on the establishment of a contract or a testament; manner. For example, the mortgagor transfers
and the other is the right to reside based on a the property at an unreasonable low price that
judgement, including “proper assistance” in the significantly depreciate the property, but the term
event of divorce, division of heritage in legal of mortgage has not expired. Pursuant to the
inheritance and transportation of enforcement, previous Property Law, since the mortgagee cannot
etc. The right to reside at will requires a contract exercise its right to the mortgage, the mortgagee
in writing48 and the registration of the right to may not enjoy the priority of compensation of
reside with the registration authorities49. The right property. However, after the Civil Code revised this
to reside cannot be transferred or inherited, or be provision, if the mortgagor ’s acts are subject to
rented unless otherwise agreed to by the parties50. other circumstances with serious effects on the
exercise of the creditor ’s rights, the mortgaged
b. Collateral Right System property may be fixed, and the mortgagee may
enjoy the priority of compensation of property.
The Civil Code has made institutional
innovations in the collateral rights system, by The previous Law of Property Rights provided
expanding the scope of collateral contracts, that no fluidity clause shall be established56,
and specifying that collateral contracts include namely the mortgaged property shall be owned
mortgage contracts, pledges and other contracts by creditors if the debtor fails to perform its due
with collateral functions51, such as sales contracts, debts. Such clause (if any) shall be invalid. Even
financial lease contracts and factoring contracts, if the Civil Code becomes effective, the fluidity
respectively in Articles 641, 745 and 768 of the clause remains invalid, but creditors can only
Civil Code. enjoy priority of compensation from mortgaged
property pursuant to law57.
The Civil Code adds the right to use the sea
area as a mortgageable property52; however, it The Civil Code amends the regulations
has not clarified the problem of operations and on the establishment of right to a pledge.
management of a mortgage on such property. First, it deletes the provisions of the specific
The Civil Code amends the relevant regulations 53 Civil Code, Article 396
o n a “ f l o a t i n g c h a r g e ”, a n d d e t e r m i n e s t h a t 54 Laws of Property Rights, Article 181
“creditors enjoy a priority of compensation over 55 Civil Code, Article 411 provides “where mortgage is
movable property when the mortgaged property created in accordance with Article 396 of this Code, the
mortgaged property shall be determined under any of the
Shen Chunyao, director of the Legislative Affairs Commis- following circumstances:
sion of the Standing Committee of the National People’s (1) that creditor's right is not exercised upon the expira-
Congress tion of the term for performing the obligation;
48 Civil Code, Article 367 (2) that the mortgagor is declared bankrupt or is dis-
49 Civil Code, Article 368 solved;
50 Civil Code, Article 369 (3) that mortgage shall be exercised as agreed upon by
51 Civil Code, Article 388 the parties;
52 Civil Code, Article 395 (4) any other circumstance that seriously affects the exer-
cise of the creditor's right.”
214 56 Law of Property Rights, Article 186
57 Law of Property Rights, Article 401
is not limited to divorced women, babysitters and is fixed”53 rather than “priority of compensation
other disadvantaged or specific groups of people when the right to mortgage is fulfilled”54 as
under protection; rather, it is the right to reside in previously stated in the Law of Property Rights.
general, with features of investment, and can be Combining the four conditions for determination
applied to “housing for the elderly”. of a floating charge on property in the Civil Code,
Article 41155 provides that creditors shall focus on
Pursuant to the Civil Code, the right to reside the status of debt performance, mortgagor and
can only be established for a residence, but not for mortgaged property. In the event of determining
a house. Therefore, shops and other commercial mortgaged property, creditors shall promptly
housing cannot establish the right to reside. There confirm the scope and value of the mortgaged
are two ways of establishing the right to reside: property with the debtor and the mortgagor,
one is the right to reside passed on by a will, based and perform their rights to mortgage in a timely
on the establishment of a contract or a testament; manner. For example, the mortgagor transfers
and the other is the right to reside based on a the property at an unreasonable low price that
judgement, including “proper assistance” in the significantly depreciate the property, but the term
event of divorce, division of heritage in legal of mortgage has not expired. Pursuant to the
inheritance and transportation of enforcement, previous Property Law, since the mortgagee cannot
etc. The right to reside at will requires a contract exercise its right to the mortgage, the mortgagee
in writing48 and the registration of the right to may not enjoy the priority of compensation of
reside with the registration authorities49. The right property. However, after the Civil Code revised this
to reside cannot be transferred or inherited, or be provision, if the mortgagor ’s acts are subject to
rented unless otherwise agreed to by the parties50. other circumstances with serious effects on the
exercise of the creditor ’s rights, the mortgaged
b. Collateral Right System property may be fixed, and the mortgagee may
enjoy the priority of compensation of property.
The Civil Code has made institutional
innovations in the collateral rights system, by The previous Law of Property Rights provided
expanding the scope of collateral contracts, that no fluidity clause shall be established56,
and specifying that collateral contracts include namely the mortgaged property shall be owned
mortgage contracts, pledges and other contracts by creditors if the debtor fails to perform its due
with collateral functions51, such as sales contracts, debts. Such clause (if any) shall be invalid. Even
financial lease contracts and factoring contracts, if the Civil Code becomes effective, the fluidity
respectively in Articles 641, 745 and 768 of the clause remains invalid, but creditors can only
Civil Code. enjoy priority of compensation from mortgaged
property pursuant to law57.
The Civil Code adds the right to use the sea
area as a mortgageable property52; however, it The Civil Code amends the regulations
has not clarified the problem of operations and on the establishment of right to a pledge.
management of a mortgage on such property. First, it deletes the provisions of the specific
The Civil Code amends the relevant regulations 53 Civil Code, Article 396
o n a “ f l o a t i n g c h a r g e ”, a n d d e t e r m i n e s t h a t 54 Laws of Property Rights, Article 181
“creditors enjoy a priority of compensation over 55 Civil Code, Article 411 provides “where mortgage is
movable property when the mortgaged property created in accordance with Article 396 of this Code, the
mortgaged property shall be determined under any of the
Shen Chunyao, director of the Legislative Affairs Commis- following circumstances:
sion of the Standing Committee of the National People’s (1) that creditor's right is not exercised upon the expira-
Congress tion of the term for performing the obligation;
48 Civil Code, Article 367 (2) that the mortgagor is declared bankrupt or is dis-
49 Civil Code, Article 368 solved;
50 Civil Code, Article 369 (3) that mortgage shall be exercised as agreed upon by
51 Civil Code, Article 388 the parties;
52 Civil Code, Article 395 (4) any other circumstance that seriously affects the exer-
cise of the creditor's right.”
214 56 Law of Property Rights, Article 186
57 Law of Property Rights, Article 401
