The Supreme People's Court has issued judicial interpretations of the Property Law.

Clarify how to resolve disputes over real estate registration and confirmation of rights.

On the morning of February 23, the Supreme People's Court held a press conference to release the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Property Law of the People's Republic of China (I)" (hereinafter referred to as the "Interpretation"). This judicial interpretation addresses difficult issues encountered in judicial practice regarding real estate property rights and registration, the priority purchase rights of co-owners, good faith acquisition, and other related matters. The "Interpretation" consists of 22 articles and will take effect on March 1 of this year. The key contents of the "Interpretation" include the following six aspects:

(1) Regarding disputes over real estate registration and confirmation of property rights or foundational relationships.

Article 14 of the Property Law stipulates that the establishment, change, transfer, and extinction of real estate property rights that are required by law to be registered shall take effect upon being recorded in the real estate registration book. In practice, there is a viewpoint that, unless otherwise provided by law, property rights cannot be obtained or enjoyed without registration by the real estate registration authority, and disputes involving property rights should be resolved through administrative litigation. This viewpoint is widely accepted and has led to a significant degree of mutual shirking between civil and administrative adjudication departments, as well as conflicts between civil and administrative judgments, which not only increases the litigation burden on the parties involved but also undermines the authority and credibility of the judiciary. In response to this situation, the "Interpretation" provides regulations from two aspects: first, regarding the acceptance of cases, it stipulates that lawsuits arising from disputes over the ownership of real estate property rights, as well as transactions such as sales, gifts, and mortgages that serve as the basis for real estate property rights registration, fall within the scope of civil litigation accepted by the people's courts, which should be accepted and tried according to law. Second, from the perspective of the evidentiary power of the real estate registration book in litigation, it stipulates that the final judgment on the ownership of disputed real estate property rights should rely on the examination of the underlying actions or foundational relationships. Therefore, if a party provides evidence proving that the record in the real estate registration book does not match the true state of rights, and they are the true rights holder of the real estate property, their litigation request should be supported.

(2) Regarding the effectiveness of pre-registration.

Article 20, Paragraph 1 of the Property Law stipulates that after pre-registration, any disposition of the real estate without the consent of the pre-registered rights holder shall not have property rights effect. In practice, there is ambiguity regarding what kind of disposition by the actual registered rights holder will not have property rights effect due to violation of legal provisions, and in some cases, there is even an inappropriate tendency to expand the effectiveness of pre-registration. Based on the connotation of the pre-registration system, the correct application of the pre-registration system must pay attention to maintaining a balance between safeguarding the claims of registered rights holders and restricting the disposition rights of registration obligors. Therefore, Article 4 of the "Interpretation" provides a restrictive interpretation of the "disposition actions" referred to in Article 21 of the Property Law, limiting it to actions that transfer ownership of real estate or establish land use rights, easements, mortgages, and other property rights without the consent of the pre-registered rights holder, which legally endanger or hinder the timely realization of creditor's rights.

(3) Regarding "good faith third parties" in the transfer of special movable property.

In recent years, disputes arising from special movable properties such as ships, aircraft, and motor vehicles have been on the rise. With the increase in the second-hand trading volume of motor vehicles, cases of discrepancies between the name and actual ownership of motor vehicles are not uncommon. Additionally, rights holders formed due to motor vehicle mortgages, traffic accidents leading to damage compensation, or bankruptcy of motor vehicle owners may intersect with the rights of both parties in motor vehicle sales transactions in many situations. Therefore, how to properly handle related disputes has become a hot and difficult issue in judicial practice. In this regard, Article 6 of the "Interpretation" is guided by the types of rights conflicts that frequently occur in practice, following the property law rules for the transfer of special movable property rights, and provides regulations from the perspective of excluding the transferor's creditors as "third parties" as referred to in Article 24 of the Property Law.

(4) Regarding the scope of legal documents from people's courts and arbitration committees that cause changes in property rights.

According to Article 28 of the Property Law, changes in property rights directly caused by legal documents from people's courts and arbitration committees do not require registration or delivery as a condition for effectiveness; once the legal documents take effect, they produce property rights effects. The issue of the scope of legal documents from people's courts and arbitration committees that directly lead to changes in property rights has been a contentious topic in judicial practice. We believe that, in order to maintain the stability of the property rights change model system, it is necessary to prevent the inappropriate expansion of the application of Article 28 of the Property Law in practice, which could harm the legitimate rights and interests of relevant rights holders. Therefore, a purposive restrictive interpretation of the effective legal documents referred to in this article is required. Accordingly, Article 7 of the "Interpretation" stipulates: "Legal documents such as judgments, rulings, and mediation documents made by people's courts and arbitration committees that change the original property rights relationship in cases of dividing jointly owned real estate or movable property, as well as auction sale rulings and debt-settlement rulings made by people's courts in execution procedures, shall be recognized as legal documents from people's courts and arbitration committees that lead to the establishment, change, transfer, or extinction of property rights as referred to in Article 28 of the Property Law."

(5) Regarding the judicial protection of the priority purchase rights of co-owners.

Article 101 of the Property Law establishes the system of priority purchase rights for co-owners, but the wording of this article is relatively simple and far from addressing important issues that urgently need clarification in practice, such as the preconditions, methods, and legal effects of exercising priority purchase rights. This has also led to inconsistencies in the practical application and judicial standards for the priority purchase rights of co-owners, severely affecting the functionality of this system. The "Interpretation" refines the system of priority purchase rights for co-owners based on the legislative spirit and purpose of Article 101 of the Property Law, providing regulations from Article 9 to Article 14, covering the starting conditions for exercising priority purchase rights, the determination of equal conditions, the exercise period, the scope of subjects, and judicial protection, greatly improving the institutional framework for exercising priority purchase rights, making this system a highly operable and vibrant system that moves from legal principles to reality.

(6) Regarding the application of the good faith acquisition system.

Article 106 of the Property Law stipulates the system of good faith acquisition. From the perspective of judicial practice, disputes related to good faith acquisition are very common. They not only exist in disputes over property rights confirmation and execution objections but are also more widely spread across numerous contracts, torts, and even marriage and family inheritance disputes. There are many controversies in the understanding of Article 106 of the Property Law, and how to correctly apply the good faith acquisition system is a key, difficult, and hot topic in the application of the Property Law. In this regard, Article 15 of the Interpretation stipulates the basic standards for determining "good faith," specifically what "good faith" refers to in the good faith acquisition stipulated in Article 106 of the Property Law, and who bears the burden of proof in litigation; Articles 16 and 17 provide specific provisions on the determination of non-good faith of the acquirer in real estate good faith acquisition and the determination of gross negligence of the acquirer in movable property good faith acquisition, respectively. These three provisions, along with Article 18 regarding the timing of good faith judgment, together constitute a specific interpretation of the first item of the first paragraph of Article 106 of the Property Law, which states that "the acquirer is in good faith when acquiring the real estate or movable property." Article 19 addresses the second item of the first paragraph of Article 106 of the Property Law, which states "transfer at a reasonable price," pointing out that the legislative purpose and value orientation should be strictly followed, based on the specific circumstances of individual transactions, deeply understanding the general social perception of transactions, and accurately judging whether the price is reasonable. Article 20 clarifies how to apply the third item of the first paragraph of Article 106 of the Property Law to special movable properties such as motor vehicles. The above provisions form a relatively complete rule system for the application of good faith acquisition. In addition, the Interpretation also provides for the exclusion of circumstances in which the good faith acquisition system applies, based on the value concept that the law does not protect illegal transactions, with the aim of enhancing social recognition of judicial rulings and simplifying the rationale for judgments.