Civil Code of the People's Republic of China/Book Two

by National People's Congress

Book Two
Real Rights

Part One
General Provisions

Chapter I
General Rules

Article 205

　　This Book regulates the civil-law relations arising from the attribution and utilization of things.

Article 206

　　The State upholds and improves the fundamental socialist economic systems, such as the ownership system under which diverse forms of ownership co-develop with public ownership as the mainstay, the distribution system under which multiple forms of distribution co-exist with distribution according to work as the mainstay, as well as the system of socialist market economy.

　　The State consolidates and develops the public sector of the economy, and encourages, supports, and guides the development of the non-public sector of the economy.

　　The State implements a socialist market economy and protects the equal legal status and development rights of all market participants.

Article 207

　　The real rights of the State, collectives, private individuals, and the other right holders are equally protected by law and free from infringement by any organization or individual.

Article 208

　　The creation, alteration, alienation, or extinguishment of the real rights in immovable property shall be registered in accordance with law. The creation and alienation of real rights in movable property shall be subject to the delivery of the movable property in accordance with law.

Chapter II
Creation, Alteration, Alienation, and Extinguishment of Real Rights

Section 1
Registration of Immovable property

Article 209

　　The creation, alteration, alienation, or extinguishment of a real right in immovable property shall become effective upon registration in accordance with law, and shall not take effect without registration, unless otherwise provided by law.

　　Ownership registration is not required for natural resources that are owned by the State in accordance with law.

Article 210

　　The registration of immovable property shall be handled by the registration authority at the place where the immovable property is located.

　　The State implements a unified registration system with respect to immovable property. The scope, authorities, and measures for the unified registration shall be specified by laws and administrative regulations.

Article 211

　　When applying for registration of immoveable property, an applicant shall, in light of the different items to be registered, provide necessary materials such as the proof of real rights, metes and bounds, and area of the immovable property.

Article 212

　　The registration authority shall perform the following responsibilities:

　　(1) to examine the proof of real rights and other necessary materials provided by the applicant;

　　(2) to inquire the relevant registration items of the applicant;

　　(3) to register the relevant items truthfully and in a timely manner; and

　　(4) to perform other responsibilities as provided by laws and administrative regulations.

　　Where further proof is required for the relevant information of the immovable property to be registered, the registration authority may require the applicant to provide supplementary materials, and may conduct onsite inspection where necessary.

Article 213

　　A registration authority may not engage in the following acts:

　　(1) to require an appraisal of the immovable property;

　　(2) to carry out repeated registration in the name of annual inspection, and the like; or

　　(3) to engage in other acts that exceed the scope of its responsibilities for registration.

Article 214

　　The creation, alteration, alienation, or extinguishment of a real right of the immovable property that is required by law to be registered becomes effective at the time when it is recorded in the register of immovable property.

Article 215

　　A contract concluded by the parties on the creation, alteration, alienation, or extinguishment of a real right becomes effective upon its formation, unless it is otherwise provided by law or agreed upon by the parties, and the validity of the contract is not affected by the fact that the real right is not registered.

Article 216

　　The register of immovable property is the basis for determining the attribution and contents of the real rights in immovable property.

　　The register of immovable property shall be kept by the registration authority.

Article 217

　　The real right certificate for immovable property is a proof of a right holder’s entitlement to the real right in the immovable property. The items recorded in the real right certificate for immovable property shall be consistent with what are recorded in the register of immovable property; in case of inconsistency between the two, what is recorded in the register of immovable property shall prevail, unless there is evidence establishing a clear error in the register of immovable property.

Article 218

　　A right holder or an interested person may apply for retrieving and making copies of the information of the registered immovable property, and the registration authority shall provide the information.

Article 219

　　An interested person may not disclose or illegally use the registered information of a right holder’s immovable property.

Article 220

　　A right holder or an interested person may apply for rectification of the registration if he believes that an item is incorrectly recorded in the register of immovable property. Where the right holder as recorded in the register of immovable property agrees in writing to make rectification, or where there is evidence establishing a clear error in the register, the registration authority shall rectify it.

　　Where the right holder as recorded in the register of immovable property does not agree to make rectification, an interested person may apply for registration of a demurrer. Where the registration authority registers the demurrer but the applicant fails to file a lawsuit within 15 days from the date of such a registration, the registration of demurrer becomes ineffective. Where a demurrer is improperly registered and damage is thus caused to the right holder, the right holder may request the applicant to pay damages.

Article 221

　　Where the parties enter into an agreement for the sale of a house or on any other real right in immovable property, they may apply for registration of a priority notice to a registration authority in accordance with the agreement so as to ensure the realization of the real right in the future. Where, after the priority notice is registered, the immovable property is disposed of without the consent of the right holder as registered in the priority notice, the disposition is not effective in terms of the real right.

　　Where, after the priority notice is registered, no application for registration of the real right of immovable property has been made within 90 days from the date on which the creditor’s claim extinguishes or the immovable property is eligible for registration, the registration of the priority notice becomes ineffective.

Article 222

　　A party who provides false materials upon application for registration and thus causes damage to another person shall be liable for compensation.

　　Where damage is caused to another person due to a clerical error upon registration, the registration authority shall be liable for compensation. After having made such compensation, the registration authority has the right to indemnification against the person who has made the error.

Article 223

　　The fee for the registration of immovable property shall be collected on a piece-by-piece basis and may not be collected in proportion to the area, size, or purchase price of the immovable property.

Section 2
Delivery of Movable Property

Article 224

　　The creation or alienation of a real right in movable property shall take effect upon delivery, unless otherwise provided by law.

Article 225

　　The creation, alteration, alienation, or extinguishment of the real rights in vessels, aircrafts, motor vehicles, and the like, that have not been registered is not effective against a bona fide third person.

Article 226

　　Where a right holder is already in possession of a movable property before a real right in the movable property is created or alienated, the real right in the movable property becomes effective at the time when the civil juristic act is effected.

Article 227

　　Where a third person is in possession of a movable property before a real right in the movable property is created or alienated, the person obligated to deliver the movable property may transfer his right to restitution against the third person as substitute for delivery.

Article 228

　　Where, upon alienation of a real right in movable property, the parties agree that the transferor continues to be in possession of the movable property, the real right in the movable property becomes effective at the time when such an agreement enters into effect.

Section 3
Other Rules

Article 229

　　Where a real right is created, altered, alienated, or extinguished as a result of a legal document issued by the people’s court or an arbitration institution, or based on an expropriation decision made by the people’s government, the creation, alteration, alienation, or extinguishment of the real right becomes effective at the time when the legal document or expropriation decision enters into effect.

Article 230

　　Where a real right is acquired through succession, the real right as inherited becomes effective at the time when the succession opens.

Article 231

　　Where a real right is created or extinguished as a result of a de facto act such as lawful construction or demolition of a house, the creation or extinguishment of the real right becomes effective when the de facto act is accomplished.

Article 232

　　Where disposition of a real right in immovable property as provided in this Section is required by law to be registered, the disposition of the real right, if not so registered, is not effective.

Chapter III
Protection of Real Rights

Article 233

　　Where a real right is infringed upon, the right holder may have the problem solved by means of settlement, mediation, arbitration, litigation, and the like.

Article 234

　　Where a dispute arises over the attribution or contents of a real right, an interested person may request for confirmation of the right.

Article 235

　　Where an immovable or movable property is possessed by a person not entitled to do so, the right holder may request for restitution.

Article 236

　　Where there is a nuisance or a potential nuisance against a real right, the right holder may request for removal of the nuisance or elimination of the danger.

Article 237

　　Where an immovable or movable property is destructed or damaged, the right holder may request for the repair, redoing, replacement, or restoration to the original condition in accordance with law.

Article 238

　　Where a real right is infringed upon and damage is thus caused, the right holder may, in accordance with law, request the infringing person to pay damages or bear other civil liabilities.

Article 239

　　The forms of real right protection provided in this Chapter may be applied either separately or concurrently according to the circumstances of the infringement of a right.

Part Two
Ownership

Chapter IV
General Rules

Article 240

　　An owner is entitled to possess, use, benefit from, and dispose of his own immovable or movable property in accordance with law.

Article 241

　　An owner of immovable or movable property is entitled to create a right to usufruct and a security interest on his own immovable or movable property. A usufructuary or security interest holder, when exercising their rights, shall not harm the rights and interests of the owner.

Article 242

　　Where an immovable or movable property is provided by law to be exclusively owned by the State, no organization or individual may acquire ownership of it.

Article 243

　　For the need of the public interest, the collectively-owned land and the houses and other immovable property of an organization or individual may be expropriated within the scope of authority and pursuant to the procedures provided by law.

　　In the case of expropriation of collectively-owned land, land compensation fees, resettlement subsidies, and compensation fees for rural villagers’ dwellings and other ground attachments as well as young crops shall be paid in full in a timely manner in accordance with law, and social security premiums of the farmers whose land has been expropriated shall be arranged, their lives secured, and their lawful rights and interests safeguarded.

