Paying a million dollars for an apartment in China is not a sure shot bet to avoid the tangled web of Chinese politics.
If you spend nearly a million US dollars for a luxury apartment in a fashionable section of a major world city you probably expect that everything will be legit, run smoothly, and you will get what you pay for. But this is China, the wheels of government and business spin a little differently here. Or, in the case of the property owners at Victoria Gardens in Beijing, they don’t spin at all.
The residents of this uber-fancy, rather strange looking apartment complex have been caught in the middle of a battle between the property’s developer, the Beijing Zhengxu Jingdian Property Development Co., and the local government, which appears to be stuck in gridlock. It’s been over eight years since many of the owners laid down the incredibly large sums of cash for their abodes, but they still do not have property certificates, which is the sole recognized legal document that verifies their ownership.
One foreign property owner set the stage by explaining of what kind of place this is:
Beijing. Chaoyang Park west gate. Probably where the rich and famous want to be. A sort of Central Park neighborhood atmosphere, far from the hustle and bustle of this noisy and dusty city. One luxury property pops up out of the classical facades and fancy porches of the neighborhood: Victoria Gardens, a 208 flat development, the architecture of which makes it a sort of UFO in the bleak landscape of “Golden you name it” neighboring properties. Designed by an Australian architect, a somewhat wavy and round building, arrogantly white, modern and ostensibly created to answer the needs of the most discerned customers.
Though dropping 4,500 US Dollars (not yuan!) per square meter was not enough keep away the common problems of purchasing property in China. The resident continued:
It’s an understatement to say that the developer was very … say … unprofessional and this very gentle qualification hides a forest of all sins you could think of. Developers are not perfect, we all know it, and especially the Government knows it.
Since 2006 or so, we had purchased a wonderful property, we had been promised by contract with the developer to receive our property certificate within one year or less and we had started a happy journey in this UFO. Until we realized that the deadline for receiving the property certificate was long passed and that the arguments given by the developer were making less and less sense.
Our Chinese owner friends investigated the matter and realized the horrors: embezzlement of funds, taxes unpaid, no respect of construction permits be it in maximum height or maximum building area, illegal electric and water connections, to name just a few and to hide the rest that is too difficult to mention.
The developer was fined and we were told it paid for the fine, it was then summoned to demolish the additional glass rooms that had been built in the few penthouses of its development (mostly still unsold) to bring back maximum height and maximum building surface in line with the construction permit but the developer refused to do so. And for this reason, the Government refuses to issue the “Certificate of Completion” and hence no property certificates can be handed over to us owners.
A property certificate in China is the only legal document that can evidence property ownership, it’s the equivalent of a deed.
While the residents of Victoria Gardens lack property certificates they do have purchase contracts with the developer, so there is little risk of them being thrown out of their properties empty handed. But this does means that they cannot resell their properties, and they essentially have their money locked up until a resolution is established between the government and the developer.
“So, no buyer whatsoever wants to buy from you a property with no title. To prove my point, I even signed in 2012 a one year exclusive contract with an agent to sell my property at market price. In vain!! No potential buyer dared buying my property,” one Victoria Gardens resident stated.
At one juncture the property’s homeowner association attempted to sue the developer, but nothing came of the action. The court decided that it could not force the issuance of property certificates prior to the developer receiving a completion certificate from the government, and, to make this issue a perfect Catch-22, the government refuses to issue this certificate until the developer complies with building codes, which they refuse to do because that would mean paying market value to the homeowners who would need to have their properties altered — as well as losing a good amount of face.
What the homeowners wonder is how the government can be so weak as to not enforce the rules and regulations it makes:
We do not tolerate any longer that our property rights are so overtly, so blatantly, so unambiguously, so undeniably and so outrageously ignored by a Government who is in charge of – among other things, I admit – protecting the rights of property owners. That is the right to use, lease and dispose of. At any time. This shall be protected by the Chinese Property Law enacted since 2007.
This is exactly what we foreign owners need, fast. More specifically than the Chinese owners because most of us do not plan to stay in China for the remainder of our lifetime and need to resell when we do move.
We cannot accept to have our capital stuck in a property in China and have no visibility whatsoever as to how long it will take the developer and the Government to find an “amicable” or “non amicable” agreement. Some pessimists say “another seven to ten years” Some optimists say “three to five years. I just say: NOW!
This is by no means a rare situation in China. In Beijing alone there are hundreds of developments that have been branded “illegal construction” by the Beijing Construction Department. Many of which will eventually be labeled “dead projects,” meaning that the impasse between the government and developer is so thick and complicated that both parties walk away from the table, leaving whatever is sticking up out of the ground “as is.”
Some residents fear that Victoria Gardens is approaching this latter status.
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