CHAPTER I GENERAL PROVISIONS CHAPTER II CREATION OF HYPOTHEC CHAPTER III MAKING OF MORTGAGE CONTRACT CHAPTER IV CUSTODY OF COLLATERAL CHAPTER V THE MODIFICATION, CANCELLATION AND TERMINATION OF A MORTGAGE CONTRACT CHAPTER VI MORTGAGE REGISTRATION CHAPTER VII DISPOSAL OF COLLATERAL CHAPTER VIII LEGAL LIABILITY CHAPTER IX SUPPLEMENTARY PROVISIONS Article 1 (Purpose and Basis)The present Procedures are formulated in accordance with the relevant laws and regulations and in the light of Article 2 (Scope of Application) The present Procedures shall be applicable to the real estate mortgage in Shanghai. Article 3 (Definition of Following Terms Used in the Present Procedures) 1. “Real estate mortgage” means a civil juristic act in which the mortgagor supplies his/her legitimately owned real estate or real 2. “Mortgagor” means a legal person, other organization, or a citizen who supplies real estate to the mortgagee as a guaranty for 3. “Mortgagee” means a legal person, other organization, or a citizen who receives real estate mortgage as the debtor’s guaranty for 4. “House with limited property rights” means a house owned by an owner who has the full rights of occupancy and use, and limited 5. “Future right of a house” means the right of the ownership of a house to be obtained at a certain future time agreed upon in a Article 4 (Basic Principles) The real estate mortgage shall follow the principles of voluntariness, justice, equal compensation, honesty and trust. The parties concerned who establish the relationship of real estate mortgage must abide by the relevant laws, rules and regulations The relationship of real estate mortgage established according to law shall be protected by the laws. Article 5 (Administrative Authorities) Shanghai Municipal Real Estate Administration is the competent administrative authorities of the real estate mortgage in Shanghai. The District/County Real Estate Administration, vocationally subordinating to the leadership of Shanghai Municipal Real Estate Administration,
Article 6 (Real Estate Eligible for Hypothec) The following real estate may be hypothecated: 1. The granted land-use right obtained according to law; 2. The house with post_title and the land-use right within its dimensions obtained according to law; 3. The future right of a house obtained according to law; 4. Other real estate eligible for mortgage according to law. Article 7 (Real Estate Ineligible for Hypothec) 1. The land-use right obtained through administrative allotment and with no house and other annex built on the plot; 2. Buildings of historical relic and other memorable buildings; 3. The State-owned residential house that has been leased; 4. The house located within the removal compass or the requisition compass of collectively-owned land according to law; 5. The real estate in the custody of the government; 6. The real estate of a foreign-invested enterprise that has not yet been confirmed by a Chineses registered accountant to have paid 7. The real estate that has not yet been registered for a post_title deed according to law; 8. The real estate of vague or disputable property right; 9. The real estate that has been sealed up according to an adjudication by a judicial organization or a decision by an administrative 10. Other real estate that cannot be hypothecated according to law. Article 8 (Creation of Hypothec Relevant to the Land-Use Right Through Granting) In respect of hypothecating the land-use right obtained through granting, the provisions of the State and Shanghai Municipality on When the land-use right is hypothecated, the original house and other annex on the plot before the hypothecation shall be hypothecated When all the houses on the plot obtained through granting of land-use right are hypothecated, the land-use right of the space occupied When part of the houses on the plot obtained through granting of land- use right is hypothecated, the corresponding portion of the Article 9 (Creation of Hypothec on the House of Limited Property Right) In respect of a hypothec on a house of limited property right, the hypothec shall not go beyond the limit measured by the original Article 10 (Creation of Hypothec on Future Right of a House) A hypothec on the future right of a house shall conform to the relevant provisions on forward selling of houses and the management Article 11 (Creation of Hypothec on the Leased Real Estate) In respect of hypothecating the leased real estate, the mortgagor shall clearly state the fact to the prospective mortgagee that the Article 12 (Creation of Hypothec on Real Estate with Time Limit) If an enterprise with business time limit hypothecates its real estate, the created mortgage term must not exceed the business time In respect of a hypothec on the real estate with land-use time limit, the created mortgage term must not exceed the land-use time Article 13 (Hypothec on the Jointly Owned Real Estate) In respect of a hypothec on a house jointly owned by shares, the hypothec shall be limited within the shares that the mortgagor holds. In respect of a hypothec on a jointly owned house, the hypothec shall be created with unanimous agreement of all the sharers, and Article 14 (Creation of One Hypothec on More Than Two Pieces of Real Estate) In respect of one hypothec on more than two pieces of real estate, the interested real estate shall be regarded as one piece of collateral. Article 15 (Creation of More Than One Hypothecs on the Same One Piece of Real Estate) When the real estate that has been hypothecated is remortgaged, the mortgagor shall inform the prospective second mortgagee of the In respect of the creation of more than two hypothecs on the same one piece of real estate, the deadline for performing the obligation Article 16 (House Built After Signing of Mortgage Contract) The house built on the plot after the signing of the real estate mortgage contract does not pertain to the collateral.
