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Illegal land use in PRC may expose investors to material risks

7 May 2010

On 5 May 2010, PRC Ministry of Land and Resources published on its official website the punishments on 14 illegal land uses, which showed that even if the land use by a company is permitted or acknowledged by local government authorities, so long as the land is not obtained pursuant to the statutory procedures, the company may still face serious punishments, even criminal prosecutions. The following are several examples of the punished illegal land use cases:
- In 2008, a company (known as 济源市沁北焦化有限公司) in Henan Province signed a land lease agreement with a village as landlord which owns a piece of collective land, whereby that collectively owned land was unlawfully leased to the company to build factory buildings, office buildings and other manufacturing facilities. As a result of rectification, a fine was imposed on the company, the buildings and structures newly constructed by the company on the land were confiscated or ordered to be demolished, in addition, both the legal representative of the company and head of the village committee were arrested for illegal occupation of agricultural land.
- In 2007, as approved by Yuyang District government of Yulin City of Shaanxi Province, Yulin City Land and Resource Bureau, Yuyang Branch expropriated a piece of collective land of 11,577 Mu to build an industrial concentration area. In 2008, without lawful land use procedures, the administrative committee of the industrial concentration area invited five (5) enterprises to establish factories in the concentration area. As a result of rectification, a fine was imposed on each of the five companies, the buildings constructed on the land were confiscated; and officials involved received relevant disciplinary punishments.
- In 2005, a company (known as 安吉龙袍坞生态健身有限公司) established in Anji County, Zhejiang Province obtained from relevant government departments of Anji County project approval for an ecotourism fitness centre project, and approvals for the project's feasibility study report, site selection, environmental impact assessment, etc.. Thereafter, the company signed the relevant land lease agreements with several villages (witnessed by Anji Economic Development Zone Administrative Committee), whereby the collectively owned lands were unlawfully leased to the company for it to carry out the ecotourism fitness centre project. In October 2008, an 18-hole golf course was completed by the company on the land. As a result of rectification, a fine was imposed on the company, the farmland illegally occupied by the golf course was required to be restored; in addition, the case had been handed over to the public security bureau for the suspected crime of illegal occupation of agricultural land; and officials involved received relevant disciplinary punishments.
In view of the huge risks involved in the illegal land use, it would be advisable for an investor to pay sufficient attention to make sure the validity of the land use.

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Disclaimer
Any legal information contained in this newsletter is general in nature and laws and regulations are changing from time to time and compliance will always depend upon the particular circumstances. We have not attempted to give exhaustive descriptions of law or to give a legal opinion on specific legal issues. You should not rely on this newsletter as a legal advice for any particular purpose.

 

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