New in town and clueless about renting or buying a property? We spoke with Bruce Fan of Joint-Win Partners, a full-service legal firm based in Shanghai, to get all your questions answered! And if all that’s not enough to answer all your questions, sign up for our real estate legal clinic happening this Thursday 7pm at Shanghai Tower.

I just have an oral agreement with my landlord for the use of his property and have not signed a lease for it. Are there any risks?

Under the law, oral agreements are seen as indefinite leases. This means that your landlord has the right to cancel the oral agreement or evict the tenant at any time.

Who should be responsible for the wear and tear of home fixtures and household appliances in a rental context?

The landlord usually is responsible for the normal wear and tear of the property. If the landlord refuses to take care of the repairs, the tenant may get this done first, and later deduct the costs of the repairs from the rent. The law requires the landlord to ensure that the residence is in an inhabitable condition and that there is no problem with the water or electricity, for instance.

How much deposit is a reasonable amount?

There are no specific regulations on how much deposit you should pay, but in common practice, the tenant usually pays three months’ rent and a month’s deposit on a one-year lease. This means you’ll need to have four months’ rent in cash at the start of your rental contract.

What documents should tenants check when renting an apartment?

The tenant needs to check the landlord’s identity card and deed of ownership. If the landlord does not personally show up at the signing of the lease and has instead sent a representative in his/her place, you need to ensure that, rather, the representative has the legal right to enter into a contract on behalf of the landlord. If your’e subletting a room from someone, check the lease between the landlord and the sublessor to be sure the sublessor actually has the right to sublease.

What happens if the landlord sells the property during the lease period, or if s/he passes away and the property has been inherited by one or more of their children?

Tenant leases are not affected by the ownership transfer of a property. The new owner must honor the tenant’s lease, and cannot unilaterally alter the terms of the contract or raise the rent. But as soon as the title is transfered, the tenant should ensure that the rental goes to the new owner.

Can expats purchase real estate properties in Shanghai?

Expats may purchase real estate properties after living in Shanghai for a full year. You will need to furnish proof of this by means of an employment contract and a complete tax record for a full year before the purchase contract is signed.

What should expats know about purchasing first-hand properties?

First-hand properties in general are properties that are still under construction. Before signing the contract, buyers should check the developer’s pre-sale permit. Be sure to check that all the dimensions of the property matches what is on paper. It may be good to check with publicly-released data from the government or hire an expert to conduct the investigation.

What should I know about purchasing second-hand properties?

Unlike first-hand properties, your counterpart when purchasing a second-hand property is usually a natural person, not a developer. Thus, breaches of contract occur a lot more frequently here. Ensure that there are breach clauses in the contract are detailed, explicit and unambiguous. The Shanghai government has been cracking down on property developers that have converted commercial properties to residential apartments. We do not recommend purchasing such properties.

What should I do if the seller is in breach of the contract?

Buyers may choose to terminate the contract and receive breach compensation (违约金). They may also sue for specific performance in court to force the seller to transfer the title. In practice, breach compensation does not exceed 30% of the property value. If the buyer has already sent the seller earnest money (定金), the seller must return this amount to the buyer and make a further compensation under the contract. If the contract is silent on the earnest money, it is likely the court will consider the sum as a part of the advanced payment (预付款), and the buyer may not get any extra compensation.

What’s the rule for expats to initiate a real estate litigation?

After retaining an attorney, you will need to personally show up at the court to sign a complaint. If you cannot be present, you will have to issue an authorisation to your attorney and get it notarized.