The Supreme Court issued a Judicial Explanation recently over Marriage and Divorce Law. There is a clause which may have substantial influence to expat who is ready to get married in China.
Article 10 of the Explanation states that if the property is bought with paid advance payment before the marriage by one party and the property is registered under such party, and the mortgage is paid with the common property of the couple after the marriage, in case of divorce, except the couple can reach agreement on division of the property, the property bought shall belong to the party whose name is registered. The party owning the property shall compensate the other party who contributes to the mortgage payment with common property after marriage as well as the value increase in proportion to the mortgage payment with common property.
Under current law, expat is only allowed to buy the property after working or studying in China for one year. So if the expat does not meet this condition, from legal perspective, his name will not be registered. So if he wants to buy a property for marriage in China, the only way is to register the property under the name of the Chinese party. We had clients who made all payment and the property was registered under the Chinese party before marriage, when it comes to divorce, the expat may lose his/her right over the property.
To avoid the loss, there are several ways which can be considered before buying the property, which include:
1. If the situation allows, the property shall be bought after marriage. Under current law, except there is a prenuptial agreement, the property acquired after marriage, in most cases, shall be common property of the couple. So if possible, the property shall be bought after marriage. In that case, whatever whose name is registered, the property shall not be regarded as personal property of the Chinese party;
2. If the property has to be bought before marriage and the expat will pay all or part of the advance payment but his/her name cannot be registered, a written agreement shall be signed by the couple and the ownership of the property shall be clarified;
3. For most of Chinese, it may not a happy thing to discuss the division of the property before marriage. So in some cases, even an agreement will not be considered before marriage. However, if the expat has concerns over the property and the possible divorce in the future, we still suggest the following measures be taken to reduce the loss to minimum:
(a) if the expat will contribute the advance payment for the property before marriage, he shall keep all email records for discussing the purchase matter/ownership of the property with the Chinese party. That may be a more natural way instead of signing agreement;
(b) If possible, the advance payment shall be paid from the bank account of the expat to the developer or the seller of the property directly. We had clients who paid the money to the Chinese party then the Chinese party paid to the developer or the seller. In that case, from legal perspective, it may be not easy to prove the advance payment is paid by the expat;
(c) For all mortgage to be paid after marriage, the payment shall be made from the bank account of the expat to the bank directly;
(d) The expat shall keep the sales contract, bank loan agreement and all payment transfer records/receipts, although the sales contract and the bank loan agreement may not be under the name of the expat.