　　In the case of expropriation of houses or other immovable property of organizations or individuals, compensation for the expropriation shall be made in accordance with law in order to safeguard the lawful rights and interests of the person whose immovable property has been expropriated. In the case of expropriation of individuals’ dwelling houses, the housing conditions of such individuals shall also be guaranteed.

　　No organization or individual may embezzle, misappropriate, secretly distribute, intercept, default on the payment of the expropriation compensation fees, or the like.

Article 244

　　The State provides special protection to cultivated land, strictly restricts the conversion of agricultural land into land used for construction purposes, and controls the overall volume of the land used for construction purposes. Collectively-owned land may not be expropriated exceeding the scope of authority or in violation of the procedures provided by law.

Article 245

　　An immovable or movable property of an organization or individual may, in response to an emergency such as providing disaster relief and preventing and controlling pandemics, be requisitioned within the scope of authority and pursuant to the procedures provided by law. The requisitioned immovable or movable property shall be returned to the aforementioned organization or individual after use. Where the immovable or movable property of an organization or individual is requisitioned, or where it is destructed, damaged, or lost after being requisitioned, compensation shall be made.

Chapter V
State Ownership, Collective Ownership and Private Ownership

Article 246

　　Where a property is provided by law to be owned by the State, the property belongs to the State, namely, to the whole people.

　　The ownership rights over the State-owned property shall be exercised by the State Council on behalf of the State, unless otherwise provided by law.

Article 247

　　Mineral deposits, waters, and sea areas are owned by the State.

Article 248

　　Uninhabited islands are owned by the State, and the State Council exercises the ownership rights over the uninhabited islands on behalf of the State.

Article 249

　　Urban land is owned by the State. Land in rural and urban suburbs that is provided by law to be owned by the State is owned by the State.

Article 250

　　Natural resources, such as forests, mountain ridges, grasslands, unreclaimed lands, and mudflats, other than those provided by law to be collectively-owned, are owned by the State．

Article 251

　　The wild animal and plant resources that are provided by law to be owned by the State are owned by the State.

Article 252

　　Radio-frequency spectrum resources are owned by the State.

Article 253

　　The cultural relics that are provided by law to be owned by the State are owned by the State.

Article 254

　　The assets for national defense are owned by the State.

　　Infrastructures such as railways, roads, electric power facilities, telecommunication facilities, as well as oil and gas pipelines that are provided by law to be owned by the State are owned by the State.

Article 255

　　A State organ has the right to possess and use the immovable and movable property directly under its control and to dispose of such property in accordance with law and the relevant regulations made by the State Council.

Article 256

　　A public institution established by the State has the right to possess and use the immovable and movable property directly under its control, and to benefit from and dispose of such property in accordance with law and the relevant regulations made by the State Council.

Article 257

　　With respect to enterprises invested by the State, the State Council and the local people’s governments shall, on behalf of the State, perform the investor’s duties and enjoy the investor’s rights and interests respectively in accordance with laws and administrative regulations.

Article 258

　　The State-owned property is protected by law, and no organization or individual may misappropriate, loot, secretly distribute, intercept, or destroy such property.

Article 259

　　Institutions and their staff with the duties of administration and supervision over the State-owned property shall strengthen the administration and supervision of the State-owned property in accordance with law, strive to preserve and increase the value of such property and prevent any loss thereof; they shall assume legal liabilities in accordance with law if losses are caused to the State-owned property as a result of their abuse of powers or dereliction of duties.

　　A person, who causes losses to the State-owned property by transferring it at low prices, secretly distributing it in conspiracy with other persons, creating a security interest on it without authorization, or by other means in the course of enterprise restructuring, merger or division, affiliated transactions, and the like, in violation of the provisions on the administration of the State-owned property, shall bear legal liability in accordance with law.

Article 260

　　The collectively-owned immovable and movable property include:

　　(1) the land, forests, mountain ridges, grasslands, unreclaimed land and mudflats that are provided by law to be owned by collectives;

　　(2) the buildings, production facilities, and farmland water conservancy facilities that are owned by collectives;

　　(3) the educational, scientific, cultural, public health, sports, and other facilities that are owned by collectives; and

　　(4) any other immovable and movable property that are owned by collectives.

Article 261

　　The immovable and movable property of a farmer collective are collectively owned by the members of this collective.

　　The following matters shall be decided by the collective’s members in accordance with statutory procedures:

　　(1) land contracting schemes, and the subcontracting of land to any organization or individual outside this collective;

　　(2) adjustment to the contracted land among the persons who have the right to contractual management of land;

　　(3) methods for the use and distribution of funds such as land compensation fees;

　　(4) matters such as changes in the ownership of enterprises invested by the collective; and

　　(5) other matters as provided by law.

Article 262

　　With respect to the collectively-owned land, forests, mountain ridges, grasslands, unreclaimed land, mudflats, and the like, the ownership thereof shall be exercised in accordance with the following provisions:

　　(1) where they are owned by the farmer collective of a village, the ownership shall be exercised collectively by the collective economic organization of the village or the villagers’ committee on behalf of the collective in accordance with law;

　　(2) where they are owned by two or more farmer collectives within a village, the ownership shall be exercised by the respective collective economic organizations or the villagers’ groups on behalf of the collectives in accordance with law; and

　　(3) where they are owned collectively by the farmer collective of a rural-town, the ownership shall be exercised by the economic organizations of the town on behalf of the collective.

Article 263

　　With respect to the immovable and movable property owned by an urban-town collective, the collective is entitled to possess, use, benefit from, and dispose of such property in accordance with laws and administrative regulations.

Article 264

　　Rural collective economic organizations, villagers’ committees, and villagers’ groups shall make the situation of the collectively-owned property known to the members of this collective in accordance with laws, administrative regulations, and their articles of association, as well as the local covenants. Members of the collective have the right to retrieve and make copies of the relevant materials.

Article 265

　　The property owned by a collective is protected by law, and no organization or individual may misappropriate, loot, secretly distribute, or destruct such property.

　　Where a decision made by a rural collective economic organization, a villagers’ committee, or the person in charge thereof infringes upon the lawful rights and interests of a member of the collective, the infringed member may request the people’s court to revoke the decision.

Article 266

　　A private individual has the right to own his lawful income, houses, articles for daily use, production tools, raw materials, as well as other immovable and movable property.

Article 267

　　The property lawfully owned by a private individual is protected by law, and no organization or individual may misappropriate, loot, or destruct such property.

Article 268

　　The State, collectives, and private individuals may establish companies with limited liabilities, joint stock companies limited by shares, or other enterprises through making capital contributions in accordance with law. Where the immovable or movable property of the State, collectives, and private individuals are invested in an enterprise, the investors are, in accordance with their agreement or in proportion to their investment, entitled to receive returns on the assets, make major decisions, and select business managers, and obligated to perform their duties.

Article 269

　　A for-profit legal person has the right to possess, use, benefit from, and dispose of its immovable and movable property in accordance with laws, administrative regulations, and its articles of association.

　　The provisions of the relevant laws, administrative regulations, and articles of association shall apply to the rights of a legal person other than a for-profit legal person with respect to its immovable and movable property.

Article 270

　　The immovable and movable property that is lawfully owned by a social-organization legal person or an endowed legal person is protected by law.

Chapter VI
Ownership of a Building’s Units

Article 271

　　A unit owner has the ownership over an exclusive unit of a building, such as a dwelling space or a space used for operating businesses, and has the right to co-own and jointly manage the common space other than the unit.

Article 272

　　A unit owner has the right to possess, use, benefit from, and dispose of his exclusive unit of a building. The unit owner may not, when exercising his rights, endanger the safety of the building or impair the lawful rights and interests of other unit owners.

Article 273

　　A unit owner has rights and assumes duties with respect to the common space outside his exclusive unit of a building，and may not refuse to perform such duties on the ground that he has waived such rights.

　　While a unit owner transfers a dwelling space or the space used for business operations owned by him in a building, his rights to co-own and jointly manage the common space therein shall be transferred concomitantly.

Article 274

　　Roads within the construction zone are co-owned by all unit owners, except for those that are part of the urban public roads. Green spaces within the construction zone are co-owned by all unit owners, except for those that are part of the urban public green spaces and those expressly indicated to be owned by private individuals. Other public places, public facilities, and spaces used for property management service within the construction zone are co-owned by all unit owners.

Article 275

　　The ownership of the parking spaces and garages planned for parking vehicles within the construction zone shall be agreed upon by the parties by way of selling, giving away as gifts, leasing, and the like.

　　The parking spaces for parking vehicles that occupy the roads or other spaces co-owned by all unit owners are co-owned by all unit owners.

Article 276

　　The parking spaces and garages planned for parking vehicles within the construction zone shall first meet the needs of the unit owners.

Article 277

　　The unit owners may establish the owners’ assembly and elect the members of the owners’ committee. The specific conditions of and procedures for the establishment of the owners’ assembly and the owners’ committee shall be in accordance with laws and regulations.

　　The relevant department of the local people’s government and the residents’ committee shall provide guidance to and assistance in the establishment of the owners’ assembly and the election of the members of the owners’ committee.

