Thursday, August 22, 2013

Marital Property & Divorce in China: An Update

Jeremy D. Morley

Chapter Three of the Marriage Law of China, as amended in 2001, provides for spousal community property of post-marital wages, bonuses, income from production and business, income from intellectual property, property obtained from inheritance or gift and “other properties that shall be jointly owned.” (Art. 17). Article 18 specifies items that are excluded from community property, specifically a)  pre-marital property; b) payments relating to a spouse’s bodily injury; c) “articles of living specially used by either party”; and d) “other property that shall be used by either party.” The Marriage Law also expressly authorizes variation of such arrangements by prenuptial or postnuptial agreements. (Article 19).
The Supreme People’s Court of China has issued several “Judicial Interpretations” of the property provisions of the Marriage Law.

In 2001 the Court declared, in substance, that separate property should be not be transmuted into marital property in the absence of an express agreement.

In 2003 the Court declared, in substance, that in the absence of express proof of a contrary intention, funds provided before marriage to one spouse for the purchase of real property would be deemed separate property during the marriage, while similar funds provided during the marriage by the family of one spouse would be deemed to be a gift to both spouses and should therefore be treated as marital property.
In 2011 the Court changed (or clarified) its 2003 Judicial Interpretation by stating that if the parents of one spouse provided the funding during the marriage for the purchase of real property , the property would be the separate property of whichever spouse was named on the deed as the sole owner of the property. On the other hand, if the parents of both spouses provided such funding and if the title to the real property was placed in the name of only one spouse, the real property would be owned in proportion to the amount of funding supplied by the respective parents (absent a different agreement between the parties).
The 2011 Judicial Interpretation also declared that if one spouse enters into a contract before the marriage to buy real property, and makes a down payment from premarital funds subject to a mortgage, then if marital funds are subsequently used to pay the mortgage, the party under name title to the property is placed shall compensate the other party with regard to both the mortgage payments made during the marriage and the appreciation corresponding to such mortgage payments.

In addition the 2011 Interpretation provides that if one spouse sells real property that is the community property of both spouses, without the consent of the other spouse, to a bona third party purchaser who has paid a reasonable price, the other spouse will not be able to regain the property, and may only have the remedy of seeking compensation from the selling spouse upon divorce.

See Di, Yu, Latest Evolution of Marital Residence Regime in Contemporary China, 88 Chi.-Kent L. Rev. 1013 (2012-2013); Jason Tian, China Supreme Court issued the third judicial interpretation on application of Marriage Law,