Study Of Legal Issues About Chinese REITs

REIT, Real Estate Investment Trust, is an important component of modern financial area. In the circumstance of a monetary contraction and strict credit police, trust becomes a rising fund-raising method which provides abundant capital for the real estate development. At the same time, it offers an investment channel with high return. REIT only developed10years in China. And the major regulation law is the PRC Trust Law, Management Regulation on Trust Investment Company, Measures for the Administration of the Trust Plans of Assembled Funds Trust. As a matter of fact, there are a lot of illegal problems among REIT. In one hand, the blank and loose regulation law creates opportunities to criminals. On the other hand, affected by the keen globe economy development the starting Chinese REIT has great fund scale and complicated operating process. The current major regulation law can’t handle the complex situation now. We need to learn from counties which have long history of trust adventure and mature legal regulation system such as America, Japan and England.As a brilliant invention, trust system helps evade from the fossil law and exploitation of feudal rulers since the vary day that the system born. But regulations about the property right of trust in China are quite fuzzy which absolutely abandons "double ownership "which is the most creative part of trust system. In REIT activities, the trust property includes commercial center, residential houses, security housing. When the trust fails, construction in progress and land usage right will become related property. As the trust company is lack of ownership to those property, it can’t participate efficiently in the process of projects operating not even supervise. When it comes to realize secure claims which sat on those properties, the company also will be restricted of the absence of property ownership. It is very necessary to make a clear rule on the trust property ownership. And it fails to meet the current need that has simple uniformity rules about the number of trust contracts. That brings legal risks to the trust contract as trust companies try to evade those rules. At the meantime, lack of professional regulator brings pressure to the guidance and regulation of REIT. To organize professional trust regulator will provide more professional and efficient regulation.By analysis the cause of major legal risks happens in Chinese REIT and refer to mature regulation legal system, I try to find methods to perfect the REIT regulation system in our country. First of all, it is quite necessary to set up a professional regulator agency. Secondly, we must clear out that the essential value of the trust legal system is to find a balance between safety and efficiency. We need establish related law and fill the blank of the current regulations. Thirdly, authority needs to perfect and make the education of employees in the regulator agency more professional. Last but not least, it is urgent to establish and complete an information disclosure requirement which concerns about the trust property.