Article 278

　　The following matters shall be jointly decided by the unit owners:

　　(1) to formulate and amend the procedural rules of the owners’ assembly;

　　(2) to formulate and amend the stipulations on management;

　　(3) to elect or replace members of the owners’ committee;

　　(4) to employ and remove the property management service enterprise or other managers;

　　(5) to use maintenance funds for buildings and auxiliary facilities thereof;

　　(6) to raise maintenance funds for buildings and auxiliary facilities thereof;

　　(7) to renovate and reconstruct buildings and auxiliary facilities thereof;

　　(8) to change the intended use of the co-owned space or making use of the co-owned space to engage in business activities; and

　　(9) to handle other major matters relating to co-ownership and the right to joint management.

　　The quorum for matters subject to the unit owners’ joint decision shall be two thirds or more of the exclusive units both by area and by number of unit owners. Decisions of matters provided in Subparagraphs (6) through (8) shall be subject to the consent of the unit owners representing three quarters or more of the participating exclusive units both by area and by number of unit owners. Decisions of other matters provided in the preceding Paragraph shall be subject to the consent of the unit owners representing more than half of the participating exclusive units both by area and by number of unit owners.

Article 279

　　No unit owner may turn a dwelling space into a space used for operating businesses in violation of laws, regulations, or the stipulations on management. A unit owner who intends to turn a dwelling space into a space used for operating businesses shall, in addition to abiding by laws, regulations, and the stipulations on management, obtain unanimous consent from all interested unit owners.

Article 280

　　Decisions of the owners’ assembly or the owners’ committee are legally binding on unit owners.

　　Where a decision made by the owners’ assembly or the owners’ committee infringes upon the lawful rights and interests of a unit owner, the infringed owner may request the people’s court to revoke it.

Article 281

　　The maintenance funds for buildings and their auxiliary facilities are co-owned by the unit owners. The funds may, upon joint decision of the unit owners, be used for the maintenance, renewal, and renovation of the co-owned spaces, such as elevators, roofs, exterior walls, and barrier-free facilities. Information on raising and using the maintenance funds for buildings and their auxiliary facilities shall be publicized on a regular basis.

　　Where a building and its auxiliary facilities need to be maintained in an emergency situation, the owners’ assembly or the owners’ committee may, in accordance with law, apply for the use of the maintenance funds for the building and its auxiliary facilities.

Article 282

　　The income generated from the space co-owned by the unit owners that is received by the developer, the property management service enterprise, or other managers are co-owned by all unit owners after reasonable costs are deducted.

Article 283

　　Where there is an agreement on matters such as allocation of expenses on and distribution of income gained from a building and its auxiliary facilities, such matters shall be determined in accordance with the agreement; where there is no agreement or the agreement is unclear, such matters shall be determined in proportion to the area of each unit owner’s exclusive unit to the total area.

Article 284

　　The unit owners may either manage the buildings and the auxiliary facilities on their own, or entrust a property management service enterprise or another manager for such a purpose.

　　The unit owners have the right to replace, in accordance with law, the property management service enterprise or the other managers employed by the developer.

Article 285

　　The property management service enterprise or otherwise a manager shall, as entrusted by the unit owners, manage the buildings and their auxiliary facilities within the construction zone in accordance with the provisions of Book Three of this Code relating to contracts for property management service, subject itself to the supervision of the unit owners, and respond to the unit owners’ inquiries about property management services in a timely manner.

　　The property management service enterprise or other managers shall carry out emergency measures and other management measures implemented by the government in accordance with law and actively cooperate in the performance of the relevant work.

Article 286

　　The unit owners shall abide by laws, regulations, and the stipulations on management, and their relevant acts shall meet the requirements of conserving resources and protecting the ecological environment. With respect to the emergency measures and other management measures implemented by the government in accordance with law that are carried out by the property management service enterprise or other managers, the unit owners shall, in accordance with law, be cooperative.

　　With respect to an act impairing the lawful rights and interests of others, such as arbitrarily discarding garbage, discharging pollutants or noises, feeding and keeping animals in violation of the stipulations, constructing structures against rules and regulations, encroaching on passages, and refusing to pay property management fees, the owners’ assembly or the owners’ committee has the right to request the actor to discontinue such infringements, remove the nuisance, eliminate the danger, restore to the original condition, and compensate for the losses entailed.

　　Where a unit owner or an actor refuses to perform the relevant duties, the party concerned may make a report to, or lodge a complaint with the competent administrative department, which shall handle the case in accordance with law.

Article 287

　　A unit owner has the right to request the developer, the property management service enterprise or other managers, and other unit owners to bear civil liability for any act done by them that infringes upon his lawful rights and interests.

Chapter VII
Adjacent Relationships

Article 288

　　The persons entitled to adjacent rights in immovable property shall properly deal with adjacent relationships in accordance with the principles of facilitation to production, convenience for daily lives, solidarity and mutual assistance, and fairness and reasonableness.

Article 289

　　Where there are laws and regulations providing for adjacent relationships, those provisions shall be applied. Where there are no such provisions, local customs may be followed.

Article 290

　　A person entitled to the real rights in immovable property shall provide a person entitled to an adjacent right the necessary convenience for the use of water or drainage.

　　The right to utilization of natural flowing water shall be reasonably allocated among the persons entitled to the adjacent rights of the immovable property. When discharging the water, the direction of the natural water flow shall be respected.

Article 291

　　A person entitled to the real rights in immovable property shall provide necessary convenience to the persons entitled to an adjacent right who have to utilize his land for passage, and the like.

Article 292

　　Where a person entitled to the real rights in immovable property has to utilize the adjacent land or building for constructing or maintaining a building, or for laying electrical wires, cables, or the pipelines for water, heating, gas, or the like, the person entitled to the real rights in the adjacent land or building shall provide the necessary convenience.

Article 293

　　The construction of a building may not violate the relevant construction standards of the State or obstruct the ventilation, lighting, or sunlight of the adjacent buildings.

Article 294

　　A person entitled to the real rights in immovable property may not, in violation of the regulations of the State, discard solid wastes or emit harmful substances such as atmospheric pollutants, water pollutants, soil pollutants, noises, light radiation, and electromagnetic radiation.

Article 295

　　A person entitled to the real rights in immovable property may not endanger the safety of the adjacent immovable property when excavating land, constructing buildings, laying pipelines, installing facilities, or the like.

Article 296

　　A person entitled to the real rights in immovable property who utilizes the adjacent immovable property for the purpose of using water, drainage, passage, laying pipelines, and the like, shall spare no effort to avoid causing damage to the person entitled to the real rights in the adjacent immovable property.

Chapter VIII
Co-ownership

Article 297

　　Immovable or movable property may be co-owned by two or more organizations or individuals. Co-ownership consists of co-ownership by shares and joint co-ownership.

Article 298

　　Co-owners by shares have the ownership of the co-owned immovable or movable property according to their shares.

Article 299

　　Joint co-owners jointly have the ownership of the co-owned immovable or movable property.

Article 300

　　The co-owners shall manage the co-owned immovable or movable property in accordance with their agreement. Where there is no agreement or the agreement is unclear, each co-owner is entitled and obligated to manage it.

Article 301

　　Unless otherwise agreed by the co-owners, any disposition of the co-owned immovable or movable property, or any major repair or change of the nature or intended use of the co-owned immovable or movable property shall be subject to the consent of the co-owners by shares whose shares account for two thirds or more of the total shares, or to the consent of all joint co-owners.

Article 302

　　The management expenses of and other burdens on a thing co-owned by the co-owners shall be borne according to the agreement among the co-owners where there is such an agreement; where there is no agreement or the agreement is unclear, these expenses shall be borne by the co-owners by shares proportionally, and by the joint co-owners jointly.

Article 303

　　Where the co-owners have agreed not to partition the co-owned immovable or movable property in order to maintain the co-ownership, the agreement shall be followed, provided that a co-owner may request partition if there is a compelling reason for partition. Where there is no agreement or the agreement is unclear, a co-owner by shares may request partition at any time, whereas a joint co-owner may request partition in case the basis for the joint ownership ceases to exist or there is a compelling reason for partition. Compensation shall be made if partition causes damage to the other co-owners.

Article 304

　　The co-owners may determine through negotiation the way of partition of the co-owned thing. Where they fail to reach an agreement, and where the co-owned immovable or movable property is divisible and its value is not diminished upon division, partition in kind shall be effected; where it is difficult to divide the co-owned thing or where its value would be impaired upon division, partition shall be carried out through dividing the proceeds based on appraisal or obtained from auction or a sale of it.

　　Where the immovable or movable property acquired by a co-owner by means of partition is defective, the other co-owners shall share the losses.

Article 305

　　A co-owner by shares may transfer the portion of shares he owned in the co-owned immovable or movable property. The other co-owners have the right of pre-emption to buy the shares under equivalent conditions.

Article 306

　　Where a co-owner by shares transfers the portion of shares he owned in the co-owned immovable or movable property, he shall notify the other co-owners of the conditions of transfer in a timely manner. The other co-owners shall exercise their right of pre-emption within a reasonable period of time.

