Introduction
Recently, the Zhejiang Provincial Housing and Urban-Rural Development Department, the Zhejiang Provincial Development and Reform Commission, and the Zhejiang Provincial Natural Resources Department jointly issued the "Guiding Opinions on Steadily Promoting the Pilot Work of Autonomous Renewal of Urban Old Residential Areas" (Trial) (Zhejiang Construction [2024] No. 2, hereinafter referred to as the "Guiding Opinions"), effective from 1 May 2024. This directive follows more than three years after the release of the "Implementation Opinions on Comprehensively Promoting the Renovation of Urban Old Residential Areas" (Zhezhengbanfa [2020] No. 62, hereinafter referred to as the "Implementation Opinions"). The "Guiding Opinions" specifically address the renovation of urban old residential areas through a demolition and reconstruction model, distinct from the comprehensive remediation approach, thereby imposing greater complexity and stricter requirements.
Spanning four main sections over six pages, the "Guiding Opinions" are concise, clear, comprehensive, and highly practical. They anticipate certain challenges outlined in the "Implementation Opinions." Consequently, rather than interpreting the "Guiding Opinions," the authors intend to discuss several points of interest encountered during practical implementation, offering preliminary insights and recommendations.
I. Efficient and Legal Operation of the Owners' General Meeting and Owners' Committee
The "Guiding Opinions" clearly establish a framework of "government guidance and owners as the main body," emphasizing "autonomous renewal." This distinctly separates it from the administrative law context of government expropriation, returning the primary role to the property owners themselves. From project application to scheme formulation, review and approval, construction, and joint acceptance, the entire recommended procedure necessitates the active and lawful operation of the Owners' General Meeting and the Owners' Committee. Given the high population density, ageing demographics, and high rental rates typical of demolition and reconstruction projects, it is fundamentally essential that these bodies operate efficiently and in accordance with the law. Therefore, it is recommended that the prerequisite for autonomous renewal implementation includes a comprehensive compliance review of owners' self-governance.
II. Legality and Procedural Requirements for the Disposal of Property Rights
1. Applicable Law
The first step in autonomous renewal is demolition, which constitutes the direct disposal of property rights. However, due to the unique nature of real estate, this disposal is not an isolated individual action but rather an integrated and unified process. Article 278 of Chapter VI "Owners' Separate Ownership of Buildings" in the Civil Code clearly states that the reconstruction or rebuilding of buildings and their ancillary facilities must be collectively decided by the owners, requiring the consent of owners representing more than three-quarters of the area of the proprietary parts involved and participation by more than three-quarters of the owners. Although some argue that a unanimous vote should be required since demolition is not explicitly covered under this provision, it is the authors' opinion that demolition is inherently part of reconstruction. As such, Article 278 of the Civil Code should apply.
2. Remedies for Rights
Autonomous renewal of residential areas is likely to encounter dissent among owners. Whether a resolution passed by the owners' meeting can be directly enforced is questionable. The authors believe that even if the collective decision is approved, it remains a civil act without the protective benefits of administrative law. Should any owner oppose and initiate litigation against the resolution, the project should be suspended pending judicial confirmation of the resolution's validity. Additionally, establishing a reasonable objection or reconsideration period could limit delays and prevent repeated disputes. However, such periods should not interfere with the statute of limitations for litigation but merely serve to prevent prolonged indecision. It is noteworthy that governmental guidance and support should also be evident in such potential litigations, particularly concerning the filing and trial timelines.
3. Property-Related Rights
Demolition directly affects property-related rights, most commonly mortgages and leases. Unlike in expropriation scenarios where relocation housing is either certain (existing property) or government-backed (future property), the certainty of future benefits under autonomous renewal is less secure from the perspective of relevant rights holders. Given the construction period inherent in autonomous renewal, mortgages cannot be directly transferred, necessitating their prior removal by the owners. Leases, being voluntary agreements, do not trigger force majeure but may require compensation to tenants. These attached rights impose direct economic pressures on some owners involved in autonomous renewal.
III. Design of Renewal Schemes
Autonomous renewal presents greater challenges in resettlement compared to traditional demolition, relocation, or expropriation (the latter of which has been abolished). The latter approaches focus primarily on compensation and resettlement, with other requirements supporting project legitimacy through various permits and studies, predominantly led by government departments that can efficiently manage conflicts. In contrast, autonomous renewal involves collective decision-making by multiple owners prioritising their own interests. While professional entities may be commissioned to draft schemes, the ultimate decisions rest with the owners, necessitating careful consideration of organisational planning, fundraising, property disposal, and project design to balance diverse interests. The following issues require context-specific solutions:
1. Transitional Issues
The duration between demolition and the completion of new construction in old residential areas is unpredictable, making temporary housing a critical concern for owners. Unlike expropriation, where temporary relocation costs are typically covered, autonomous renewal requires owners to bear these costs themselves. Additionally, some elderly owners may have significant immediate needs for alternative housing. The "Implementation Opinions" mandate that, for demolition and reconstruction projects, the return rate of residents should not be less than 60%, coupled with a requirement to reduce real estate speculation. Consequently, the "Guiding Opinions" limit the sale of future housing vouchers to provide immediate relocation opportunities and address liquidity issues. Government support in housing supply through exchange schemes is necessary to facilitate the initial resettlement of some owners.
