Property due diligence in China: what buyers and sellers check in 2026

China commercial property due diligence starts with one fact: there is no freehold land in China. Every private commercial property is a Land Use Right (LUR) with a fixed term - typically 40 years for commercial. Diligence means confirming remaining LUR term, whether the land is granted or allocated (allocated land can't be freely sold), and the full tax stack including Land Appreciation Tax up to 60%.

China property transfer tax stack for commercial: Deed Tax (契税) 3-5% of transaction value paid by buyer; VAT (增值税) 5% of transfer consideration paid by seller (for resale commercial held under 2 years; different rates may apply for longer holds and new development); Land Appreciation Tax (LAT, 土地增值税) 30-60% of appreciation on commercial - a progressive tax on the appreciated value of the land and building, paid by seller; Corporate Income Tax (CIT) at 25% on seller's net gains from the property sale; Stamp Duty (印花税) 0.05% of transaction value, paid by both parties. Total combined tax burden on a commercial transfer can exceed 30% of the purchase price between seller and buyer taxes.

All Chinese land is owned by the state (PRC Constitution, Article 10). What's bought and sold is a Land Use Right (LUR, 土地使用权): the right to use a specific parcel of state-owned land for a specified term. Commercial LURs are typically 40 years from the date of grant; industrial LURs 50 years; residential 70 years; mixed-use 50 years. A commercial LUR granted in 2000 expires in 2040. LURs can be resold in the secondary market but the remaining term transfers to the buyer.

Since 2016, the standard title document for Chinese real property is the Real Property Certificate (不动产权证书, Bùdòngchǎn quán zhèngshū), which integrates the former House Ownership Certificate and Land Use Right Certificate into one document. Confirm the Real Property Certificate for the property at the local Real Property Registration Center (不动产登记中心). All registered mortgages (抵押权), restrictions, and annotations appear in the registration records.

Set up a due diligence data room before advisors engage. Load the Real Property Certificate, LUR grant contract, planning permit, completion acceptance record, EIA approval, VAT/LAT calculation, and lease files before the buyer's request list arrives.

Where China property deals go wrong

Not every check carries the same weight. The table below sorts risks by deal impact - dealbreakers first, then what moves the price, then basic hygiene - so your China attorney and advisor know what to clear first.

China commercial property due diligence checklist

The table ranked risks by severity. This is the full checklist to work through, grouped by area.

Real Property Registration Center search

• Day one: commission an official registration search (登记信息查询) at the Real Property Registration Center (不动产登记中心) for the city and district where the property is located; the search result is a certified Registration Extract (登记信息查询证明) showing current owner, LUR type, LUR term expiry, registered GFA, and all encumbrances including mortgages (抵押权) and court seizures (查封)
• Confirm the registered owner name matches the seller's legal entity name exactly; any discrepancy (company name after a restructuring, subsidiary vs. parent) requires explanation and potentially additional authority documentation
• Confirm the LUR type: granted (出让) vs. allocated (划拨); if allocated: an allocated-to-granted conversion is required before the property can be transferred; get China counsel estimate of the land grant fee payable for conversion and the time required (6-12 months minimum)
• Note the LUR expiry date: if the commercial LUR expires within 15 years, model the renewal process and anticipated renewal land grant fee in your DCF; confirm lender appetite for the remaining LUR term

Give each advisor a scoped link in Ellty. China real estate attorney sees Real Property Certificate, LUR grant contract, registration extract, and court judgment searches. Building inspector sees planning permits and completion acceptance records. Environmental consultant sees EIA approval and Phase I ESA. Lender sees registration extract, LUR term, and valuation.

Allocated land conversion - critical for SOE deals

• If the LUR is allocated (划拨): the property cannot be legally transferred commercially without first converting to granted status; this is a process that requires: (1) application to the local government's Natural Resources Bureau; (2) government assessment of the land grant fee (土地出让金); (3) payment of the land grant fee; (4) issuance of new LUR grant contract (土地出让合同); (5) new Real Property Certificate
• The land grant fee for allocated-to-granted conversion is assessed by the local government on a formula that approximates market value of the land; for prime commercial land in Beijing or Shanghai that was allocated to an SOE in the 1980s, the land grant fee can be enormous - sometimes exceeding the value of the building itself; model this cost before any offer on SOE-held commercial
• SOE seller process: SOE sellers often cannot sell assets without prior SASAC (State-Owned Assets Supervision and Administration Commission) approval; for provincial or municipal SOEs, the relevant local SASAC must approve the disposal; the SOE typically must obtain a state asset appraisal (资产评估) from a licensed appraisal firm registered with SASAC, and the transaction price must be at or above the appraisal value; confirm these approvals are in place before signing
• Timeline: allocated land conversion and SOE approval processes together can take 6-24 months; these are not fast processes and should be factored into the transaction timeline from the outset

