CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe
6.2 Types of Commercial Leases In practice, commercial leases may be divided into the following categories depending on the different rent payment methods: • lease with a fixed rent, often seen in office leases, under which the rent is a fixed amount as agreed by the parties; • lease with a turnover rent, under which the rent is calculated at an agreed percentage of the tenant’s gross turnover generated from the leased property; or • lease under which the rent is the higher of a fixed base rent or a turnover rent. 6.3 Regulation of Rents or Lease Terms PRC laws stipulate that the term in a lease agreement cannot exceed 20 years. If the term exceeds 20 years, the excess period will be inva - lid. When the lease term expires, the parties may renew the lease agreement for up to 20 years from the date of renewal of the lease agreement. Lease agreements with a term longer than the remaining term of the land use right to the land located beneath the property may be at risk because it is uncertain whether the landlord will still have the right to use the land after the land use term expires. The rent for a commercial lease is generally negotiable and subject to agreement between tenant and landlord. However, rent for affordable housing such as public rental housing ( 公共租赁住 房 ) and low-rent housing ( 廉租房 ) may not exceed the guiding rental rate promulgated by the local government. 6.4 Typical Terms of a Lease Generally, the length of a lease term is subject to the agreement between the landlord and the tenant but shall not exceed 20 years (see 6.3 Regulation of Rents or Lease Terms ). The land -
Methods to obtain the use right to a piece of land vary depending on the type of land. Land is classified into farmland, construction land and unused land: • farmland means land that is directly used for agricultural production, including cultivated land, forest land, grassland, etc; • construction land mainly includes land zoned for the construction of buildings and other structures; and • unused land refers to land other than farm- land and construction land. The use right to farmland may be obtained through a contracting arrangement, whereby contractors may enter into an agreement with a landowner or other entities with delegated authority to engage in agricultural production such as planting, forestry, animal husbandry, and fishery on the land, and benefit from such production. The use right to construction land may be obtained by entering into a land grant contract (with land premiums to be paid) or a land allo - cation contract (no land premiums to be paid) with the competent local land authorities if it is stated-owned or the relevant collective if it is collectively owned. In addition, real estate owners are entitled to use the land or buildings adjacent to their own real estate for the purpose of obtaining and draining water, passage, ventilation and lighting, etc that are necessary for their life or production. Such neighbouring right is mandatory and no agree - ment between the parties is required. Parties may also create easement through execution of agreements to obtain the right to use another party’s real estate.
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