CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe LLP
6.14 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 6.13 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. 6.15 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). 6.16 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 exhortation, will result in the rescindment of the lease agreement. Where the lease agreement is so rescinded, the tenant shall reinstate and return the leased prem - ises, and the landlord is entitled to declare its claims to the court, in accordance with the bank - ruptcy proceedings, for the damages incurred thereunder. Where the administrator decides to continue the performance of the lease agree - ment, the landlord must comply. However, the landlord has the right to request the administra - tor to provide security. The lease agreement will then be deemed rescinded if the administrator fails to provide security. 6.17 Right to Occupy After Termination or Expiry of a Lease After the expiry or termination of a lease, the ten - ant generally has no right to continue occupying the leased premises. However, if the tenant con - tinues to use the premises after the expiry of the lease without any objection from the landlord, the original lease shall be deemed as remaining in force but without a fixed term. Under such cir - cumstances, either party can terminate the lease at any time, provided that the landlord gives the tenant reasonable prior notice of such termina - tion. In addition, if the landlord intends to lease the premises after the expiry of the lease, the tenant shall have a right of first refusal under the same terms and conditions.
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