The losses from a shop being sold multiple times are not only borne by the owners who purchased the shop, but also by tenants who have already paid their lease fees.
Core Tip:
A merchant that entered Ankang through investment promotion channels "jointly developed" a commercial building with a local enterprise in the core commercial area of the city. A series of unexpected events followed: the head of the developer fled abroad with nearly 1 billion yuan; there were instances of selling the same property multiple times; and over 200 shop owners were unable to process their property certificates. This seemingly ordinary "joint development" project exposed regulatory loopholes in Ankang's investment promotion, state-owned enterprise reform, and real estate management -
Although it is only nine stories high, the Southern New Century Commercial Building located in the middle section of Jinzhou Road in the core commercial area of Ankang can still be considered one of the city's most attractive sights. With the increase in demand for commercial land, the appreciation potential of this building has significantly increased. However, the 276 owners of the 492 shops inside the building cannot feel happy because they cannot process the property certificates for the shops they purchased at great expense.
What worries these owners even more is that before signing purchase contracts with the tenants and leasing their shops to others, Shaanxi Lujie Industrial Development Co., Ltd. (hereinafter referred to as Lujie Company) collected nearly 1 billion yuan, and its former legal representative disappeared without a trace.
Recruiting the "Golden Phoenix" to Jointly Build a Commercial Building
"If we can't process the property certificate, the house won't belong to us, and our hard-earned money will go down the drain. This is a lifetime's worth of savings!" Merchant Mr. Cai said that if the property certificate cannot be processed, the house cannot be traded, which means it will be stuck. "I initially chose this shop because it was located in the core commercial area, so I invested all my savings in purchasing a shop here."
The predecessor of the Southern New Century Commercial Building was a collective enterprise under the jurisdiction of the Xincheng Street Office of the Hanbin District of Ankang City - Ankang Jinzhou Department Store (formerly Chengjiao Cloth Shoe Factory). In March 2005, the department store and Hanbin District attracted merchants through investment promotion - Shaanxi Lujie Industrial Development Co., Ltd. Both parties signed a joint construction contract to build the "Jinzhou Department Store", later renamed "Southern New Century Commercial Building".
After the building was completed, on May 29, 2006, Lujie Company registered for a pre-sale license for commercial housing at the Ankang City Real Estate Administration Bureau, selling 492 shops from the first to ninth floors to 276 individual investors. They promised to handle property registration procedures and pay entrusted management returns, and also signed commercial housing purchase contracts and shop entrustment management contracts with subscribers.
According to relevant responsible persons from the Hanbin District Government, the "Southern New Century Commercial Building" joint development project was an investment promotion project of the Xincheng Street Office of Hanbin District in 2005. The "Joint Construction Contract" stipulated: Jinzhou Department Store would provide 5.934 mu of land, and Lujie Company would invest 30 million yuan in construction. The newly built Jinzhou Department Store would be jointly owned by both parties, and within the 50-year operating period, neither party could dispose of the property rights...
276 Merchants Compete to Purchase "Legal Commodities"
In order to process relevant documents, Jinzhou Department Store and Lujie Company signed a supplementary contract, agreeing that each party would own a certain proportion of the building area. Within the rights enjoyed by Lujie Company, there was "a 50-year ownership and operating right, after which the building would be handed over free of charge to Jinzhou Department Store." Subsequently, Jinzhou Department Store signed a return lease contract with Lujie Company for a term of 20 years.
In August 2005, the Xincheng Street Office of Hanbin District sent people with the "Joint Construction Contract" to apply for a pre-sale license for Lujie Company at the Ankang City Real Estate Administration Bureau. The bureau believed that the clause "transferring 50-year operating rights" did not meet the pre-sale regulations and explicitly pointed out: to apply for a pre-sale license, developers must submit business licenses, qualification grade certificates, state-owned land use certificates, etc.
In May 2006, the Xincheng Street Office applied again to the Ankang City Real Estate Administration Bureau to process a pre-sale license and provided relevant procedures. "This time, they submitted an additional 'Supplementary Agreement'." According to relevant responsible persons from the Ankang City Real Estate Administration Bureau, the "Supplementary Agreement" changed the main contract clause regarding the 50-year operating rights and clarified the division ratio of both parties' property rights.
