November 2023: Rectifying Local Legislative Encroachments on Homeowner Rights
New grassroots legislative outreach office. First-ever responses to delegate suggestions in braille. Plus: belated coverage of first two "recording and review" guiding cases.
Welcome back to NPC Observer Monthly, a monthly newsletter about China’s national legislature: the National People’s Congress (NPC) and its Standing Committee (NPCSC).
Each issue will start with “News of the Month,” a recap of major NPC-related events from the previous month, with links to any coverage we have published on our main site, NPC Observer. If, during that month, we have also written posts that aren’t tied to current events, I’ll then provide a round-up in “Non-News of the Month.” Finally, depending on the month and my schedule, I may end an issue with discussions of an NPC-related topic that is in some way connected to the past month.
If you enjoyed this issue, I hope you’ll consider sharing it. —Changhao
News of the Month
Before getting to news, a quick announcement: This newsletter now has a custom URL—newsletter.npcobserver.com (n.npcobserver.com for short)—which means it is now accessible in mainland China and its links will no longer be suppressed by Twitter X’s algorithm. 🥳
Last month at the NPC was the quietest since the newsletter’s launch, with only two moderately notable events.
On November 10, the NPCSC Legislative Affairs Commission (LAC) formally announced the designation of the Beijing Financial Street Services Bureau [北京金融街服务局] as its 32nd grassroots legislative outreach office (GLOO) [基层立法联系点].1 The Bureau is an agency of the Beijing municipal government that serves the Beijing Financial Street—a district where all of China’s national financial regulators as well as an impressive array of domestic and international financial institutions are headquartered. The GLOO designation means the Bureau now also acts as a limited-purpose local branch of the LAC. According to the GLOOs’ governing rules, the LAC should “give full play” to their role in the following ways (art. 5):
(1) when formulating and drawing up drafts of the NPCSC’s five-year legislative plans and annual legislative work plans, soliciting comments and suggestions [on the drafts] through the outreach offices;
(2) distributing draft laws to the outreach offices to solicit their comments, except when they involve matters of state secrets;
(3) using the outreach offices as the bases for conducting in-depth legislative investigation and research, carrying out in-depth investigation and research at the outreach offices or entrusting the outreach offices to conduct investigation and research on issues in legislation in a targeted manner;
(4) inviting representatives of the outreach offices to attend legislative seminars, debate sessions, or hearings, or holding legislative seminars at the outreach offices to directly listen to the comments and suggestions of the people at the basic level, according to the needs of legislative work;
(5) relying on the outreach offices to track and understand the implementation of laws, keep abreast of the problems arising in the implementation of laws in a timely manner, and collect suggestions for revising and improving relevant laws;
(6) in conjunction with legislative work, organizing and guiding the outreach offices to carry out legal publicity activities centered around the Constitution, exploring effective ways and means of legal publicity, and enhancing its effectiveness;
(7) soliciting comments and suggestions on legislative work through the outreach offices;
(8) entrusting the outreach offices to carry out other relevant work according the needs of legislative work.
In brief, the GLOOs’ core mission is to gather the views of their local communities on the relevant draft laws, draft legislative plans, and other aspects of the NPC’s legislative work, as directed by the LAC—and to transmit the collected comments “in their original juice and flavor” [原汁原味] to the LAC. The GLOOs therefore supplement the legislature’s passive, non-targeted online public consultations on draft legislation. Though many GLOOs connect with communities with distinct features (demographic, economic, or otherwise), the Bureau is the first and only that focuses on a particular industry (in this case, finance).
On November 13, the NPCSC Deputy Affairs Commission delivered the first-ever responses to delegate suggestions in braille to Wang Yongcheng, the first blind delegate in NPC history. Elected to the 14th NPC in February 2023, Wang works as a physician (specializing in tui na massage, a branch of traditional Chinese medicine) in the Fujian Provincial Employment and Service Center for Persons with Disabilities. During his first year in office, Wang submitted four suggestions—policy proposals to which the relevant government departments must respond—that touched on employment, education, and transportation issues concerning persons with disabilities.
I asked a friend of mine who’s a Chinese disability-rights scholar for her thoughts on this development. She viewed the responses in braille as “progress”—a “reasonable accommodation” that enabled Wang to “participate in social life.” She also pointed out, however, that political participation by people with disabilities in China still faces “severe restrictions,” which explains why Wang is only the first blind NPC delegate. She hopes that reasonable accommodations such as the one afforded Wang would be available in more settings, instead of remaining “privileges reserved for people’s congress delegates alone.”