Planning permits and completion records

• Request the following permit chain from seller: (1) Construction Land Planning Permit (建设用地规划许可证) from Natural Resources Bureau; (2) Construction Works Planning Permit (建设工程规划许可证) from Natural Resources Bureau; (3) Construction Permit (建筑工程施工许可证) from Housing and Urban-Rural Development Authority; (4) Completion Acceptance Filing (竣工验收备案表) from Housing Authority; (5) Fire Safety Completion Acceptance (消防验收合格证) from Fire Department
• Confirm the completion acceptance filing and fire acceptance documents exist; for China commercial buildings constructed before 2000: these records may be incomplete, lost, or never have been properly filed; buildings with incomplete completion records are in irregular status and create legal risk for buyers
• Compare the building's registered GFA in the Real Property Certificate against the GFA in the Construction Works Planning Permit; if they match: no excess GFA issue; if the registered GFA is larger than the permitted GFA: investigate whether the excess was legally approved or represents an unauthorized addition
• For fire safety: confirm the current fire safety compliance status is current (China requires annual fire inspection); for large commercial buildings: confirm the fire safety certificate is current

Load all files into Ellty before advisors engage. China real estate attorney sees registration extract, LUR contract, and planning permits. Building inspector sees planning permits and completion acceptance records. Environmental consultant sees EIA approval and Phase I ESA. Track who reviews the completion acceptance records and court judgment searches most carefully.

LAT, VAT, and full tax computation

• Engage Chinese tax counsel to compute the full seller-side tax stack before signing: LAT (Land Appreciation Tax), VAT (value-added tax on the building portion of the transfer), and CIT (corporate income tax on net gains); these must be modeled to understand the seller's net proceeds and their pricing logic
• LAT computation: appreciation = transfer price minus deductible items; deductible items include original land grant fee, construction costs, finance costs, taxes paid, and a 20% bonus deduction on land and construction costs; progressive LAT rates: 30% for appreciation rate up to 50%; 40% for 50-100%; 50% for 100-200%; 60% for over 200%; pre-pay LAT calculation and confirm with the local tax authority
• VAT on commercial property transfer: for non-residential property sold by a company: 5% of the transfer price (or the spread between acquisition and transfer price for properties held over 2 years); confirm with China tax counsel which VAT calculation method applies to the specific transaction
• Buyer's Deed Tax (契税): 3% of transfer price for most commercial; confirm local rate with China counsel as some jurisdictions have different rates
• Structure: many China commercial transactions are structured as equity transfers (购买持有物业公司的股权) rather than direct property transfers to avoid some transfer taxes; equity transfers have their own tax implications and additional corporate diligence requirements; confirm with China counsel and tax advisor which structure is more efficient

Compare Taiwan's commercial property due diligence process for cross-strait portfolio strategy. China and Taiwan both have state or government-owned land underpinning all private property (China: state-owned land with LUR system; Taiwan: private freehold land with separate land and building registration), both have significant land appreciation taxes on transfers (China LAT 30-60% vs. Taiwan LVIT 20-40% on officially assessed increment), and both have seismic risk considerations (Taiwan very high; China varies significantly by region with high risk in Sichuan, Yunnan, and coastal areas).

How due diligence works in China

Step 1 - Registration search and LUR type confirmation

Day one: commission registration search at the Real Property Registration Center. Confirm LUR type (granted vs. allocated), LUR term expiry, registered GFA, and all encumbrances. For SOE sellers: request SASAC approval documentation and state asset appraisal.

Do not pay any deposit before confirming the LUR is granted (not allocated) and no court seizures are registered. Allocated land and court seizures are dealbreakers that must be resolved before any transfer is possible.

Step 2 - Planning permits, environmental, and LAT computation

Request complete permit chain from seller. Commission China tax counsel LAT computation and full transfer tax analysis. For former industrial or SOE commercial in urban redevelopment zones: commission Phase I ESA with mandatory soil investigation under Soil Pollution Law.

Confirm EIA approval exists for the building's construction.

Step 3 - Leases, tenant notices, and AML

Abstract all commercial leases. Confirm seller has served or will serve statutory right of first refusal notice on all tenants (15-day notice required under Civil Code Article 726). Review any change-of-control provisions in major leases. Run National Enterprise Credit System search and Dishonest Judgment Debtors List search. Run OFAC and sanctions screens. Confirm MOFCOM/NDRC requirements for foreign buyers.

Step 4 - Transfer registration and closing

China property transfers must be registered at the Real Property Registration Center to complete title transfer; a signed and notarized purchase contract does not transfer title - only registration creates the new owner's title. Transfer registration requires: payment of Deed Tax, VAT clearance from seller, LAT clearance (or pre-payment arrangement), and submission of all required documents to the Registration Center.

Load all closing documents into Ellty before completion. China attorney sees registration documents, permit chain, and tax clearance certificates. Lender sees new Real Property Certificate with clean encumbrance record.

