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Tenants in China have a right of first refusal if their landlords sell – creating risk and uncertainty for potential buyers. Jeff Wenhai Cai explains how to navigate the Chinese property minefield

Mainland Chinese law confers a right of first refusal (ROFR) on tenants, whereupon a landlord who wants to sell a rental property, and who has reached agreement with a potential buyer on the sale terms, must first offer the property to the tenant on those terms. But all is not as simple as it first sounds.

Landlords must give three months’ notice to tenants before a proposed sale, in accordance with Article 118 of the Tentative Opinions on Certain Matters concerning the Application of the General Principles of Civil Law (SCC Opinions) issued by the Supreme Court of China (SCC), as well as local regulations. The law does not specify that notice must be given in writing; however, landlords give verbal notice at their own risk, as the onus is on them to prove service. Landlords must also inform tenants a reasonable time before the proposed sale that they have a right to buy the property on the same terms as the proposed sale, as per Article 230 of the Contract Law.

The issue of ROFR arises irrespective of whether the landlord is prepared to sell with tenancy or with vacant possession, or whether the property is residential, commercial or otherwise.

Under Mainland Chinese law, a co-owner of a property also has a ROFR when the other co-owner wishes to sell the property.

ROFR can be differentiated from a right of first offer, which gives the tenant the first option to buy or lease occupied property should the owner decide to sell or lease. Unlike an option to purchase, a ROFR does not entitle the holder with the right to compel the other party to sell the property. In China, an option to purchase or a right of first offer is not a statutory right.

Tenants’ ROFR has been the subject of numerous legal disputes and court decisions, which demonstrates the importance of comprehending the perils and pitfalls involved.

Key points of the ROFR

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