CHAPTER III MAKING OF MORTGAGE CONTRACT Article 17 (Form of Mortgage Contract) A mortgage contract that establishes real estate mortgage relationship must be made in writing. Article 18 (Place of Signing a Mortgage Contract) A mortgage contract must not be signed in a country that has not established diplomatic relations with China (PRC) or in a country Article 19 (Main Contents of Mortgage Contract) The following shall be specified in a mortgage contract: 1. Parties to the mortgage; 2. Location, type, structure, area, value, post_title, right of use, and post_title number of the collateral; 3. Amount and time limit of the liabilities guaranteed by the mortgage; 4. Custodian, custody form of the collateral, responsibilities for the custody and responsibilities for unexpected damage or loss; 5. Responsibilities for the breach of the contract; 6. Conditions of abolishing the mortgage; 7. Ways of settling disputes; 8. Other items agreed upon by both parties to the mortgage; 9. Time and place of signing the mortgage contract. If a party to the mortgage is a citizen, his/her name, nationality and address shall be specified in the mortgage contract. If a party Article 20 (Language of Mortgage Contract) A mortgage contract shall be written in Chinese. In case of other language used simultaneously, the Chinese version is considered Article 21 (Notarization and Attestation of Mortgage Contract) A mortgage contract signed between citizens or between a legal person or other organization and a citizen must be notarized by a notary A mortgage contract signed inside China (PRC) may be notarized by the notary office at the place where the mortgage contract is signed Article 22 (Validity of Mortgage Contract) A mortgage contract signed in a foreign country becomes effective as of the date it is attested. A mortgage contract signed in Hong Article 23 (Appraisal of Collateral) The collateral shall be appraised for the purpose of establishing real estate mortgage relationship, and the appraised value shall Article 24 (Insurance of Collateral) If the parties concerned agree to have the collateral insured, the mortgagor shall have the collateral insured at an insurance company. Article 25 (Lease of Collateral) When the real estate that has been created hypothec is leased, the lessor must clearly inform the prospective lessee of the fact that Article 26 (Agreement on the Restriction of Collateral) If the mortgagee wants to restrain the mortgagor from leasing, lending, subletting the collateral, or from changing the nature of Article 27 (Invalid Contract) The following mortgage contracts are invalid contracts: 1. A mortgage contract signed in violation of Article 7 of the present Procedures; 2. A contract guaranteed by a mortgage contract is invalid; 3. Other mortgage contracts signed in violation of the law.
