CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe
loss of or damage to the insured property arising from any natural hazards or accident. Damages caused or expenses incurred by intentional acts or gross negligence, confiscation, requisition, destruction or damage by any action or order of any government or public authority, war, coup d’état, or strike are generally excluded. On the other hand, the tenant is usually requested by the landlord to take out and maintain through the lease term construction/installation works all risks insurance for the tenant’s fitting-out or improvement works, and public liability insur - ance for the tenant’s business operations in the leased premises. Business interruption insurance, an insurance ancillary to the property all risks insurance, gen - erally only covers losses incurred by business interruption resulting from property damage. 6.12 Restrictions on the Use of Real Estate In practice, the landlord commonly imposes vari - ous restrictions in the lease agreement on how a tenant shall use the leased property, including but not limited to restrictions on the permitted use, subleasing, assignment, and fitting-out of the leased premises. Applicable PRC laws also require that use of the leased premises shall be in accordance with the zoned usage, and the tenant shall not change the load-bearing struc - ture or demolish indoor facilities without the landlord’s approval. 6.13 Tenant’s Ability to Alter and Improve Real Estate Typically, the tenant must obtain the landlord’s prior consent if the tenant intends to improve or fit out the leased premises. A fitting-out plan is typically required in order to obtain the land - lord’s written consent. To ensure the safety of the leased premises, the landlord usually requires
that the tenant takes out insurance for such improvement or fitting-out works and engag - es qualified contractors. As discussed in 6.12 Restrictions on the Use of Real Estate , the ten- ant may not change the load-bearing structure or other main structure of the leased premises without approval. Furthermore, it is common practice for the landlord to require the tenant to complete all the approval, filing and recording procedures required by the competent authori - ties (including but not limited to the planning, construction and fire-protection approvals and completion acceptance) for such improvement or fitting-out at the tenant’s own cost. 6.14 Specific Regulations Leasing of various types of real estate are mainly governed by: • the Civil Code of the PRC; • the Administrative Measures for Commodity Real Estate Leasing; and • the Interpretation of the Supreme People’s Court on Certain Issues Concerning Specific Application of Law in the Trial of Contractual Disputes over the Leasing of Urban Housing 2009 (as amended in 2020). 6.15 Effect of the Tenant’s Insolvency It is common practice to specify in the lease that the landlord is entitled to terminate the lease should the tenant become insolvent. Failing explicit agreement, the Enterprise Bankruptcy Law of the PRC shall govern. If the court accepts the tenant’s application for bankruptcy, the ten - ant’s bankruptcy administrator decides wheth - er to rescind or continue to perform the lease agreement. Failure by the bankruptcy adminis - trator to notify the landlord of its decision within two months from the date when the bankruptcy application was accepted, or to reply to the land - lord within 30 days after receiving the landlord’s
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