Last month, the NPC released the official (but non-binding) English translation of the Legislation Law [立法法] as amended in March. I covered the latest amendments here.
Civil Code vs. Local Property Management Regulations
Last month marked the tenth anniversary of the Communist Party’s ambitious Third Plenum in 2013. The plenum’s Decision on Several Major Issues Concerning Comprehensively Deepening Reform was the first Central Committee-level document to speak to, among a variety of other issues, “improving” the system of “recording and review” (R&R) [备案审查]. This gives me an opportunity to catch up on some developments in the R&R system from earlier this year.
For purposes of this post, R&R is a process whereby the NPCSC—through its Legislative Affairs Commission (LAC)—ensures that local legislation conforms to national law. R&R is, of course, a lot more than that; for instance, it is also the sole channel for challenging the constitutionality of enacted legislation in China. For those interested, my writings on R&R are collected on this page.
Despite major reforms in the last decade, R&R is still very much a work in progress. One shortcoming that the LAC itself has acknowledged is its failure to adequately explain its decisions to the public. Its annual reports on R&R, for instance, devote only a sentence or two to most “cases.” In late 2022, it pledged to strengthen reason-giving in its decisions and to “explore the establishment of a case-guidance system.” In 2023, the LAC took crucial steps in those directions by releasing two (what have been semi-officially referred to as) “guiding cases”: documents with detailed explanations of the legal disputes, the LAC’s decisionmaking processes, and the rationales for its decisions—the sort of output one’d expect from an adjudicative body.
Probably not by coincidence, both cases concern local property management legislation.
Background on Homeowner Rights
Because of the ubiquity of residential compounds with multistory buildings in China, Chinese law recognizes a special type of property ownership called “ownership of a building’s units” [建筑物区分所有权] (Civil Code art. 271). This right has two components: (1) a homeowner’s exclusive ownership of their unit in a building; and (2) their right to co-own and jointly manage the common space in the building and the surrounding residential compound with other homeowners (id. arts. 271–274). The homeowners may form an “owners’ assembly” [业主大会] as a self-governing body, which in turn will elect an “owners’ committee” [业主委员会] to carry out its decisions (id. arts. 277–281). For instance, an owners’ assembly has the authority to decide which property management company to hire, and its owners’ committee will sign a service contract with the assembly’s pick. Such a contract binds all homeowners (id. art. 939).
“Ownership of a building’s units” also applies to commercial buildings where the floors or offices are individually owned, but its application to residential buildings is far more common, so I’ll refer to it as “homeowner right” below for ease of reference.
Guiding Case #1: Homeowners’ Right of Joint Management
The LAC had disclosed its conclusions in Guiding Case #1 in its 2022 R&R report before releasing the full guiding case in January 2023.
The dispute there was whether local regulations (i.e., legislation enacted by local people’s congresses) may either (1) prohibit a homeowner from serving on the owners’ committee for failure to fulfill certain homeowner obligations (e.g., pay property management fees); or (2) suggest that an owners’ assembly may want to restrict, through its bylaws, a homeowner’s right of joint management (e.g., participating in the assembly or voting on proposed actions) for the same behavior.
The LAC concluded that neither restriction was permissible, for three independent reasons. First, it explained that homeowners’ right of joint management is a component of the broader homeowner right. It is thus an ownership right that “no organization or individual may restrict or deprive” unless otherwise provided by statutes, necessary for the public interest, or waived by the homeowners themselves. Second, the LAC faulted the local legislation for conflating property interests with contractual relationships. Nonpayment of property management fees could constitute a breach of contract —which shouldn’t be remedied, however, by limiting the party’s property rights as a homeowner. In addition, the homeowner may have refused to pay the fees because the property management company failed to do its job first. Restricting the former’s right of joint management (to potentially replace the company) would therefore limit their ability to seek relief from the self-governing mechanism. Third, the LAC concluded that homeowners’ right of joint management is among the “basic systems of civil law” [民事基本制度]—matters within the national legislature’s exclusive jurisdiction. And because the Civil Code’s delegation of authority to local legislature didn’t extend to eligibility requirements for owners’ committees or the right to participate in owners’ assemblies, the relevant local people’s congresses exceeded their authority.