　　Where two or more co-owners assert their rights of pre-emption, they shall determine through negotiation the proportion of shares each may purchase; where no agreement is reached, they shall exercise their right of pre-emption in proportion to the shares they each own at the time of transfer.

Article 307

　　In terms of external relations, the co-owners are jointly and severally entitled to claims and are jointly and severally obligated to perform obligations arising from the co-owned immovable or movable property, unless it is otherwise provided by law or where the third person is aware that the co-owners are not in a relationship of joint and several claims and obligations. In terms of internal relations, unless otherwise agreed by the co-owners, the co-owners by shares are entitled to claims and obligated to perform obligations in proportion to the shares they each own, and the joint co-owners are jointly entitled to claims and obligated to perform obligations. A co-owner by shares who has performed the obligation in excess of his shares has the right of contribution against the other co-owners.

Article 308

　　Where there is no agreement among the co-owners or the agreement is unclear as to whether the co-owned immovable or movable property is under co-ownership by shares or under joint co-ownership, the immovable or movable property shall be deemed to be under co-ownership by shares, unless the co-owners are in a relationship such as familial relationship and the like.

Article 309

　　The share of a co-owner by shares in the immovable or movable property shall be determined according to his capital contribution where there is no agreement or the agreement is unclear. Where it is impossible to determine the amount of capital contribution, each co-owner by shares shall be entitled to an equal share.

Article 310

　　Where two or more organizations or individuals are jointly entitled to a right to usufruct or a security interest, the relevant provisions of this Chapter shall be applied mutatis mutandis.

Chapter IX
Special Provisions on the Acquisition of Ownership

Article 311

　　Where a person with no right to dispose of an immovable or movable property transfers it to another person, the owner has the right to recover it; unless otherwise provided by law, the transferee acquires the ownership of the immovable or movable property under the following circumstances:

　　(1) the transferee is in good faith at the time when the immovable or movable property is transferred to him;

　　(2) the transfer is made at a reasonable price; and

　　(3) the transferred immovable or movable property has been registered as required by law, or has been delivered to the transferee where registration is not required.

　　Where a transferee acquires the ownership of the immovable or movable property in accordance with the provisions of the preceding paragraph, the original owner has the right to claim damages against the person who disposes of the property without a right.

　　Where a party acquires, in good faith, a real right other than ownership, the provisions of the preceding two paragraphs shall be applied mutatis mutandis.

Article 312

　　An owner or any other right holder has the right to recover a lost thing. Where the lost thing is possessed by another person by way of transfer, the right holder has the right to claim damages against the person who disposes of the thing without the right to disposition, or to request the transferee to return the original thing within two years from the date on which the right holder knows or should have known of the transferee, provided that where the transferee has acquired the lost thing at auction or from a qualified business operator, the right holder shall, at the time of requesting the return of the original thing, reimburse the expenses that have been paid by the transferee. The right holder has, after having reimbursed the expenses paid by the transferee, the right to indemnification against the person who disposes of the thing without the right to disposition.

Article 313

　　After a bona fide transferee acquires the movable property, the original rights in the movable property is extinguished, unless the bona fide transferee knows or should have known of such rights at the time of the transfer.

Article 314

　　Where a lost thing is found, it shall be returned to its right holder. The finder shall, in a timely manner, notify its right holder or hand it over to the relevant departments such as the department for public security.

Article 315

　　Where the relevant department receives a lost thing and knows who is its right holder, the department shall, in a timely manner, notify him to collect the lost thing; where the department does not know who is the right holder, it shall issue a lost-and-found notice in a timely manner.

Article 316

　　A finder shall well keep a lost thing before it is delivered to the relevant department, and the relevant department shall well keep it before it is collected. A person who, intentionally or by gross negligence, causes the lost thing in his custody to be destructed, damaged, or lost shall bear civil liability.

Article 317

　　The right holder of a lost thing shall, at the time of collecting it, pay to the finder or the relevant department the necessary expenses, such as the expense for safekeeping the lost thing.

　　Where a right holder has offered a reward for finding the lost thing, he shall, at the time of collecting the lost thing, perform his obligations as promised.

　　Where a finder misappropriates the lost thing, he is neither entitled to request reimbursement of expenses such as the expense for safekeeping the lost thing, nor entitled to request the right holder to perform the obligations as promised.

Article 318

　　Where a lost thing has not been claimed by anybody within one year from the date the lost-and-found notice is publicized, the lost thing is to be escheated to the State.

Article 319

　　Where a drifting thing is found or a thing buried underground or hidden is discovered, the provisions relating to the finding of lost things shall be applied mutatis mutandis, unless otherwise provided by law.

Article 320

　　Where a principal thing is transferred, the accessary thereof shall be transferred concomitantly, unless otherwise agreed by the parties.

Article 321

　　Unless otherwise agreed by the parties, the natural fruits of a thing shall be acquired by the owner of the thing, or by a usufructuary if there are both an owner and a usufructuary of the thing.

　　The legal proceeds of a thing shall be acquired as agreed by the parties if there is such an agreement, or, where there is no agreement or the agreement is unclear, in accordance with the course of dealing.

Article 322

　　A thing, that is created as a result of processing, or combining or mixing with another thing or things, shall be owned as agreed if there is such an agreement, or in accordance with law if there is no agreement or the agreement is unclear, or, in the absence of any provisions in law, be determined in compliance with the principles of making full use of the thing and protecting the party without fault. Where damage is caused to another party owing to one party’s fault or owing to the determination of the attribution of the thing, indemnity or compensation shall be paid.

Part Three
Rights of Usufruct

Chapter X
General Rules

Article 323

　　A usufructuary has the right to possess, use, and benefit from the immovable or movable property owned by another person in accordance with law.

Article 324

　　Organizations and individuals may, in accordance with law, possess, use, and benefit from the natural resources owned by the State, the State-owned natural resources that are used by collectives, and the natural resources that are owned by collectives as provided by law.

Article 325

　　The State implements a system of compensation for the use of natural resources, unless otherwise provided by law.

Article 326

　　A usufructuary shall, when exercising his right, abide by the provisions of laws on the protection, rational exploitation, and utilization of resources and the protection of the ecological environment. The owner may not interfere with the exercise of such rights by the usufructuary.

Article 327

　　Where a right to usufruct is extinguished or adversely affected due to expropriation or requisition of the immovable or movable property, the usufructuary has the right to compensation according to the provisions of Articles 243 and 245 of this Code.

Article 328

　　The right to use the sea areas that is acquired in accordance with law is protected by law.

Article 329

　　The right to explore and mine minerals, to draw water, and to use waters and mudflats to engage in aquaculture or fishing that are acquired in accordance with law is protected by law.

Chapter XI
Right to Contractual Management of Land

Article 330

　　Rural collective economic organizations shall adopt a two-tier management system, with household contractual management as the basis and integrated with the collective management.

　　A system of contractual management of land is adopted in accordance with law for cultivated land, forestland, grassland, and other land used for agricultural purposes which are owned by farmers collectively, or owned by the State and used by farmers collectively.

Article 331

　　A person who has the right to contractual management of land is, in accordance with law, entitled to possess, use, and benefit from the cultivated land, forestland, and grassland contracted and managed by him, and to engage in agricultural production such as crop cultivation, forestry, and animal husbandry.

Article 332

　　The term of a contract for cultivated land is 30 years. The term of a contract for grassland ranges from 30 to 50 years. The term of a contract for forestland ranges from 30 to 70 years.

　　Upon expiration of the term of contract as provided in the preceding paragraph, the person with the right to contractual management of land is entitled to renew the contract in accordance with the provisions of laws on rural land contracting.

Article 333

　　A right to contractual management of land is created at the time when the contract on the right to contractual management of land enters into effect.

　　The registration authority shall issue a certificate, such as a certificate of the right to contractual management of land, a certificate of the right to forestry, and the like, to the person entitled to the respective right to contractual management of land, and establish a register for this purpose to record and confirm such rights.

Article 334

　　The persons with the rights to contractual management of land are entitled to exchange or transfer such rights in accordance with law. The contracted land may not be used for non-agricultural construction purposes without being approved in accordance with law.

Article 335

　　Where the rights to contractual management of land are exchanged or transferred, the parties may apply to the registration authority for registration; without registration, such exchange or transfer may not be asserted against a bona fide third person.

Article 336

　　Within the term of contract, the party offering the contract may not adjust the contracted land.

　　Under special circumstances such as severe deterioration on the contracted land caused by natural disasters, appropriate adjustments shall be made in accordance with the provisions of laws on rural land contracting where necessary.

Article 337

　　Within the term of contract, the party offering the contract may not take back the contracted land, unless otherwise provided by law.

Article 338

　　Where the contracted land is expropriated, the affected person with the right to contractual management of land is entitled to the corresponding compensation according to the provisions of Article 243 of this Code.

Article 339

　　A person with the right to contractual management of land may decide on his own to transfer the right to management of land to others by leasing, contributing it as shares, or other means in accordance with law.