Subsequently, on May 29, 2006, the Ankang City Real Estate Administration Bureau issued them a pre-sale license. The main content of this "Southern New Century" commercial housing pre-sale license was: the total area of the building was 20,160 square meters, minus the 4,000+ square meters owned by Jinzhou Department Store, the approved pre-sale area was 16,000 square meters. In June 2007, the Ankang City Real Estate Administration Bureau also processed the general property certificate for Lujie Company. "Most merchants bought shops at that time because they had a pre-sale license and a general property certificate. Since it was legal commercial housing, we bought it with confidence," one merchant said. "After we bought the shops, we leased them back to Lujie Company for management, and they paid us annual returns." Ms. Liu, a merchant, said that all 276 merchants leased their shops back to Lujie Company, "because Lujie Company offered very tempting returns, with annual returns reaching 12%, some even reaching 15%."
It is understood that among the 276 merchants who bought shops, the least invested tens of thousands of yuan, while the most invested millions of yuan. Police and real estate departments confirmed that just this item alone resulted in Lujie Company receiving over 76 million yuan in housing payments.
Property Dispute Leads to Sudden "Suspension of Certificate Processing"
As investors, merchants did not doubt the legality of the building because it had a pre-sale license and a general property certificate. Until July 2008, the Ankang City Real Estate Administration Bureau suddenly stopped processing property certificates for merchants. "In February 2008, Lujie Company processed separate household property certificates for 11 merchants who bought shops. When other merchants heard the news and went to process their property certificates, the bureau refused to process them." During this period, merchants heard rumors: the boss of Lujie Company fled abroad with over 1 billion yuan, and the "Southern New Century" commercial building could not process property certificates due to irregular sales behaviors.
Soon, over 200 merchants gathered together and went to the Ankang Municipal Government and the Real Estate Administration Bureau to reflect the situation. Some requested the bureau to continue processing certificates, while others demanded refunds...
Relevant responsible persons from the Ankang City Real Estate Administration Bureau said: "The reason for stopping the processing of certificates was that Jinzhou Department Store sent people to report disputes over property rights with Lujie Company, claiming that Lujie Company sold the building that belonged to them." Therefore, the Ankang City Real Estate Administration Bureau notified both parties to negotiate and resolve the property dispute, which took 10 months.
On the morning of June 12 this year, over a hundred employees of Jinzhou Department Store suddenly gathered at the office building of Ankang City Construction Bureau where the Real Estate Administration Bureau was located, demanding the revocation of the "Southern New Century" commercial housing pre-sale license and the general property certificate, citing the reason that "Lujie Company violated the contract by selling the building." At the same time, Jinzhou Department Store believed that issuing pre-sale licenses and general property certificates to Lujie Company by the real estate department was illegal behavior. "With the assistance of relevant government leaders, they exploited policy loopholes, repeatedly changing the contract with the purpose of transferring the ownership of the building to their name and then selling it."
Recently, the reporter tried multiple times to contact the person in charge of Lujie Company but failed. In the two offices set up by Lujie Company on the fifth floor of the "Southern New Century," the reporter did not find any staff members. The building's property management personnel said: "Lujie Company has had few staff members coming in the past two months, and we do not have their contact information."
"Joint Development" Without Land Transfer is Legally Irregular
Why did a good thing of both parties cooperating to develop and revitalize state-owned enterprises lead to so many problems?
"The main issue is that the Real Estate Administration Bureau should not have issued pre-sale licenses and property certificates to Lujie Company. If the certificates couldn't be processed, Lujie Company wouldn't sell the building, and the merchants' money wouldn't end up in their pockets." Jinzhou Department Store believed that issuing pre-sale licenses and general property certificates to Lujie Company by the Ankang City Real Estate Administration Bureau was illegal, "because the land use certificate has always been in Jinzhou Department Store's possession and hasn't been transferred."