What makes China different

The allocated land (划拨 land) issue is the most common dealbreaker-level surprise for buyers who are new to China commercial real estate. The PRC Land Administration Law and Urban Real Estate Administration Law prohibit the commercial transfer of allocated land use rights without government approval and payment of the land grant fee. In practice, this means that a significant number of commercial buildings in Chinese cities - particularly older buildings built on land originally allocated to SOEs (state-owned enterprises) or government institutions in the pre-market era - sit on allocated land that cannot be freely sold. The allocated land status is disclosed in the Real Property Certificate (the LUR type field shows 划拨), but buyers who don't check this before due diligence engagement are frequently surprised late in the process. The conversion process from allocated to granted land involves applying to the local Natural Resources Bureau for a new LUR grant, paying the land grant fee assessed by the government (which can be very large for prime commercial land in Beijing or Shanghai), and obtaining a new Real Property Certificate reflecting the granted LUR. This process takes 6-24 months and is subject to government approval that is not guaranteed. No competent China real estate counsel would let a buyer proceed to signing without confirming the LUR type, but buyers working without specialized local counsel in secondary and tertiary cities have been caught out. Confirm the LUR type before the first conversation about price.

China's Land Appreciation Tax is one of the highest effective transaction taxes on real estate in Asia, and its interaction with seller pricing is systematically misunderstood by buyers who come to China from other markets. LAT is not a tax on the total transaction value but a tax on the appreciation - specifically, the difference between the transfer price and the "deductible items" (original land cost, construction cost, finance costs, and a 20% bonus deduction). The progressive rate structure (30-60%) means that a commercial property in a prime location that has appreciated significantly since initial development may face a LAT liability equal to 40-50% of the gross appreciation. This is the seller's cost, not the buyer's, but it directly affects seller net proceeds and therefore the seller's price floor. A seller of a Shanghai Grade A office building who paid RMB 50 million for the LUR and building in 2005 and is selling at RMB 300 million in 2026 faces a LAT calculation on approximately RMB 200 million of appreciation (after deductibles) - at the 60% LAT rate, that's RMB 120 million in LAT alone, reducing the seller's net proceeds to roughly RMB 150 million after LAT and CIT. Understanding this math is essential for buyers who want to understand why China commercial sellers have the price floors they have and why the LAT burden shapes deal negotiations.

The court seizure (司法查封) risk is an underappreciated timing risk in China commercial transactions. Under China's civil enforcement system, a court can order seizure of real property to secure enforcement of a judgment against the property owner; the seizure is registered at the Real Property Registration Center and once registered, the property cannot be transferred. The problem for buyers is that a registration search conducted early in due diligence may show no seizure, but a seizure order can be registered at any time - including between the initial search and the transfer registration. Chinese litigation in civil and commercial courts involving a corporate seller creates the risk of a seizure order appearing unexpectedly. The standard China practice for managing this risk is: conduct an initial registration search at the start of diligence; re-run the search immediately before the transfer registration is submitted; if possible, coordinate the transfer registration submission to minimize the gap between the final search and registration submission. Also search the National Enterprise Credit Information System and the Supreme People's Court's Dishonest Judgment Debtors List for any enforcement proceedings against the seller entity that could result in a future seizure order.

Timeline and cost in China

Weeks 1-4 cover kickoff: Real Property Registration Center search (LUR type, term, encumbrances), confirmed seller authorization (SASAC approval for SOE), court seizure and enforcement search at National Enterprise Credit System and Supreme People's Court database, planning permit chain request, completion acceptance records, EIA approval confirmation, Phase I ESA commission for former industrial, LAT/VAT/CIT computation by China tax counsel, tenant right of first refusal notice analysis, lease abstraction, MOFCOM/NDRC foreign investment assessment (if foreign buyer), and AML/KYC. China counsel fees in this phase: RMB 200,000-800,000 (approx. USD 28,000-110,000).

Load all files into Ellty before advisors engage. Standard China commercial: 60-120 days. Allocated land conversion: 6-24 months additional. SOE SASAC approval: 3-6 months. MOFCOM foreign investment approval: 1-3 months.

Weeks 4-8 cover deep review: registration search analysis, LUR conversion feasibility (if allocated), planning permit vs. as-built GFA comparison, completion acceptance status review, fire safety compliance, EIA approval review, Phase I ESA delivery, soil investigation (if land use conversion from industrial), LAT and full tax stack computation, lease right of first refusal notice process, lease change-of-control analysis, and lender pre-approval. Costs in this phase: RMB 300,000-1,500,000 (approx. USD 42,000-210,000).

Weeks 8-16 handle resolution: court seizure clearance (if any), mortgage release, SOE SASAC approval finalization, allocated land grant fee negotiation and payment (if applicable), MOFCOM foreign investment filing (if required), tenant right of first refusal notice period (15 days), LAT pre-payment arrangement with local tax authority, Deed Tax payment, and transfer registration at Real Property Registration Center.

China total buyer-side costs: Deed Tax 3-5% of consideration + registration fee (small, typically under 0.1%) + legal and advisory fees; total buyer costs: approximately 4-6% of transaction value. Seller costs: LAT (30-60% of appreciation after deductibles) + VAT 5% + CIT 25% on net gains; total seller costs can be very large for long-held appreciated commercial in prime cities. Total transaction friction (combined buyer and seller costs) in China commercial is among the highest of any major CRE market globally.