Article 340

　　Within the time limit as agreed in the contract, the person with the right to management of land is entitled to possess the rural land, to carry out agricultural production and operation on his own, and to benefit therefrom.

Article 341

　　The right to management of land which is transferred for a term of five years or longer is created when the contract for the transfer enters into force. The parties may apply to the registration authority for registration of the right to management of land; without registration, such a right may not be asserted against a bona fide third person.

Article 342

　　Where rural land is contracted by means including bidding, auction, or open negotiation, for which a title certificate is obtained through registration in accordance with law, the right to manage such land may, in accordance with law, be transferred by means of leasing, contributing it as shares, mortgaging, or by other means.

Article 343

　　Where contractual management is adopted for the State-owned land that is used for agricultural purposes, the relevant provisions of this Book shall be applied mutatis mutandis.

Chapter XII
Right to Use Land for Construction Purposes

Article 344

　　With respect to the State-owned land zoned for construction purposes, a person with the right to use a lot of such land is entitled to possess, use, and benefit from the lot, and to use it to construct buildings, structures, and auxiliary facilities.

Article 345

　　The right to use a lot of land for construction purposes may be created separately on the surface of, above, or below the lot of land.

Article 346

　　The right to use a lot of land for construction purposes shall be created in conformity with the requirements for conservation of resources and protection of the ecological environment, and in compliance with the provisions of laws and administrative regulations on the planned use of the lot, and may not impair the rights to usufruct already created thereon.

Article 347

　　The right to use a lot of land for construction purposes may be created by way of transfer or gratuitous grant.

　　The bidding, auction, or other means of public bidding shall be adopted in transferring a lot of land used for business purposes, such as for industrial, commercial, tourism, recreational, and commercial residential purposes, or where there are two or more intended users competing for the right to use the same lot of land.

　　The creation of a right to use a lot of land for construction purposes by way of gratuitous grant is strictly restricted.

Article 348

　　Where a right to use a lot of land for construction purposes is created through bidding, auction, agreement, or other means of transfer, the parties shall enter into a contract in writing for the transfer of the right to use the lot of land for construction purposes.

　　A contract for the transfer of the right to use a lot of land for construction purposes generally contains the following clauses:

　　(1) the name and address of each party;

　　(2) the metes and bounds and area of the lot of land;

　　(3) the space occupied by the buildings, structures, and the auxiliary facilities thereof;

　　(4) the planned use and zoning conditions of the lot;

　　(5) the term of the right to use the lot of land for construction purposes;

　　(6) the transfer fee and other fees, and the mode of payment thereof; and

　　(7) the means of dispute resolution.

Article 349

　　To create a right to use a lot of land for construction purposes, application shall be filed with the registration authority for the registration of the right. The right to use a lot of land for construction purposes is created upon registration. The registration authority shall issue a title certificate to the person entitled to the right.

Article 350

　　A person who has the right to use a lot of land for construction purposes shall make reasonable use of the lot and may not change its planned use. Where it is necessary to change the planned use of the lot, approval shall be obtained from the competent administrative department in accordance with law.

Article 351

　　A person who has the right to use a lot of land for construction purposes shall pay the transfer fee and other fees in accordance with law and the contract.

Article 352

　　The ownership of buildings, structures, and auxiliary facilities thereof constructed by a person with the right to use the lot of land for construction purposes belongs to the person, unless it is proved by evidence to the contrary.

Article 353

　　Unless otherwise provided by law, the persons with a right to use a lot of land for construction purposes are entitled to transfer, exchange, offer as capital contribution, give away as a gift, or mortgage their rights.

Article 354

　　Where a right to use a lot of land for construction purposes is transferred, exchanged, offered as capital contribution, given away as a gift, or mortgaged, the parties shall enter into a contract thereon in writing. The term of the use shall be agreed upon by the parties, provided that it may not exceed the remaining term of the

right to use the lot of land for construction purposes.

Article 355

　　Where a right to use a lot of land for construction purposes is transferred, exchanged, offered as capital contribution, or given away as a gift, an application for registration of the change shall be filed with the registration authority.

Article 356

　　Where a right to use a lot of land for construction purposes is transferred, exchanged, offered as capital contribution, or given away as a gift, the buildings, structures, and auxiliary facilities thereof attached to the land shall be disposed of concomitantly.

Article 357

　　Where a building or structure, and auxiliary facilities thereof are transferred, exchanged, offered as capital contribution, or given away as a gift, the right to use the lot of land for construction purposes in the lot of land occupied by the building, structure, and auxiliary facilities thereof shall be disposed of concomitantly.

Article 358

　　Where a right to use a lot of land for construction purposes needs to be taken back prior to expiration of its term for public interest purposes, compensation shall be paid for the houses and other immovable property on the land according to the provisions of Article 243 of this Code, and the portion of the unused transfer fee shall be refunded.

Article 359

　　The right to use a lot of land for construction of residential buildings is automatically renewed upon expiration of the term. The payment, reduction, or exemption of the renewal fees shall be dealt with in accordance with the provisions of laws and administrative regulations.

　　The renewal of the right to use a lot of land for construction of buildings other than residences, upon expiration of the term, shall be dealt with in accordance with the provisions of the laws. The ownership of the buildings and other immovable property on such lot of land shall be determined in accordance with the agreement, or, where there is no agreement or the agreement is unclear, in accordance with the provisions of laws and administrative regulations.

Article 360

　　Where a right to use a lot of land for construction purposes is extinguished, the transferor of the right shall deregister the right in a timely manner. The registration authority shall withdraw the title certificate thereof.

Article 361

　　The using of a lot of collectively-owned land for construction purposes shall be dealt with in accordance with the provisions of the laws on land administration.

Chapter XIII
Right to Use a House Site

Article 362

　　A person who has the right to use a house site is entitled to possess and use the lot of land owned by the collective, and to utilize such lot of land to build a dwelling and auxiliary facilities in accordance with law.

Article 363

　　The acquisition, exercise, and transfer of the right to use a house site are governed by the laws on land administration and the relevant regulations of the State.

Article 364

　　Where a house site is destroyed due to natural disasters or for other reasons, the right to use the house site is extinguished. A new house site shall be allocated in accordance with law to the villagers who have lost their house site.

Article 365

　　Where a registered right to use a house site is transferred or extinguished, registration of the change or deregistration of the right shall be made in a timely manner.

Chapter XIV
Right of Habitation

Article 366

　　A person with a right of habitation is entitled to the right to usufruct of possessing and using another person’s dwelling as agreed in the contract, so as to meet his needs of habitation.

Article 367

　　To create a right of habitation, the parties shall enter into a contract on such a right in writing.

　　A contract on a right of habitation generally contains the following clauses:

　　(1) the name and address of each party;

　　(2) the location of the dwelling;

　　(3) the conditions and requirements for the habitation;

　　(4) the duration of the right of habitation; and

　　(5) the means of dispute resolution.

Article 368

　　A right of habitation shall be created free of charge, unless otherwise agreed by the parties. To create a right of habitation, an application for the registration of the right shall be filed with the registration authority. The right of habitation is created upon registration.

Article 369

　　A right of habitation may not be transferred or inherited. The dwelling in which a right of habitation is created may not be let on lease, unless otherwise agreed by the parties.

Article 370

　　A right of habitation is extinguished if the term of the right expires, or if the person entitled to the right deceases. Where a right of habitation is extinguished, deregistration of the right shall be made in a timely manner.

Article 371

　　Where a right of habitation is created by will, the relevant provisions of this Chapter shall be applied mutatis mutandis.

Chapter XV
Easements

Article 372

　　A person who has a right to easement is entitled to utilize the immovable property of another person as agreed in a contract so as to enhance the efficiency of his own immovable property.

　　The immovable property of another person referred to in the preceding paragraph is the servient land, and the immovable property of the person entitled to the easement is the dominant land.

Article 373

　　To create an easement, the parties shall enter into an easement contract in writing.

　　An easement contract generally contains the following clauses:

　　(1) the name and address of each party;

　　(2) the location of the servient land and the dominant land;

　　(3) the purposes and methods of utilizing the servient land;

　　(4) the duration of the easement;

　　(5) the fees and the mode of payment; and

　　(6) the means of dispute resolution.

Article 374

　　An easement is created at the time the easement contract enters into effect. Where the parties request for registration, applications may be filed with the registration authority for the registration of the easement; without registration, such an easement may not be asserted against a bona fide third person.

Article 375

　　A right holder of the immovable property served as the servient land shall allow the person entitled to an easement to utilize the immovable property as agreed in the contract and may not interfere with the exercise of the right to easement by such person.

Article 376

　　A person entitled to an easement shall utilize the servient land in accordance with the purposes and methods of utilization as agreed in the contract, and minimize restrictions on the real rights of the right holder in the servient land.

Article 377

　　The duration of an easement shall be agreed upon by the parties, provided that it may not exceed the remaining term of the right to usufruct, such as the right to contractual management of land or the right to use a lot of land for construction purposes.

Article 378

　　Where an owner of a lot of land is entitled to or is encumbered with an easement, when a right to usufruct, such as a right to contractual management of land or a right to use a house site is created on the lot of land, the usufructuary shall continue to be entitled to or be encumbered with the easement thereon that has already been created.

