Hi Mr. Lee, thanks a lot for the clairification on the issue. However I still need to further understand the legal consequence if, say, a Chinese buyer uses the trust to purchase without being initially discerned, but later on caught by government after the purchase is done. I notice that you mentioned the trustees will be prohibited from purchasing as one of the legal consequence of breach of the rule, but will the trust be invalidated and therefor the Chinese buyer beneficiary be denied its equitable in the property in question? What about the title to the property now?
There has been a hot debate in China regarding whether the actual money contributor who use a nominee to purchase property in restricted cities like Shanghai, Beijing or Shenzhen should be protected with regard to the title to the property registered in the name of the nominee. In China, such nominee arrangement is not considered as a bare trust, just nomineeship. One school of thought thinks the actual money payer shall not be given the title of the property in case of dispute between them and have only credit against the nominee owner, and the other school thought the law shall not deprive the actual money payer title to the property in noninee’s name because the property is just another form of the money from the actual purchaser, and therefore shall be recognized as having full title to the property, though the title may not be registered if the actual buyer is not qualified to purchase under local restriction policies.
Jason Tian
Dentons Shanghai