Analysis On Right Of Preemption Of Lessee

The right of preemption of lessee is a very important legal system in real estate lease. There are few laws and rules in relation to lessee’s right of preemption in China, the vast majority of related regulations are presented in judicial interpretations of Supreme People’s Court. Article 118 of Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China(For Trial Implementation)(hereinafter referred to as “Civil Law Judicial Interpretation’) issued on 2nd April, 1988, is the first provision to expressly regulate right of preemption of lessee. Contract Law of the People’s Republic of China which was effective from 1 October, 1999, officially set up lessee’s preemption right in the form of law. On 18 th December, 2008, Article 118 of Civil Law Judicial Interpretation was void. Subsequently, Supreme People’s Court issued Interpretation of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Cases about Disputes Over Lease Contracts on Urban Buildings(hereinafter referred to as “Building Lease Contact Judicial Interpretation”) on 30 July, 2009, in which the provisions from Article 21 to Article 24 set out the detailed regulations regarding infringement of right of preemption of lessee and its liability, the legal effect over contact between lessor and a third party, the implementation of right of first refusal during the procedures of trade-in and auction and the limitations of right of preemption etc.,The evolution of above mentioned laws and judicial interpretations produce a sting of confusions in legal practice. whether the changes, from Article 118 of Civil Law Judicial Interpretation “Provided lessor fails to sell real estate in accordance with this provision, lessee may claim to People’s Court to declare the contact is null and void” to Article 21 of Building Lease Contact Judicial Interpretation “People’s Court will not support the claim to confirm contact between lessor and a third party is null and void”, mean the right of preemption of lessee has been substantially impartible? How to weigh on the infringement behaviors under “the circumstance that lessor fails to inform the lessee the sale of real estate within reasonable period and other circumstances of right of preemption infringement” ? What is the detailed circumstance? Whether the only remedy lessee can seek for is “claiming lessor to be liable for compensation”? How to define “reasonable notice period” in the case of lessor sells real estate? Is there any limitation on the period to exert the right of first refusal by lessee? How to define a third party purchase real estate “in good will”? Whether lessee can claim right of preemption in the event of a third party is not in good will to purchase leased real estate and make the registration by referring to “ a third party purchase leased real estate in good will and make the registration, lessee shall not claim right of preemption”? How is the logical relationship between a third party’s good will in Article 24 and indemnifications in Article 21? By referring to the provisions concerning right of preemption of lessee from Article 21 to Article 24 in Building Lease Contract Judicial Interpretation, it is quite difficult to give an definitive answer. Moreover, the disunited issues in the literal and logical context lead to different understandings and opinions towards judicial interpretations by courts, and the different judgments for similar cases come out consequentially.This paper is aimed to further analyze lessee’s right of preemption system set up by Building Lease Contract Judicial Interpretation through research on the nature, effect, implementation and limitations of right of preemption and its remedies and the discussions on the same. We expect this paper may benefit the resolutions on juridical application issues regarding lessee’s right of preemption.