Article 28 (Custody of Collateral and Custodian’s Responsibility) A collateral is in the mortgagor’s custody. The custodian shall keep the collateral safe and intact during the custody period. Article 29 (Appointed Inspection of Mortgagee) The mortgagee shall, pursuant to the agreement in the mortgage contract, have the right to inspect the collateral in the mortgagor’s Article 30 (Restrictions on Transfer, Demolition or Remodel of Collateral) Without a written consent from the mortgagee the mortgagor must not sell, exchange, donate, demolish, or remodel the real estate that The mortgagor shall promptly inform the mortgagee in writing if the real estate that has-been hypothecated has been included within If the collateral is inherited or split up, the successor shall promptly inform the mortgagee in writing. Article 31 (Obligations After the Transfer of Collateral) If a collateral is transferred, the obligations guaranteed by the collateral remain unchanged. When, as a citizen, the mortgagor dies or is declared dead, his/her legal inheritor/inheritress or devisee shall assume corresponding Article 32 (Remedies for Loss of or Damage to Collateral) The mortgagor shall promptly inform the mortgagee of the loss of or damage to the collateral except for natural deterioration and When the collateral cannot or is not sufficient to perform the obligation as a guaranty because of the loss of or damage to the collateral Article 33 (Compensation and Indemnity) The compensation and indemnity obtained for the loss of or damage to the collateral not attributable to the mortgagor’s fault, or
CHAPTER V THE MODIFICATION, CANCELLATION AND TERMINATION OF A MORTGAGE CONTRACT Article 34 (Modification of Mortgage Contract) If the real estate that has been hypothecated has been remodeled or included within the removal compass according to law, and if it If, according to Section 2, Article 32 of the present Procedures, the mortgagor resupplies or increase the collateral, the mortgage Unless provided in Section 1 and Section 2 of this Article, modification of the mortgage contract must be subject to the consensus The parties concerned shall sign a mortgage modification contract if the mortgage contract is modified. Article 35 (Cancellation of Mortgage Contract) If the hypothecated real estate that has been included within the removal compass due to a construction project of the State has been A mortgage cancellation contract must be signed subject to the consensus from the parties concerned through consultation except the Article 36 (Termination of Mortgage Contract) A mortgage contract shall terminate if the mortgagor clears of his/her debt, or the mortgagee abandons the claim to the obligation
Article 37 (Validity of Mortgage Registration) A mortgage registration must be transacted with the real estate registration office upon the establishment of the mortgage relationship. Article 38 (Time and Agency for Mortgage Registration) The parties to a real estate mortgage shall register with the municipal or district/county real estate registration office according 1. A mortgage shall, if the contract is signed inside China, be registered within 30 days from the date when it becomes effective; 2. A mortgage shall, if the contract is signed in Hong Kong, Macao or Taiwan regions or in a foreign country, be registered within In respect of a mortgage on the future right to a house, if the house is completed during the mortgage term, the mortgage registration Article 39 (Documents Required for Mortgage Registration) When going through the mortgage registration,the parties to the mortgage must produce the mortgage contract, identity cards, and must 1. Construction land planning license and certificate of land-use right of State-owned land in respect of a mortgage on the granted 2. post_title to the house and certification of the land-use right in respect of a mortgage on the house and the land-use right within 3. Legally valid forward selling (buying) contract of the house in respect of a mortgage on the future right to a house bought in 4. Legally valid construction project contract and certification of land-use right in respect of a mortgage on the future right to If the parties to the mortgage entrust an agent with real estate mortgage registration, a letter of authorization and the agent’s Article 40 (Registration of Mortgage Modification) If a mortgage contract is modified, the parties to the mortgage shall have the mortgage modification registered with the original Article 41 (Registration of Mortgage Cancellation) If a mortgage contract is cancelled or terminated, the parties to the mortgage shall have the mortgage cancellation registered with Article 42 (Production of Registration Certificate) A real estate mortgage registration office shall produce registration certificate to the registrant within 15 days from the date when Article 43 (Registration Fee) The parties to the mortgage shall pay the registration fee to the registration office for mortgage registration, mortgage modification Article 44 (Reference to Registration Documents) The relevant documents concerning mortgage registration, mortgage modification registration or mortgage cancellation registration
