To maintain real property transaction order and curb real estate speculation, the Legislative Yuan passed the draft amendments to the Equalization of Land Rights Act (the “Act”) on January 10, 2023.
The key points of these amendments, which warrant special attention, are summarized as follows:
1.Restrictions on the transfer and resale of the agreements on the sale of pre-sale or new-built houses
To prevent buyers of pre-sale or new-built houses from making profits and jacking up property prices by transferring or reselling the agreements for the sale of pre-sale or new-built houses, thereby impacting real property transaction order, the amendments to Article 47-4 of the Act generally prohibits buyers of pre-sale or new-built houses from (i) transferring or reselling the agreements for pre-sale or new-built houses to any third party and/or (ii) advertising said transfer or resale or entrusting others to advertise. Nevertheless, there are two exceptions to such restrictions: (i) transfer or resale to a buyer’s spouse, lineal blood relatives, collateral relatives by blood within the second degree; or (ii) any of the permitted circumstances announced by the central competent authority (e.g., a buyer’s properties are subject to compulsory execution after the buyer signed the sales agreement).
2.Severe penalties for real estate speculation and establishment of a mechanism for reporting with rewards
In order to curb (1) the state of disorder which results from the private sale of pre-sale houses before the building permits for such houses are granted by the authorities and (2) price gouging caused by the unreal high demand, these amendments include severe penalties ranging from NT$1,000,000 to NT$50,000,000 to be imposed on the following three circumstances on the basis of the transaction unit, so as to preserve the real property transaction order: (i) disseminating false or inaccurate information in order to influence market prices; (ii) creating a false sense of demand for real property transactions by conducting fraudulent transactions; or (iii) selling in violation of laws, continuously acquiring or reselling real properties at higher prices, thereby significantly affecting market order, monopolizing real property transactions or making profits via resale (Articles 47-5 and 81-3 of the Act).
In addition, given that it may be difficult for the competent authority to inspect the significant volume of real property transactions, these amendments include a mechanism for reporting any violation of the regulations on the sale, purchase or actual price registration of real property transactions. The fines received would be allocated, in a certain ratio, to the fund of rewards for those who report the violations (Article 81-4 of the Act).
3.Requirements for private entities to obtain the approval for the acquisition of residential buildings
To deter private entities from hoarding residential buildings, under the amendments, private entities that aim to acquire residential buildings are required to submit a building-use plan and obtain the approval of the central competent authority, unless under any of the exempted circumstances announced by the competent authority (Article 79-1 of the Act).
Furthermore, a building acquired by a private entity with the aforesaid approval is prohibited from being transferred or being applied for registration of caution within five years from the registration date of acquisition, except for a transfer due to compulsory execution, expropriation, court judgment or other laws and regulations.
4.Requirement to report the rescission of real property sales agreements
With regard to the supervision on the sale of pre-sale houses, Article 47-3 of the Act originally stipulated that a seller of any pre-sale house should report to the competent authority within 30 days from the execution date of the sales agreement so as to maintain transaction transparency. Nevertheless, in order to prevent fraudulent transactions from jacking up property prices and misleading consumers into accepting prices which might not be market prices, these amendments further require that, in case of rescission of a sales agreement for a pre-sale house, the seller should report to the competent authority within 30 days from the rescission date.
These amendments to the Act are generally expected to discourage and prevent real estate speculation and maintain real property transaction order. While the effective date of some of the amendments will be decided by the Administrative Yuan separately, the regulations on the approval for private entities’ acquisition of residential buildings (including urban renewal and reconstruction of unsafe and old urban buildings, which are of great concern to the real estate market at this stage) are also pending the competent authorities’ further enactment.
Given the significant impact that these amendments will have on real property transactions, for the planning of the real property transactions, it is advisable to pay special attention to the development of the Act, especially the relevant regulations which would be promulgated by the competent authorities in the future. All relevant factors and legal requirements should be taken into consideration as a whole before proceeding with any real property transaction.