So, did the Ankang City Real Estate Administration Bureau violate regulations when issuing pre-sale licenses and general property certificates to Lujie Company? Regarding this, relevant responsible persons from the Ankang City Real Estate Administration Bureau admitted: "Joint development without land transfer is a unique model in Ankang, but it is legally irregular. We issued the certificates based on the spirit of relevant meetings of the municipal government."
It is understood that in recent years, to solve the operating problems of struggling enterprises and reformed enterprises, the Ankang Municipal Government issued policies such as "joint development," allowing joint development without land transfer. "The 'Southern New Century' project jointly developed by Lujie Company and Jinzhou Department Store is neither the first nor the last in Ankang City. Among the dozens of joint development projects that have already been handled, all adopted this method." The Ankang City Real Estate Administration Bureau explained.
"According to China's property management methods and commercial housing pre-sale management methods, transferring the land from Jinzhou Department Store to the developer Lujie Company is an important condition for obtaining a commercial housing pre-sale license and property certificate. If the land has not been transferred, the Real Estate Administration Bureau is not allowed to issue certificates according to regulations." Lawyer Guo Lei from Shaanxi Xianyi Law Firm believed that the "Ankang Model" lacks legal basis and can easily lead to developers absconding with the money, posing significant risks. "The government's violation in opening green lights for developers to obtain certificates exposes the government, enterprises, and merchants to great risks, and the Southern New Century case is an example."
"This is still an issue of interests. If the land is transferred, Jinzhou Department Store would have to pay the government 30% of the land transfer fee." An informed person revealed that according to the then land price, the total price of Jinzhou Department Store transferring 5.934 mu of land would be at least over 15 million yuan.
Is Lujie Company Doing a Losing Business?
"We calculated the accounts, and after the building was completed, Lujie Company rented the commercial spaces from the first to fourth floors to Southern Trade Co., Ltd. to operate the Southern New Century Building, and rented the floors above the fifth to Jinhao Business Hotel. The building's annual rental income totals over 7 million yuan, while Lujie Company needs to pay 12.7 million yuan annually for subscription trust returns and Jinzhou Department Store's lease fees." Many merchants later realized that if Lujie Company continued with its current business model, it would lose over 5 million yuan per year. "How could developers afford to do losing businesses? How could they fulfill the contractual agreements with merchants?"
According to investigations by relevant departments in Hanbin District, the legal representative of Lujie Company, Zhao, while developing the "Southern New Century," also invested in a large hotel and restaurant in another bustling commercial area in Ankang City, operated by his wife Li. Coincidentally, in late 2008, Lujie Company not only changed its legal representative, but Zhao also divorced his wife Li.
When the Ankang City Real Estate Administration Bureau was processing separate property certificates for some merchants who purchased "Southern New Century" shops in 2008, they also discovered cases of selling the same property multiple times, which became one of the reasons for suspending the processing of separate property certificates. "Lujie Company not only sold the same property multiple times, but also sold shops belonging to Jinzhou Department Store externally."
While various levels of relevant departments were contacting Zhao, the former legal representative of Lujie Company, rumors spread outside that "Zhao had fled to Canada with the funds." Preliminary checks by relevant departments in Ankang City and Hanbin District confirmed that Zhao indeed went to Canada on March 19 this year. An informed person revealed: "Zhao once told a local government official over the phone that he was going to Canada to treat his children."
Preliminary checks by relevant departments showed that Lujie Company's account currently holds only tens of thousands of yuan, and the whereabouts of nearly 1 billion yuan accumulated from selling and renting shops remains unknown. Currently, this matter has drawn high attention from the Ankang Municipal Party Committee, Municipal Government, Hanbin District Party Committee, and District Government. The Hanbin District Party Committee has established a special institution led by Secretary Gong Guangxi to coordinate handling of this matter. Relevant responsible persons indicated that they would certainly give the merchants an explanation.
On the afternoon of July 16, the reporter learned from relevant sources that currently, public security, procuratorate, and court authorities in Ankang City and Hanbin District have filed a case against suspected economic crimes and are investigating the matter. "The current legal representative of Lujie Company, Li, has been controlled by the police, and most employees have left." An informed person said.