2. Selection of Returned Housing
Under expropriation, the selection of returned housing typically follows a predetermined order based on contractual priority, supplemented by the classification of resettlement housing types or determined through lottery systems. Autonomous renewal eliminates these mechanisms. Initially, owners consider factors such as price, orientation, structure, and floor level when purchasing or receiving their current homes. Determining selection order based on randomness or alphabetical order undermines fairness. Given that the "Guiding Opinions" stipulate optimisation of building spacing, setbacks, frontage, and density during renewal and reconstruction, ensuring that new buildings closely resemble the original ones is advisable. If it is feasible to replicate the original properties, it is recommended to allocate new units according to the original building levels and orientations. In cases where new units exceed the original floor levels, historical considerations should be respected, allowing owners to choose their original locations rather than original floor levels.
3. Mixed Land Ownership
Old residential areas may involve a mix of state-owned and collectively owned land, with differing resettlement models under expropriation. Owners may have entirely different expectations based on their land ownership status. The authors suggest maintaining a uniform standard of collective ownership subordinate to state ownership within the urban framework, as isolated instances are rare and relevant regulations generally apply to cities, county towns, and urbanised towns, where state ownership predominates.
4. Fundraising Issues
According to the "Implementation Opinions," renovation projects are subject to distinct policies based on whether they fall under comprehensive remediation or demolition and reconstruction categories. As a specialised document for demolition and reconstruction, the "Guiding Opinions" clarify that autonomous renewal should, in principle, be funded by property owners in proportion to their original building area. Although it does not fall within the scope of central government financial support for the renovation of urban old residential areas, it still offers policy support in certain aspects, including the sale of reconstruction increments, debt-based financial support, attraction of private capital, and tax and fee reductions. However, the boundaries of these measures must be carefully designed. For instance, the portion of reconstruction that increases due to the indivisibility of houses can be sold, but the use of sale proceeds should be restricted. Additionally, the scale of reconstruction must align with the de-realistation objectives, and debt financing by large-scale operational entities should not assume governmental fiscal responsibilities to prevent the creation of new local hidden debts. Facilities and equipment operated under Public-Private Partnerships (PPP) should fully consult owners and adhere to their decisions.
Despite these macro-level considerations, the immediate financial challenges at the household level—such as transitional rental housing, new property settlement, mortgage removal, and construction costs—are pressing, especially in old residential areas. Therefore, the authors believe that enhancing financial support and relief for individual owners is fundamental to project initiation. Designing specialised financial products is the most direct and efficient channel, and implementing cooperation models such as material-for-labor exchanges can alleviate demolition costs. Additionally, exploring the consolidation of land use rights to establish special funds for individual owners to manage upfront expenses is advisable.
IV. Application of Administrative Licensing in the Construction Phase
The ultimate outcome of autonomous renewal must be reflected in the progress and quality of the newly constructed residential areas. The "Implementation Opinions" recommend project general contracting (EPC) and comprehensive construction consulting management models, which are commendable. The authors also suggest that, provided there is sufficient competition, the administrative entry or franchise of relevant construction entities should be reasonably regulated, complemented by necessary compliance reviews.
The parameters related to autonomous renewal, including drawing approval, construction scheme design and implementation, and joint acceptance, require high levels of professional expertise. As the Owners' Committee or its authorised entities are unlikely to be professional construction practitioners, it is advisable to apply certain administrative licensing to key participants throughout the process. This approach can positively impact owners' confidence and ensure the smooth implementation of schemes.
Conclusion
The official stance on autonomous renewal is unequivocally "I intend to renovate." As a civil act, it must adhere to the principle of voluntariness, with owners bearing ultimate responsibility for outcomes. However, a review of both sets of opinions and the central government’s directives reveals that this civil act is far from simple and independent. It necessitates the intervention and support of administrative authorities, presenting a novel challenge in social governance and exemplifying the intersection of civil and administrative law. The core objective of autonomous renewal is "People’s cities built by the people and for the people." Market mechanisms may help resolve conflicts, but autonomous renewal must not become a battleground for commercial profiteering.
