By Dominique Fong

BEIJING--China's top land agency delivered a small victory for homeowners' property rights, waiving a proposed fee for residents of the southeastern city of Wenzhou seeking the renewal of titles to the land under their apartment buildings.

The decision addressed a local issue that attracted national attention because it had the potential to affect all of the country's homeowners. China doesn't grant property rights in perpetuity, as the government retains ownership of all land. While national law stipulates that land-use rights for residential buildings are automatically renewed, there was uncertainty over whether homeowners would have to pay a state fee for the extension.

Some apartment owners in Wenzhou had been surprised to discover earlier this year that their leases had expired after only 20 years, five decades shorter than the typical Chinese land title. They were being asked by local authorities to pay fees of up to a third of the value of their apartments for the renewal of their leases.

The Ministry of Land and Resources decided that the affected Wenzhou homeowners wouldn't have to pay the fee, according to a briefing transcript citing Vice Minister Wang Guanghua posted Friday on the ministry's website.

"This is kind of a precedent that could affect millions and millions of household owners in the future," said Li Ping, a senior attorney and a land tenure expert at Landesa, an international organization on land laws and policies. "It will definitely increase the confidence of homeowners" in China, he said.

The land ministry's decision won't necessarily apply to the 70-year leases that are set to expire decades from now. The agency said that the move was a transitional approach and that it would continue to study the issue.

However, clarifying the Wenzhou leases helps ease other homeowners' concerns about their property claims, legal experts said. The decision also comes after the State Council, China's cabinet, unveiled broad measures to protect property rights in late November.

When the government began dismantling the planned economy and privatized homeownership in urban China during the late 1990s, people rushed to buy homes without Western-style legal protections. Land was rapidly sold before comprehensive rules were adopted for leases and many other property-related issues. This allowed, for example, the affected apartments in Wenzhou to be built on land with 20-year leases while others were covered by the more-prevalent 70-year deals.

Prices for homes in most Chinese cities have soared in the past two decades. Worries that housing prices might rise out of reach often trigger buying frenzies, like the property bubbles earlier this year in many of the nation's biggest cities, as do potential changes in homeownership rules. In Wenzhou, the proposed fee had been an attempt to link lease renewal to the rise in the value of residential land over the past 20 years.

"Without a clear guideline on this, this issue could spiral into a national unease," said Jason Tian, a real estate attorney for Dentons in Shanghai. "This is to pacify the property market with a view to avoiding unnecessary turmoil in the property market."

By waiving the fee for the Wenzhou apartment owners, however, the government is depriving itself of a recurring source of revenue that could fund public services and other development. "The government should have something to collect from the appreciation of the land price," said Landesa's Mr. Li

Write to Dominique Fong at Dominique.Fong@wsj.com

(END) Dow Jones Newswires

December 23, 2016 09:16 ET (14:16 GMT)

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