Study Of Real Estate Mezzanine Financing Legal Issues

Recent years have seen a great increase in the real estate market, accordingly, real estate enterprises are eager to go after financing; the channel of real estate financing is narrowed however, under the background of macro control policy in economy. The demand on money made real estate enterprises tries hard to find a new resolution to suffice their capital requirement. As a financing model between equity ownership and overriding primary debt,mezzanine financing is a possible solution.In real estate, since mezzanine financing which is junior to mortgage loan but senior to the equity investor has some advantages of both debt financing and equity financing, this financing tool will be popular in the real estate capital market in China. It is such a new model of real estate financing technique for China capital marker that the law of china has not special rules for this financing technique, but it may be operated under present laws of China. This article focuses on the legal issues of mezzanine financing of real estate based on the legal system of China. Section I of this article will discuss the concept of mezzanine financing and analyze the legal structure of two typical models of mezzanine financing, this part will also unveil motivation of the rising of mezzanine financing of real estate by introducing its birth and growth in US. In Section II, will review the real estate financing regulation policy in five years and relative laws of mezzanine financing of real estate in China, and outline the legal environment of mezzanine financing of real estate in China. The third part is the keystone of this paper. After analyzing a typical case, I will discuss probable legal problems of mezzanine financing of real estate in China's present legal system. Combined with china'law and US'mezzanine financing practice, this article will put forward and finally give some resolution to relative problems.