Article 379

　　Where a right to usufruct, such as a right to contractual management of land, a right to use a lot of land for construction purposes, and a right to use a house site, has already been created on a lot of land, the owner of the lot of land may not create an easement on the lot without the consent of the usufructuary.

Article 380

　　An easement may not be transferred separately. Where a right to contractual management of land, a right to use a lot of land for construction purposes and the like rights are transferred, the easement shall be transferred concomitantly, unless otherwise agreed in the contract.

Article 381

　　An easement may not be mortgaged separately. Where a right to contractual management of land, a right to use a lot of land for construction purposes, and the like rights are mortgaged, the easement shall be transferred concomitantly upon enforcement of the mortgage.

Article 382

　　Where a right to easement is involved when the dominant land and a right to contractual management of land, a right to use a lot of land for construction purposes, and the like rights thereon are partially transferred, the transferee is simultaneously entitled to the easement.

Article 383

　　Where a right to easement is involved when the servient land and a right to contractual management of land, a right to use a lot of land for construction purposes, and the like rights thereon are partially transferred, the easement is legally binding on the transferee.

Article 384

　　Where a person entitled to an easement is under any of the following circumstances, the person who has the right to the servient land is entitled to rescind the easement contract to extinguish the easement:

　　(1) abusing the right to easement in violation of the provisions of laws or the contract; or

　　(2) in case of paid use of the servient land, failing to pay the relevant fees despite of receipt of two warning notices within a reasonable period of time after the payment is due according to the agreement.

Article 385

　　Where a registered easement is altered, transferred, or extinguished, the registration of the change or deregistration shall be made in a timely manner.

Part Four
Security Interests

Chapter XVI
General Rules

Article 386

　　Where a debtor fails to perform his obligations due, or any event upon which an security interest is to be enforced as agreed upon by the parties occurs, the person entitled to the security interest has priority to be paid from the collateral in accordance with law, unless otherwise provided by law.

Article 387

　　Where a creditor needs to secure his claims in a civil activity such as lending, buying and selling, and the like, he may create a security interest in accordance with the provisions of this Code and other laws.

　　Where a third person provides security to the creditor for the debtor, the debtor may be requested to provide a counter-security. Counter-security shall be governed by the provisions of this Code and other laws.

Article 388

　　To create a security interest, a security contract shall be entered into in accordance with the provisions of this Code and other laws. Security contracts include mortgage contracts, pledge contracts, and other contracts with a function of security. A security contract is a contract secondary to the principal contract with the principal claims and obligations. Where the principal contract is void, the security contract is also void, unless otherwise provided by law.

　　Where a security contract is determined to be void, if the debtor, the security provider, and the creditor are at fault, they shall each bear civil liability in proportion to their fault.

Article 389

　　Unless otherwise agreed by the parties, the scope covered by a security interest includes the principal claim and its interests based on the principal contract, liquidated damages, compensatory damages, and the expenses arising from safekeeping the collateral and enforcing the security interests.

Article 390

　　Where a collateral is destructed, damaged, or lost, or is expropriated during the secured period, the person entitled to a security interest has priority to be paid from the insurance payment, compensation, or indemnity received on the collateral. Where the collateral is destructed, damaged, or lost, or is expropriated prior to the due date of performance of the secured claim, the insurance payment, compensation, or indemnity may also be placed in escrow.

Article 391

　　Where a third person provides security and the creditor allows the debtor to transfer all or part of the secured obligations without the third person’s written consent, the security provider is no longer liable for securing the part of the obligations so transferred.

Article 392

　　Where a claim is secured by both a collateral and a surety, and the debtor fails to perform his obligations due or any event upon which a security interest is to be enforced as agreed upon by the parties occurs, the creditor shall enforce the claim in accordance with the agreement. Where there is no agreement or the agreement is unclear, if the collateral is provided by the debtor, the creditor shall first enforce the claim against the collateral, and if the collateral is provided by a third person, the creditor may elect to enforce the claim against the collateral or request the surety to assume liability. After the third person who provides security has assumed such liability, he has the right of indemnification against the debtor.

Article 393

　　A security interest is extinguished under any of the following circumstances:

　　(1) the claim under the principal contract is extinguished;

　　(2) the security interest is enforced;

　　(3) the creditor waives his security interest; or

　　(4) there exists any other circumstance in which security interest is extinguished as provided by law.

Chapter XVII
Mortgage

Section 1
General Mortgage

Article 394

　　Where a debtor or a third person, in order to secure the performance of an obligation, mortgages his property to the creditor without relinquishing the possession of the property, the creditor has priority to be paid from the collateral if the debtor fails to perform his obligation due or an event upon the occurrence of which the security interest in the collateral is to be enforced as agreed by the parties occurs.

　　The debtor or the third person as specified in the preceding paragraph is the mortgagor, the creditor is the mortgagee, and the collateral mortgaged to secure the claim is the mortgaged property.

Article 395

　　The following property, which the debtor or a third person is entitled to dispose of, may be mortgaged:

　　(1) buildings and other things attached to the land;

　　(2) the right to use a lot of land for construction purposes;

　　(3) the right to use the sea areas;

　　(4) production equipment, raw materials, work in process, and finished products;

　　(5) buildings, vessels, and aircraft under construction;

　　(6) vehicles for transport; and

　　(7) other property not prohibited by laws or administrative regulations from being mortgaged.

　　A mortgagor may mortgage the property listed in the preceding paragraph concurrently.

Article 396

　　An enterprise, an individual-run industrial and commercial household, or an agricultural production operator may mortgage their production equipment, raw materials, work in process, and finished products that they currently own or thereafter acquired, and if the debtor fails to perform his obligations due or any event upon which a security interest in the mortgaged property is to be enforced as agreed by the parties occurs, the creditor has priority to be paid from the movable property determined at the time when the mortgaged property is ascertained.

Article 397

　　Where a building is mortgaged, the right to use the lot of land in the area occupied by the building for construction purposes shall be mortgaged concomitantly. Where a right to use a lot of land for construction purposes is mortgaged, any building on the lot of land shall be mortgaged concomitantly.

　　Where a mortgagor fails to concomitantly mortgage the property as provided in the preceding paragraph, the unmortgaged property in question shall be deemed to be concomitantly mortgaged.

Article 398

　　A right to use a lot of land for construction purposes of a township or village enterprise may not be mortgaged separately. Where a factory premise or any other building of a township or village enterprise is mortgaged, the right to use the lot of land in the area occupied by the building for construction purposes shall be concomitantly mortgaged.

Article 399

　　The following property may not be mortgaged:

　　(1) land ownership;

　　(2) the right to use the land owned by a collective, such as house sites, land and hills retained for household use, unless it may be mortgaged as provided by law;

　　(3) educational facilities, medical and health facilities, and other public welfare facilities of non-profit legal persons established for public welfare purposes, such as schools, kindergartens, and medical institutions;

　　(4) property of which the ownership or right to the use is unclear or disputed;

　　(5) property that has been seized, detained, or placed under custody in accordance with law; and

　　(6) other property that may not be mortgaged as provided by laws or administrative regulations.

Article 400

　　To create a mortgage, the parties shall enter into a mortgage contract in writing.

　　A mortgage contract generally contains the following terms:

　　(1) the type and amount of the secured claim;

　　(2) the term during which the debtor shall perform obligations;

　　(3) such particulars as the name and quantity of the mortgaged property; and

　　(4) the scope of the security interest covered.

Article 401

　　Where, prior to the due date of performance of an obligation, the mortgagee reaches an agreement with the mortgagor under which the mortgaged property belongs to the creditor in the event that the debtor fails to perform the obligation due, the mortgagee, regardless, may only have priority to be paid from the mortgaged property in accordance with law.

Article 402

　　To create a mortgage on the property as specified in Subparagraphs (1) through (3) of the first paragraph of Article 395, or on the building under construction as specified in Subparagraph (5) of the first paragraph of this Code, registration shall be made for the mortgage. The mortgage shall be created upon registration.

Article 403

　　A mortgage on movable property shall be created at the time when the mortgage contract enters into effect; without registration, such a mortgage may not be asserted against a bona fide third person.

Article 404

　　A mortgage on movable property may not be asserted against a buyer who has paid a reasonable purchase price and acquired the mortgaged property in the ordinary course of business.

Article 405

　　Where a mortgaged property has been let to and possessed by another person prior to creation of the mortgage, the lease relationship shall not be affected by the mortgage.

Article 406

　　A mortgagor may transfer the mortgaged property to another person during the term of the mortgage unless otherwise agreed by the parties. The transfer of the mortgaged property shall not affect the mortgage.

　　A mortgagor who transfers the mortgaged property to another person shall notify the mortgagee in a timely manner. The mortgagee may request the mortgagor to apply the proceeds of the transfer to pay off the obligation before it is due, or place such proceeds in escrow where he may establish that the transfer of the mortgaged property may impair his right to the mortgage. The portion of the proceeds obtained from the transfer in excess of the amount of the obligation owed shall belong to the mortgagor, while any deficiency shall be satisfied by the debtor.

