Purchase of Residential Properties by Private Entities in Taiwan
Publication | Update:
Jun 2024
To prevent private entities from purchasing residential properties for speculation and to regulate the housing market, the Taiwan Ministry of the Interior (MOI) stipulated Article 79-1 of the Equalization of Land Rights Act ("Act") and its relevant regulations ("New System"), which took effect on July 1, 2023. In response to certain loopholes in the New System, amendments were made to the Regulations on Permission for Private Entities Purchasing Residential Properties ("Permission Regulations") on May 17, 2024.
Under the New System, private entities are permitted to purchase residential properties only for certain purposes. These purposes are divided into (1) those that require the MOI's approval before private entities apply for ownership transfer registration with the land office ("Approval Required Circumstances"); and (2) those that do not require the MOI's approval, but private entities must submit supporting documents for proving that an approval exempt circumstance exists when applying for transfer registration with the land office ("Approval-Exempt Circumstances").
1) Definition of a Residential Property under the Act
A residential property is defined under the Act as a built house, new-built house, or pre-sale house of which the purpose is registered as a residence or a residential house. In Taiwan, the construction of a building requires a building permit; once the building is completed, an occupancy permit must be obtained for its use. Furthermore, the title (ownership) of the building must be registered with the land office. Therefore, the terms "built houses," "new-built houses" and "pre-sale houses" refer to different stages of a building's development, as explained below:
- Pre-sale houses: buildings with building permits but are still under construction.
- New-built houses: buildings with occupancy permits but have not yet been registered with the land office.
- Built houses: buildings that are registered with the land office.
The Permission Regulations also stipulate a few exceptions that are not subject to the Act, such as mixed-use buildings.
2) Approval Required Circumstances
The Permission Regulations state that a private entity may apply to purchase a residential property only for any of the following purposes:
- Use as a dormitory: The number of dormitories that a private entity may purchase for this purpose is limited to the number of regular employees, and the private entity must have a minimum of five regular employees. The purchase of high-value residential properties (as defined under the regulations of the Central Bank of Taiwan) for such purpose is prohibited.
- Operate business of leasing-built houses for residential use: A private entity's registered business items must include real estate leasing, and the total number of units purchased, as well as the previously acquired units under the same occupancy permit, must be five or more.
- Joint construction of, implementation of, or participation in urban renewal or reconstruction of unsafe and old urban buildings: This is limited to built houses and is subject to statutory conditions (e.g., houses aged 30 years or more) (Article 6 of the Permission Regulations). This limitation does not apply to houses located in areas where the competent authority must demarcate or change as a renewal area at the earliest time as per the requirement under Article 7 of the Urban Renewal Act owing to earthquake, fire, flood, storm or other major incidents.
- Health and welfare institutions in Categories H-1 and H-2, Appendix 2, Article 2 of the Regulations on Defining and Changing Classified Uses of Buildings (e.g., elderly welfare institutions, welfare institutions for the physically and mentally challenged, and long-term care service institutions).
- A cooperative's establishment of a residential facility for public use.
- Other purposes announced by the MOI.
The MOI's approval for the purchase of a residential property is generally valid for one year. However, for pre-sale and new-built houses, the approval is valid for one year from the completion date of the initial ownership registration. Hence a private entity must apply for ownership transfer with the land office within one year:(1) after the approval date (in the case of built houses); or (2) after the title registration date (in the case of pre-sale houses or new-built houses). A private entity which purchases a residential property with the MOI's approval is generally not permitted to transfer the property to another entity or person within five years, unless under the exceptional circumstances prescribed under the Act (e.g., compulsory enforcement).
3) Approval-Exempt Circumstances
The MOI has stipulated nine major circumstances that do not require its approval, including: (1) when an asset management company invested by a financial holding company or a bank purchases a residential property that (a) serves as collateral for non-performing loans or (b) is for sale through a public tender initiated by any government agency; (2) certain circumstances related to joint construction, or implementation of or participation in urban renewal or reconstruction of unsafe and old urban buildings; and (3) when a private entity purchases a residential property by exercising its right of first refusal in accordance with applicable laws (e.g., the co-owners' right of first refusal under Paragraph 4, Article 34-1 of the Land Act) or at a court auction.
It is important to note that whether the MOI's approval is required for the acquisition of a residential property for joint construction, urban renewal, or reconstruction of old and unsafe buildings depends on the specific circumstances of each case. For example, in the early stage of urban renewal, approval from the MOI is required for the purchase of a residential property that is 30 years old or more. However, if such a property is located in an area where the competent authority must demarcate or change as a renewal area at the earliest time as per the requirement under Article 7 of the Urban Renewal Act owing to earthquake, fire, flood, storm or other major incidents, the MOI's approval would not be required.
It is advisable for private entities to thoroughly assess the impact of the New System when planning residential property transactions.
Find more information on real estate laws and regulations in Taiwan with Lee and Li, Attorneys-at-Law’s contribution to ICLG – Real Estate 2024.
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