On April 25, 2023, the Ministry of the Interior, Administrative Yuan, announced five draft –sub-laws as the subordinate legislation of the amended Equalization of Land Rights Act (the "Act"). The subject five draft sub-laws include the "Regulations on Permission for Private Entity that Purchases a Residential Property (the "Permission Regulations")", the "Circumstances Where the Private Entity Is Exempted from the Permission Regulations by the Announcement of the Ministry of the Interior in Accordance with Paragraph 1 of Article 79-1 of the Equalization of Land Rights Act (the "Exemption Circumstances Regulations")", the "Regulations on Examination on the Assignment or Transfer of the Sales Contracts for Pre-sale Houses and New-built Houses (the "Examination Regulations")", the "Circumstances Where the Sales Contracts for Pre-sale Houses and New-built Houses May Be Assigned or Transferred by Resale (the "Transfer Circumstances Regulations")" and the "Regulations on Rewards for Reporting and the Imposition of Fines for Violation Cases of Sale, Transaction or Declared Real Estate Transaction Information (the "Reporting Regulations")". The period for the public to comment on the sub-laws ended on May 15, 2023. The sub-laws are expected to take effect on July 1, 2023. Below are the crucial points of the aforesaid draft sub-laws:
1.Corresponding Regulations on the Private Entity's Purchase of a Residential Property
Generally, a private entity has no residential needs. To prevent private entities from purchasing a residential property for real estate speculation and to mediate the housing market to a reasonable extent, Article 79-1 of the Act stipulates the requirements for applying for the approval of the private entity's purchase of a residential property. Accordingly, the Permission Regulations explicitly state that "a residential property " under the Act only refer to the built houses, new-built houses and pre-sale houses of which the primary purpose is registered as "Residence" or "Residential Houses", which exclude the buildings of which (i) the primary purpose is registered as multiple purposes such as "Residential and Commercial" or "Residential and Industrial", (ii) no primary purpose is registered, or (iii) no purpose or use is registered, so as to avoid affecting the business operation of private entities.
The Permission Regulations further provide that a private entity may apply to purchase a residential property only for any one of the following purposes:
(1) Dormitory: The number of dormitories purchased pursuant to this purpose are not permitted to exceed that of the regular employees.
(2)Leasing business of built houses for residential use; in addition, the private entity's registered businesses items should include real estate leasing and the total number of units purchased and the previously acquired units under the same occupancy permit is five or more.
(3)Joint construction, implementation of or participation in urban renewal or reconstruction of unsafe and old urban buildings: This is limited to built houses and is subject to the statutory conditions (e.g., houses aged 30 years or more; please refer to Article 6 of the Permission Regulations). Said limitation does not apply to the houses located in renewal areas which should be demarcated or changed at the earliest time as required by law given the urgency to said situation.
(4)The health and welfare institutions in Categories H-1 and H-2, Appendix 2, Article 2 of the Regulations on Defining and Changing Buildings Classified Use ( e.g., elderly welfare institutions, welfare institutions for the physically and mentally challenged, and long-term care service institutions).
(5)A cooperative's establishment of a residential utility for public use.
(6)Other purposes announced by the central competent authority
The Ministry of the Interior explicitly provides the exceptions to the aforesaid permission under the Exemption Circumstances Regulations, including without limitation: (1) a private entity enters into a joint construction agreement with a land owner and purchases the house(s) owned by said land owner; (2) a financial holding company, an asset management company invested by a bank or an asset management company wholly-owned by bank joint ventures purchases a residential property which is provided as the collateral for non-performing loans or the target for public tender by government agencies at all levels; or (3) a private entity's purchase of a residential property by exercising its right of first refusal according to applicable laws (e.g., the co-owners' right of first refusal under Paragraph 4, Article 34-1 of the Land Act) or attending an auction held by the court.
The Ministry of the Interior’s approval of the aforesaid purchase of residential property is valid for one year in general. The approval for purchasing a pre-sale or new-built house is valid for one year starting from the completion date of the initial ownership registration. The private entity should apply with the land office for the registration of ownership transfer within the valid term of the approval; if the approval expires, the application for registering ownership transfer would be rejected.
2.The ancillary measures for transferring or reselling the agreements for the sale of pre-sale or new-built houses
Considering that buyers of pre-sale or new-built houses may transfer or resell the agreements for the sale of pre-sale or new-built houses in order to make profit, which may jack up property prices and thus have a negative impact thereon, the Act principally prohibits any transfer or resale of the agreements for the sale of pre-sale or new-built houses while the Transfer Circumstances Regulations provide the circumstances under which said transfer or resale may be exceptionally permitted:
(1)The buyer is under any of the following circumstances:
(a)The buyer has been made redundant and has been unemployed for more than 6 months.
(b)The buyer or any of his/her family member suffers from a severe illness or injury due to a major accident. Said illness or injury should meet the definition of a major illness or injury under the National Health Insurance Act or that of a specific illness under the Public Assistance Act and should have been diagnosed by a specialist in a medical institution who decides that at least six months’ full-time care is required.
(c)The house (owned by the buyer or any of his/her family members) where the buyer resides and has registered his/her household registration is ruined by a disaster to the extent that it is not fit for residential use, and the buyer needs to lease another house.
(2) The buyer passes away and its heir(s) has no intention to maintain the subject agreement.
(3)The resale or transfer between co-buyers. However, this exception does not apply to a legal person so as to prevent the legal person from circumventing relevant laws and regulations by purchasing pre-sale or new-built houses with its shareholders in joint name and transferring or reselling the subject agreement.
The Examination Regulations further state the procedures for applying for the approval of the aforesaid exceptions and stipulate that the buyer could only transfer or resell one unit nationwide every two years based on the approval under the Examination Regulations. Transferring or reselling the subject property in part is deemed as transferring or reselling one unit. In other words, the buyer may apply for the aforesaid approval once every two years.
3.A mechanism for rewarding reporting violations
To ensure real estate transactions to be in compliance, the Act further includes a reporting mechanism. The Reporting Regulations (as enacted by the Ministry of Interior) stipulate the scope of use of the rewards, receivers of the rewards, procedures and revocation of the rewards and the use of the allocated fines. In principle, according to the Reporting Regulations, reporting in real name with supporting evidence is required so as to deter false reporting.
As the amendments to the Act and the enforcement of relevant subordinate legislation would impose certain restrictions on private entities' purchase of real property, transfer or resale of the agreements for the sale of pre-sale or new-built houses and so on, the aforesaid new regulations (including the applicable scope and the effective date) should be taken into consideration in planning relevant real property transactions so as to ensure that the impact thereof is thoroughly considered in order to be prepared in advance.