Newsletter
The Amendment to the "Operation Directions for Establishment of Superficies on National Non-Public Use Land"
The Ministry of the Interior amended and published the "Operation Directions for Establishment of Superficies on National Non-Public Use Land" (the "Operation Directions") on 30 September 2013. The amended Article 16-1 of the Operation Directions provides that if a building built by a superficiary of a national non-public used land is a condominium building, meeting certain conditions, a part of the building may be assigned to others along with the proportionate share of superficies. Upon the amendment, the rights of assignees of "superficies buildings" will no longer be limited to the right to use the building. They will further be able to obtain title to the condominium buildings and the proportionate share of the superficies of the land on which such building locates.
According to the Operation Directions, the conditions for a superficiary to assign a part of the superficies and ownership of the building to others are as follows: (1) An entrust management agreement without consideration has to be signed by the original superficiary and the authority administering the superficies (the "Authority") under which the original superficiary is responsible for the management of the superficies during the term of the superficies, including collecting the rents from the assignees of the superficies; in addition, a performance bond is required; (2) the assignees' commitment of assuming all of the rights and obligations under the superficies agreement is required; and (3) the assignees' commitment of transferring the ownership of the building (i.e., the condominium buildings) to the state without consideration and moving out unconditionally when the superficies expires.
The amount of the aforesaid performance bond is equal to five times the amount of the annual rent of the superficies for the year in which the entrust management agreement is entered into. In case the original superficiary has violated his/her obligations under the entrust management agreement, the Authority may deduct the relevant amount from the performance bond. After the deduction of the performance bond, the trustee shall make up the difference from the original amount upon the notice of the Authority . If the amount of difference which the original superficiary fails to make up within the time limit has reached 2/5 of the performance bond, the Authority may terminate the entrust management agreement and claim for the amount equal to five times the amount of the annual rent of the superficies at the time of the termination as liquidated damages.
By virtue of the amendment to the Operation Directions, there is now a legal basis for assigning the superficies of national non-public used land and a part of the building thereon. In this case, when there are residential buildings on the national land to be built and sold by the developers, the assignee of the superficies will likely be able to obtain a mortgage loan from a bank. However, as the aforesaid Operation Directions' amendment had only just been promulgated, not only is the willingness of financial institutions to extend facilities with such collaterals uncertain, but also the loan-to-value ratio, interest rates and other supporting measures are, likewise, uncertain for now. The impact and influence on the real estate market in Taiwan which may arise from the aforesaid Operation Directions' amendment remain to be seen.