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The Ministry of the Interior Amends the Regulations on Permission for Private Entity that Purchases a Residential Property



The Ministry of the Interior Amends the Regulations on Permission for Private Entity that Purchases a Residential Property
To adequately implement the mechanism permitting private entities to purchase residential properties, the Ministry of the Interior under the Executive Yuan amended Articles 4, 14, and 16 of the “Regulations on Permission for Private Entity that Purchases a Residential Property” (the “Regulations”) on May 17, 2024 (the “Amendment”). The key points of the Amendment are as follows:
1.     Additional restrictions on private entities acquiring residential properties for dormitory use
Private entities generally do not have a need for housing. To prevent private entities from using residential properties for investment or property speculation, the Regulations prohibit them from acquiring residences, but allow exceptions where specific criteria are met. Under Subparagraph 1, Paragraph 1, Article 3 of the Regulations, private entities may acquire residential housing for dormitory use. However, abuses of this provision have led to additional restrictions being included in the Amendment, as stated in Article 4:
(1)   The cap on the number of properties specified under Paragraph 1, Article 4 of the Regulations was set on the “number of properties purchased,” but to avoid misunderstanding, the provision has been revised to the “number of properties obtained.” That is, the cap on the number of properties applies not only to those acquired by “purchase,” but also to those “obtained” by private entities by means other than purchase before the implementation of Article 79-1 of the Equalization of Land Rights Act.
(2)   In principle, private entities may only acquire built properties for dormitory use. However, a private entity may apply to the Ministry of the Interior for an exemption if it intends to acquire pre-sale properties due to a large demand for dormitories arising from facility relocation or operational plans.
(3)   To prevent private entities from purchasing luxury residences under the pretense of acquiring properties for dormitory use, the Amendment stipulates that the purchase price of a property acquired by a private entity for dormitory use must not exceed that of a “high-priced residence” defined under the Regulations Governing the Extension of Mortgage Loans by Financial Institutions (i.e., NT$70 million in Taipei City, NT$60 million in New Taipei City, and NT$40 million in other areas of Taiwan according to the current regulations).
(4)   To ensure that a private entity that has been permitted to acquire residential properties for dormitory use has indeed maintained a stable and long-term employment of a certain number of employees requiring the use of a dormitory, the Amendment stipulates that such private entity should have at least five employees every month (as evidenced by the number of employees enrolled in the labor insurance program by the private entity).
2.     Transfer registration requirement for private entities acquiring residential properties for rental operations
Subparagraph 2, Paragraph 1, Article 3 of the Regulations allows private entities engaging in Real Estate Leasing business to “acquire residential properties for rental operations.” To prevent private entities from using this provision to circumvent the requirement for a minimum number of properties/units held (i.e., five properties/units, as stipulated under Paragraph 2, Article 5 of the Regulations), Article 14 of the Amendment stipulates that when a private entity “acquires a residential property for rental operations,” as permitted under the Regulations, the private entity must also apply for the registration of the title ownership.
The Amendment, promulgated on May 17, 2024, has now taken effect. Private entities are advised to review the provisions discussed above when planning to acquire real estate, to ensure that the relevant transactions are arranged and consummated in accordance with the law.
Lee and Li’s Real Estate and Construction Practice Group is dedicated to providing legal services related to real estate and construction issues and will continue to monitor the legislative developments in these areas. If real estate developers and investors wish to further analyze or consult on the Amendment or the relevant regulations, please do not hesitate to contact our Real Estate and Construction Practice Group.
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