CHAPTER VII DISPOSAL OF COLLATERAL Article 45 (Conditions of Disposal) The mortgagee has the right to demand the disposal of the collateral under any one of the following conditions: 1. The debtor fails to perform his/her obligation on the due date according to the agreement; 2. If the debtor, as a citizen, dies or is claimed dead and nobody performs the due obligation on his/her behalf, 3. The legitimate inheritor/inheritress or devisee of the mortgagor refuses to perform the due obligation; 4. The mortgagor is declared disbanded or bankrupt; 5. The mortgagor disposes the collateral at liberty in violation of the stipulations under Article 30; 6. The performance of the mortgage contract is or may be affected when capital reduction or split-up, etc. happen to the mortgagor, 7. Other conditions agreed upon in the mortgage contract. Article 46 (Ways of Disposal) Under any one of the conditions stipulated in Article 45 of the present Procedures, the parties to the mortgage may, through consultation, 1. Assignment based on an evaluated price; 2. Auction. When the parties to the mortgage cannot reach an agreement on assigning the collateral based on an evaluated price, the collateral Article 47 (Notice Before Disposal) The mortgagee shall inform the mortgagor in writing before the disposal of the collateral; and shall, at the same time, inform the Article 48 (Preemption) When the collateral is disposed according to the present Procedures, except through auction, the following legal person, other organization 1. The lessee of the leased collateral; 2. The co-owner with shares in the co-owned collateral; 3. The co-owner of the real estate that does not fit to be divided or that shares a common set of facilities with the collateral. Before the disposal of the collateral through auction, the mortgagee shall inform in writing the interested parties who have the preemption Article 49 (Priority to Repayment) When a real estate with more than two hypothecs is disposed, the priority to repayment shall be determined by the following order: 1. The registrant who registers the mortgage within the time limit shall have the priority over the one who registers the mortgage 2. In respect of the registrants who register the mortgage within the time limit, the one with a mortgage contract of an earlier effective 3. In respect of the registrants who register the mortgage after the deadline for registration, the one who has an earlier registration When the real estate that has been hypothecated is disposed, the newly- built house on the land may, according to law, be disposed Article 50 (Treatment of Tenancy Relationship Concerning Disposal) After the collateral within the lease term has been disposed, the original tenancy relationship shall remain valid if the collateral Article 51 (Treatment of Proceeds out of Allocated Land-use Right at Disposal of Collateral) If the land-use right that creates the hypothec has been obtained in the form of allocation, and after it is disposed according to Article 52 (Collateral After Bankruptcy) The real estate that creats the hypothec before bankruptcy is excluded from the bankrupt property after the mortgagor becomes bankrupt. Article 53 (Suspension of Auction) When the parties to the mortgage chose to dispose the collateral through auction, the auction may be suspended under any one of the 1. There is a dispute over the post_title to the collateral; 2. The mortgagee demands to suspend the auction; 3. The mortgagor applies for suspending the auction if he/she is willing to perform the obligation instantly, or provides the mortgagee 4. Other conditions due for suspending the auction. Article 54 (Regulations Governing Ways of Disposal) If the parties to the mortgage choose to dispose the collateral through auction, the disposal shall be made according to the relevant If the parties to the mortgage choose to dispose the collateral by assignment based on an evaluated price, the disposal shall be made Article 55 (Distribution of Proceeds From Disposal) The distribution of the proceeds from the disposal of the collateral shall comply with the following order and principle: 1. To pay the expenses required for the disposal of the collateral; 2. To pay the due taxes after the disposal of the collateral; 3. To pay the debt and the penalty for breaking the contract; 4. To return the balance to the mortgagor. If the proceeds from the disposal of the collateral are insufficient to perform the obligation and pay the penalty, the mortgagee Article 56 (Shift of Allocated Land-use Right) When the future right to the hypothecated house on the land plot with allocated land-use right is disposed, the corresponding allocated
Article 57 (Liability for Breaking Contract) Once the mortgage contract becomes effective, the parties to the mortgage shall fulfil the contract; if any party does not fulfil If the mortgage contract cannot be fulfilled due to the fault made by any party to the mortgage, the faulty party shall compensate Article 58 (Compensation for Third Party’s Loss) The mortgagor shall compensate the third party for a loss resulting from the mortgagor’s unauthorized lease, lending, transfer, selling, Article 59 (Liability for Concealing Circumstance of Collateral) The mortgagor shall compensate for other person’s loss resulting from the mortgagor’s concealment of the circumstances that the collateral Article 60 (Release From Liability) The mortgagor shall promptly inform the mortgagee of the complete or partial loss, damage or devaluation of the collateral due to Article 61 (Settlement of Dispute) Any dispute between the parties to the mortgage arising in the performance of the mortgage contract or in the disposal of the collateral
CHAPTER IX SUPPLEMENTARY PROVISIONS Article 62 (Formulation of Appraisal, Registration and Reference Fee Standard) The fee standard for appraising a collateral, registering a mortgage and referencing to registration documents, which are set by the Article 63 (The Supplementary Mortgage Registration) In respect of the
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