Guiding Case #2: Ownership of Utilities Infrastructure & Payment of Property Management Fees
Guiding Case #2, released in August 2023, involved a challenge to three provisions in the Qinghai Provincial Property Management Regulations [青海省物业管理条例]. (Qinghai repealed all offending provisions just last week.) Here I’ll focus on two of them.2
The first provision at issue required construction companies to transfer ownership of public utilities infrastructure located in residential compounds—e.g., secondary water supplies, power transformers, gas pressure regulators—to the corresponding public utilities, once the development project is completed and received regulatory approval. The utility companies would then be responsible for “managing, repairing, maintaining, and renovating” such infrastructure—responsibilities that are also imposed by State Council regulations. By vesting ownership of utilities infrastructure in the utility companies themselves, the Qinghai legislature likely intended to aid them in performing those duties.
The LAC disagreed, however. It cited Civil Code article 274, which provides that homeowners co-own the “public facilities” in a residential compound—which the LAC read to include the utilities infrastructure at issue. Qinghai’s provision therefore “implicated citizens fundamental property rights,” contradicted the Civil Code, and exceeded the provincial legislature’s authority.
The second provision at issue provided that a homeowner who accepted their property but hasn’t moved in should pay only 70% of the property management fees otherwise due. While this provision may seem sensible, the Civil Code, again, stood in the way. In a chapter specifically regulating contracts for property management services, the Code provides that the payment of property management fees should be governed by agreements between homeowners and the chosen property management company (art. 944). And once the company has provided the agreed-upon services, the homeowners may not refuse to pay the fees on the ground that they haven’t accepted or don’t need the services provided (id.).
Given those provisions, whether owners who haven’t moved in may benefit from reduced property management fees should be specified in contracts. Without such a stipulation, the Civil Code will govern, the LAC concluded. An across-the-board 30% reduction in fees imposed by local legislation for those who have yet to move into their new homes therefore “has no basis in [national legislation], is difficult to administer in practice, and is prone to generate disputes,” the LAC wrote.
Preliminary Thoughts
It is probably unsurprising that the first two Guiding Cases both involve local property management legislation. The legislative overreach they address was apparently widespread and likely affected millions of Chinese homeowners. In Guiding Case #1, for instance, the LAC reported, as of August 2022, 49 local regulations that conditioned homeowners’ right of joint management on timely payments of property management fees. (A subsequent study found 20 more such regulations as of February 2023.3) By resolving both cases generally in favor of homeowner rights and providing detailed public reasoning, the LAC could build up citizens’ confidence in the review process.
But what exactly is a guiding R&R case? Who does it guide and to what extent? There is so far no official document that answers those questions. In both guiding cases, the LAC asked local legislatures to “sort out and study” existing legislation with the same kind of problematic provisions and to timely “correct and improve” them. What if they fail to comply? According to the LAC staffer who was responsible for Guiding Case #1, the LAC could “directly” request rectification by citing the guiding case.4 Her remark suggested that at the very least the LAC itself would treat the guiding cases as binding, and could expedite the review process when a new dispute presents an issue already resolved by a guiding case. Beyond that, the legal force of guiding cases is uncertain. One leading Chinese scholar believes the guiding cases have “soft binding force“ [软性约束力],5 though it seems to me that when a legislative body chooses to follow a guiding case, it now does so primarily out of political—not legal—considerations. Authoritative pronouncement from the NPCSC on the legal force of guiding R&R cases is therefore sorely needed.
What’s certain is that the case-guidance system and the broader R&R system will continue to develop and evolve. In fact, the NPCSC is expected to adopt new legislation later this month on “improving and strengthening the system of recording and review.” So watch this space.
That’s all for this month’s issue. Thanks for reading!
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The China University of Political Science and Law is also a legislative outreach office of the LAC, albeit not a “grassroots” one.
The third provision imposed a discretionary fine of between RMB 10,000 and 50,000 on homeowners who damage the load-bearing structures or main structures of their property. Because this provision clearly contradicts the State Council’s Regulations on the Quality Management of Construction Projects [建设工程质量管理条例]—which impose a mandatory fine of at least RMB 50,000 for the same conduct—this part of the guiding case isn’t particularly interesting, legally at least.
李海平 (Li Haiping) & 邢涛 (Xing Tao), 地方性法规限制业主共同管理权的权限与条件——全国首个备案审查指导案例评析 (The Authority of and Conditions for Local Regulations to Restrict Homeowners’ Right of Joint Management: Analysis of the Nation’s First Recording-and-Review Guiding Case), 备案审查研究 (J. Reguls. Filing & Rev.), no. 2, 2023, at 21, 22.
韩谦 (Han Qian), 打通物业管理“死胡同”，备案审查“一号指导案例”诞生记 (Opening Up the “Dead Ends” of Property Management: Chronicling the Birth of ‘Guiding Case No. 1’ of Recording and Review ), 南方周末 (S. Wkly.), Mar. 2, 2023.
Id.