Article 407

　　A mortgage may not be transferred separately from the underlying claim or be used as security for another claim. Where a claim is transferred, the mortgage securing the claim shall be transferred concomitantly with it, unless otherwise provided by law or agreed by the parties.

Article 408

　　Where an act of a mortgagor suffices to reduce the value of the mortgaged property, the mortgagee is entitled to request the mortgagor to refrain from performing such an act. Where the value of the mortgaged property is reduced, the mortgagee is entitled to request the mortgagor to restore its value or provide additional security to the extent of the reduced value. Where the mortgagor neither restores the original value of the mortgaged property, nor provides additional security therefor, the mortgagee is entitled to request the debtor to pay off the debt before it is due.

Article 409

　　A mortgagee may waive his right to the mortgage, or waive his priority order in the line of the mortgagees. A mortgagee and the mortgagor may reach an agreement to change such things as the mortgagee’s priority order in the line of the mortgagees and the amount of the secured claim, provided that any change to the mortgage may not adversely affect the other mortgagees without their written consent.

　　Where a debtor creates a mortgage on his own property, and the mortgagee waives his right to the mortgage and his priority order in the line of mortgagees, or changes the mortgage, the other security providers shall be exempted from the security liability to the extent of the rights and interests of the mortgagee that are forfeited owing to the waiver of his priority to be paid from the mortgaged property, unless the other security providers are committed to still provide security.

Article 410

　　Where a debtor fails to perform his obligation due or an event upon which a mortgage is to be enforced as agreed upon by the parties occurs, the mortgagee may, upon agreement with the mortgagor, have the priority right to appraise and accept the mortgaged property, or apply the proceeds obtained from auction or sale of the mortgaged property to satisfy his claim against the mortgagor. Where the agreement is detrimental to the interests of other creditors, the other creditors may request the people’s court to rescind the agreement.

　　Where a mortgagee and a mortgagor fail to reach an agreement on the methods of enforcing the mortgage, the mortgagee may request the people’s court to have the mortgaged property sold at auction or in a sale.

　　The appraisal or sale of the mortgaged property shall be based on the market price thereof.

Article 411

　　Where a mortgage is created in accordance with the provisions of Article 396 of this Code, the mortgaged property shall be ascertained at the time when one of the following circumstances occurs:

　　(1) the claim is not satisfied upon expiration of the term of performance of the obligation;

　　(2) the mortgagor is declared bankrupt or dissolved;

　　(3) an event upon which the mortgage is to be enforced as agreed upon by the parties occurs; or

　　(4) any other circumstance that seriously affects the enforcement of the claim.

Article 412

　　Where a debtor fails to perform his obligation due or an event upon the occurrence of which the mortgage is to be enforced as agreed upon by the parties occurs, resulting in the seizure of the mortgaged property by the people’s court in accordance with law, the mortgagee is entitled to collect the natural fruits or legal proceeds accrued from the mortgaged property as of the date of the seizure, unless the mortgagee fails to notify the person who is obligated to pay off the legal proceeds.

　　The fruits or proceeds as specified in the preceding paragraph shall first be applied to offset the expenses of collecting them.

Article 413

　　Where the appraised value of a mortgaged property or the proceeds obtained from auction or sale of it is in excess of the amount of the obligation owed, the excessive portion shall belong to the mortgagor, while any deficiency shall be satisfied by the debtor.

Article 414

　　Where a property is mortgaged to two or more creditors, the proceeds obtained from auction or sale of the mortgaged property shall be applied in accordance with the following provisions:

　　(1) where the mortgages have all been registered, the order of payment is based on the priority in time of registration;

　　(2) a registered mortgage has priority over an unregistered mortgage to be paid; and

　　(3) where none of the mortgages are registered, payment shall be made on a pro rata basis against the claims.

　　The preceding paragraph shall be applied mutatis mutandis with regard to the priority order of payment for other security interests that are registrable.

Article 415

　　Where both a mortgage and a pledge are created on the same property, the priority order of payment with the proceeds obtained from auction or sale of the property shall be based on the priority in time of registration and delivery of the property.

Article 416

　　Where a principal claim secured by a mortgage on movable property is the purchase price of the mortgaged property, and registration for the mortgage is made within 10 days after delivery of the property, the mortgagee has the priority to be paid over the other persons, other than a lienholder, who have security interests thereon in relation to the purchaser of the mortgaged property.

Article 417

　　Where a right to use a lot of land for construction purposes is mortgaged, any newly added buildings on the lot of land are not part of the mortgaged property. Upon enforcement of the mortgage on the right to use the lot of land for construction purposes, the newly added buildings on such land shall be disposed of concomitantly with the right to use such land for construction purposes, provided that the mortgagee has no priority to be paid from the proceeds obtained from disposition of the newly added buildings.

Article 418

　　Where a right to use a lot of land owned by a collective is mortgaged in accordance with law, the nature of the ownership and the purpose of use of the land may not be altered without going through statutory procedures after the mortgage is enforced.

Article 419

　　A mortgagee shall exercise his right to mortgage within the limitation period for claiming against the principal obligation; otherwise no protection may be provided by the people’s court.

Section 2
Maximum Mortgage for Floating Claims

Article 420

　　Where a debtor or a third person provides a collateral for future claims that will arise consecutively within a certain period of time to secure performance of the obligations, if the debtor fails to perform an obligation due or an event upon which such a mortgage is to be enforced as agreed upon by the parties occurs, the mortgagee has the priority to be paid from the mortgaged property up to the maximum amount of his claim.

　　A claim that exists prior to the creation of the maximum mortgage for floating claims may, upon consent of the parties, be included in the claims secured by such a mortgage.

Article 421

　　Before the claims secured by the maximum mortgage for floating claims are ascertained, where part of the claims is transferred, the mortgage may not be transferred unless otherwise agreed by the parties.

Article 422

　　Before the claims secured by a maximum mortgage for floating claims are ascertained, the mortgagee and the mortgagor may change by agreement the period of time for the ascertainment of the claims, the scope of the claims, and the maximum amount of the claims, provided that such changes may not adversely affect other mortgagees.

Article 423

　　The claims of the mortgagee are ascertained under one of the following circumstances:

　　(1) where the agreed period of time for the claims to be ascertained expires;

　　(2) where there is no agreement on the period of time for the claims to be ascertained or the agreement is unclear , and the mortgagee or the mortgagor requests for ascertainment of the claims after the lapse of two years from the date of the creation of the mortgage;

　　(3) where it is impossible for a new claim to arise;

　　(4) where the mortgagee knows or should have known that the mortgaged property has been seized or detained;

　　(5) where the debtor or the mortgagor is declared bankrupt or dissolved; or

　　(6) any other circumstance under which the claims are to be ascertained as provided by law.

Article 424

　　In addition to the provisions of this Section, the relevant provisions of Section 1 of this Chapter shall be applied to the maximum mortgage for floating claims.

Chapter XVIII
Pledge

Section 1
Pledge in Movable Property

Article 425

　　Where a debtor or a third person pledges his movable property to the creditor for possession in order to secure the performance of an obligation, if the debtor fails to perform the obligation due or an event upon the occurrence of which the pledge is to be enforced as agreed upon by the parties occurs, the creditor has priority to be paid from the movable property.

　　The debtor or third person as specified in the preceding paragraph is the pledgor, the creditor is the pledgee, and the movable property delivered is the pledged property.

Article 426

　　Movable property may not be pledged where its transfer is prohibited by laws or administrative regulations.

Article 427

　　To create a pledge, the parties shall enter into a pledge contract in writing.

　　A pledge contract generally contains the following clauses:

　　(1) the type and amount of the secured claim;

　　(2) the term for the debtor to perform the obligation;

　　(3) such particulars as the name and quantity of the pledged property;

　　(4) the scope of the security covered; and

　　(5) the time for and the mode of the delivery of the pledged property.

Article 428

　　Where, prior to the due date of performance of an obligation, the pledgee reaches an agreement with the pledgor under which the pledged property belongs to the creditor in the event that the debtor fails to perform the obligation due, the pledgee, regardless, may only have priority to be paid from the pledged property in accordance with law.

Article 429

　　A pledge is created upon delivery of the pledged property by the pledgor.

Article 430

　　A pledgee has the right to collect the fruits and proceeds accrued from the pledged property unless otherwise agreed in the contract.

　　The fruits and proceeds as specified in the preceding paragraph shall first be applied to offset the expenses of collection of them.

Article 431

　　A pledgee who, during the effective period of the pledge, uses or disposes of the pledged property without the consent of the pledgor and thus causes damage to the latter shall be liable for compensation.

Article 432

　　A pledgee is obligated to well keep the pledged property, and shall be liable for compensation where the pledged property is destructed, damaged, or lost due to his improper custody.

　　Where the pledgee’s act is likely to cause the pledged property to be destructed, damaged, or lost, the pledgor may request the pledgee to place the pledged property in escrow, or request the pledgee to discharge the obligation before it is due and return the pledged property.

