CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian and Liangqian Ying, JunHe LLP
tal representations and warranties, and otherwise only claim for damages in the event of breach of general representations and warranties. The seller’s representations and warranties apply pri - marily to the facts and circumstances existing at the time of contract execution and are deemed to have been remade on and as of the closing date. A sophis - ticated seller may insist on adding a time limit for bringing claims for breach of such representations or warranties and capping the seller’s liability for breach of the same. A typical cap for the aggregate of all the claims is 100% of the total contract price, while a sophisticated seller generally sets different sub-caps for different categories of claims. Representation and warranty insurance is more often seen in cross-border transactions involving inter - national players, mostly taken out by purchasers in cross-border transactions. Local parties, particularly state-owned enterprises, are becoming increasingly aware of and interested in such insurance. 2.6 Important Areas of Law for Investors See 1.1 Main Sources of Law , 2.2 Laws Applicable to Transfer of Title , 2.11 Legal Restrictions on Foreign Investors and 5.5 Applicable Governance Require- ments . 2.7 Soil Pollution or Environmental Contamination The Environmental Protection Law and Soil Pollution Prevention and Control Law of provide that the per - son causing the soil pollution (the “causing person”) is responsible for managing the soil pollution risks and the remediation of the soil pollution it caused. Howev - er, if the causing person cannot be identified, the land use right owner (eventually the buyer, unfortunately) is responsible for managing the soil pollution risks and remediation of the same, even if the land use right owner did not cause the pollution or contamination. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law A buyer can ascertain the permitted use of a parcel of real estate by viewing the construction land plan - ning permit ( 建设用地规划许可证 in Chinese), land grant contract ( 土地出让合同 in Chinese), the construction
works planning permit ( 建设工程规划许可证 in Chinese), other relevant zoning documents and the title certifi - cate. In addition, a buyer may make further verifica - tion by accessing, with the authorisation of the seller, the relevant files of the real estate at the competent planning and natural resources authority (the Planning and Natural Resources Commission or PNRC) or the competent local urban construction archives. 2.9 Condemnation, Expropriation or Compulsory Purchase The state may, in the public interest: • expropriate real estate, including land collectively owned by farmers and buildings or other real estate owned by any entities or individuals, with appropriate compensation; or • temporarily requisition the real estate of any enti - ties and individuals which will be returned to the said entities and individuals after such use. The power of expropriation and temporary requisition must be exercised with due authority and legitimate process. Compensation The compensation must be fair and reasonable in the case of expropriation and temporary requisi - tion. Where the land to be expropriated is collec - tively owned by farmers, they shall be compensated according to the principle that their living standard is not negatively affected; while the land user, in respect of land under a land grant contract to be taken back by the government for public interest, shall be com - pensated, considering the actual elapsed term of the land use and the status and condition of the develop - ments made on the land. In the case of requisition, compensation shall be made for any damage to or destruction of the requisitioned real estate. 2.10 Taxes Applicable to a Transaction In respect of the purchase and sale of real estate, taxes payable may differ depending on the different transaction structures. Asset Deal In an asset deal, taxes payable include:
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