Article 433

　　Where, due to a cause the pledgee is not responsible for, the pledged property is likely to be damaged or significantly diminished in value which suffices to jeopardize the pledgee’s rights, the pledgee has the right to request the pledgor to provide additional security; where the pledgor fails to do so, the pledgee may have the pledged property sold at auction or in a sale and may, by agreement with the pledgor, apply the proceeds obtained from the auction or sale to discharge the obligation before it is due or place such proceeds in escrow.

Article 434

　　A pledgee shall be liable for compensation where he, during the effective period of the pledge, repledges the pledged property without the consent of the pledgor to a third person and thus causes destruction, damage, or loss to the pledged property.

Article 435

　　A pledgee may waive his right to the pledge. Where a debtor creates a pledge on his own property and the pledgee waives his right to the pledge, the other security providers shall be exempted from the security liability to the extent of the rights and interests of the pledgee that are forfeited owing to the waiver of his priority to be paid from the collateral, unless the other security providers are committed to still provide security.

Article 436

　　A pledgee shall return the pledged property after the debtor has performed his obligation or the pledgor has paid the secured claim before it is due.

　　Where a debtor fails to perform an obligation due or an event upon the occurrence of which the pledge is to be enforced as agreed upon by the parties occurs, the pledgee may, by agreement with the pledgor, appraise and accept the pledged property as satisfaction of his claim, or have priority to be paid from the proceeds obtained from auction or sale of the pledged property.

　　The appraisal or sale of the pledged property shall be based on the market price.

Article 437

　　A pledgor may request the pledgee to enforce the pledge in a timely manner after expiration of the period for the performance of the obligation; where the pledgee fails to do so, the pledgor may request the people’s court to have the pledged property sold at auction or in a sale.

　　Where a pledgor requests the pledgee to enforce the pledge in a timely manner, and damage is caused to the pledgor owing to the pledgee’s indolence in doing so, the pledgee shall be liable for compensation.

Article 438

　　After a pledged property is appraised and accepted by the pledgee as full or partial satisfaction of his claim, or is sold at auction or in a sale, where the value of the pledged property as appraised or the proceeds obtained from auction or sale is in excess of the amount of the obligation owed, the excessive portion shall belong to the pledgor, while any deficiency shall be satisfied by the debtor.

Article 439

　　A pledgor and a pledgee may create a maximum pledge for floating claims upon agreement.

　　In addition to the relevant provisions of this Section, the relevant provisions of Section 2 of Chapter 17 of this Book shall be applied mutatis mutandis to the maximum pledge for floating claims.

Section 2
Pledge on a Right

Article 440

　　The following rights, which a debtor or a third person is entitled to dispose of, may be pledged:

　　(1) bills of exchange, promissory notes, and checks;

　　(2) bonds and certificates of deposits;

　　(3) warehouse receipts and bills of lading;

　　(4) transferable fund shares and equity;

　　(5) transferable proprietary rights consisted in intellectual property such as the right to the exclusive use of registered trademarks, patent rights, and copyrights;

　　(6) existing and after-acquired accounts receivables; and

　　(7) other proprietary rights that may be pledged in accordance with the provisions of laws and administrative regulations.

Article 441

　　Unless otherwise provided by law, a pledge on a bill of exchange, promissory note, check, bond, certificate of deposits, warehouse receipt, or bill of lading is created at the time when the certificate of such a right is delivered to the pledgee, or, in the absence of such a certificate, at the time when the pledge is registered.

Article 442

　　Where the maturity date for the payment or the delivery of goods against a pledged bill of exchange, promissory note, check, bond, certificate of deposits, warehouse receipt, or bill of lading precedes the due date of the principal claim, the pledgee may cash the certificate or take delivery of the goods, and, upon agreement with the pledgor, apply the purchase price or the goods accepted to discharge the obligation before it is due or place it in escrow.

Article 443

　　A pledge on fund shares or equity is created upon registration of the pledge.

　　The fund shares or equity, after being pledged, may not be transferred unless otherwise agreed by the pledgor and the pledgee through consultation. The proceeds obtained by the pledgor from the transfer of the pledged fund shares or equity shall be applied to pay to the pledgee to discharge the obligation before it is due or be placed in escrow.

Article 444

　　A pledge on a proprietary right in intellectual property, such as the right to the exclusive use of a registered trademark, a patent right, or copyright, is created upon registration.

　　A proprietary right in intellectual property, after being pledged, may not be transferred or licensed by the pledgor to another person, unless otherwise agreed by the pledgor and the pledgee through consultation. The proceeds obtained by the pledgor from the transfer or licensing of the proprietary right in the pledged intellectual property shall be applied to pay to the pledgee to discharge the obligation before it is due or be placed in escrow.

Article 445

　　A pledge on an account receivable is created upon registration.

　　An account receivable, after being pledged, may not be transferred unless otherwise agreed by the pledgor and the pledgee through consultation. The proceeds obtained by the pledgor from the transfer of the account receivable shall be applied to pay to the pledgee to discharge the obligation before it is due or be placed in escrow.

Article 446

　　In addition to the provisions of this Section, the relevant provisions of Section 1 of this Chapter shall be applied to the pledge on rights.

Chapter XIX
Lien

Article 447

　　Where a debtor fails to perform his obligation due, the creditor may retain the debtor’s movable property which is already in the lawful possession of the creditor and has priority to be paid from the movable property.

　　The creditor as specified in the preceding paragraph is the lienholder, the movable property in his possession for this purpose is the property under lien.

Article 448

　　The movable property retained under a lien by the creditor shall be in the same legal relationship as the underlying claim, unless the lienholder and the debtor are both enterprises.

Article 449

　　The movable property that may not be retained under a lien as provided by law or agreed by the parties may not be so retained.

Article 450

　　Where the property retained under a lien is a divisible thing, the value of the retained property shall be equivalent to the amount of the obligation.

Article 451

　　A lienholder is obligated to well keep the retained property and shall be liable for compensation where the retained property is destructed, damaged, or lost due to improper custody.

Article 452

　　A lienholder has the right to collect the fruits and proceeds accrued from the property retained under a lien.

　　The fruits and proceeds as specified in the preceding paragraph shall first be applied to offset the expenses for collecting them.

Article 453

　　A lienholder and the debtor shall reach an agreement on the term of performance of the obligation after the property is retained under the lien; where there is no agreement or the agreement is unclear, the lienholder shall give the debtor a period of 60 or more days as the term of performance, unless the retained movable property is fresh, living, or perishable so that it is hard to keep it for long. Where a debtor defaults upon expiration of the term of performance, the lienholder may, upon agreement with the debtor, appraise and accept the retained property to fully or partially satisfy the obligation, or be paid with priority from the proceeds obtained from auction or sale of the retained property.

　　The appraisal or sale of the retained property shall be based on the market price.

Article 454

　　A debtor may request the lienholder to enforce the lien after expiration of the term of performance of the obligation; where the lienholder fails to do so, the debtor may request the people’s court to have the retained property sold at auction or in a sale.

Article 455

　　After the property retained under a lien is appraised and accepted by the lienholder as full or partial satisfaction of his claim, or is sold at auction or in a sale, where the value of the retained property or the proceeds obtained from auction or sale of the retained property is in excess of the amount of the obligation owed, the excessive portion shall belong to the debtor, while any deficiency shall be satisfied by the debtor.

Article 456

　　Where a lien is created on a movable property on which a mortgage or pledge has already been created, the lienholder has priority to be paid.

Article 457

　　A lien is extinguished where the lienholder loses possession of the retained property or accepts another form of security provided by the debtor.

Part Five
Possession

Chapter XX
Possession

Article 458

　　In the case of possession of immovable or movable property based on a contractual relationship, matters such as the use of the immovable or movable property, the benefits therefrom, and the default liability shall be subject to the agreement in the contract; where there is no agreement thereon in the contract or the agreement is unclear, the relevant provisions of laws shall be applied.

Article 459

　　Where damage is caused to the immovable or movable property by its possessor as a result of use of the property, a mala fide possessor shall be liable for compensation.

Article 460

　　Where an immovable or movable property is in the possession of another person, a person holding a right in the property may request the possessor to return the original property and its fruits and proceeds, provided that the necessary expenses incurred by a bona fide possessor for the maintenance of the immovable or movable property shall be paid.

Article 461

　　Where the immovable or movable property in another person’s possession is destructed, damaged, or lost, and a person holding a right in the property requests for compensation, the possessor shall return to the right holder the amount of insurance payment, compensation or indemnity he has received for the property destructed, damaged, or lost; where the right holder has not been fully compensated, a possessor mala fide shall also compensate for the loss.

Article 462

　　Where an immovable or movable property is trespassed or converted, its possessor is entitled to request restitution. Where there is a nuisance against the possession, the possessor has the right to request the removal of the nuisance or the elimination of the danger. Where damage is caused as a result of the trespass, conversion, or nuisance, the possessor has the right to request compensatory damages in accordance with law.

　　The possessor’s right to request for restitution is extinguished if such a right has not been exercised within one year from the date the trespass or conversion occurs.