According to Article 7 of the Provisional Measures for the Administration of Allocated Land Use Rights, the transfer of allocated land use rights involves two methods: separate transfer of the land itself and transfer together with the buildings on the land.

The separate transfer of allocated land use rights. Article 11 of the “Interpretation by the Supreme People’s Court on Issues Concerning the Application of Law in the Adjudication of Disputes over Contracts Involving State-Owned Land Use Rights” stipulates that if a land user enters into a contract with a transferee to transfer allocated land use rights without obtaining approval from the government authorized to grant such approval, the contract shall be deemed invalid. However, if, prior to filing a lawsuit, the government authorized to grant approval has approved and completed the procedures for the transfer of land use rights, the contract shall be deemed valid.

According to Articles 11 through 13 of the Interpretation, after the transfer of allocated land use rights has been approved by the people's government with the authority to approve such transfers, the following handling methods are available:

1. The land use right holder shall handle the transfer procedures for land use rights with the government’s land administration department, converting allocated land into granted land. Subsequently, the land use right holder may transfer the land again; in this scenario, what is being transferred is the granted land.

2. The transferee directly handles the transfer procedures with the government’s land administration department. In this scenario, the underlying reality is that the government department is reclaiming the land and then re-leasing it.

3. The government’s land administration authority will reclaim the land-use rights from the current land-use right holder and then allocate them to an eligible transferee. This situation essentially constitutes a re-allocation of land-use rights.

In the latter two methods, the land transfer contract concluded between the land use right holder and the transferee shall be treated as a compensation contract.

As can be seen, the transfer of allocated land use rights does not involve direct assignment; only after such rights are converted into granted land use rights does the issue of transfer arise.

The land-use rights allocated for a plot are transferred together with the buildings erected on it. According to Article 40, Paragraph 1 of the Urban Real Estate Management Law, when real estate involving allocated land is transferred, approval from the government must be obtained. After the government approves the transfer, the transferee shall handle the procedures for transferring the land-use rights and pay the land-transfer fee.

Here arises a question: If a transfer is made without government approval, is such a contract still valid? The “Urban Real Estate Management Law” and related laws and regulations do not contain any mandatory provisions explicitly addressing this issue. However, in the case of the housing sales contract dispute between Pulicorp and Ruidkang Corporation—a judgment handed down by the Supreme People’s Court (Case No.: (2014) Min Kang Zi No. 41)—the parties agreed to sell Pulicorp’s Pulicorp Mall, together with the allocated land-use rights belonging to the mall, to Ruidkang Corporation. This agreement was held to be valid.

The key point of the court’s ruling is that Pulic Mall was approved by the Hohhot Municipal Government during the urban renewal process for the development and construction of commercial residential properties on allocated land. In the agreement between the two parties, it was explicitly stated that the land under the mall was designated as allocated land, and the transaction price was agreed to include the land premium, as well as the costs associated with Pulic Company’s submission of approval applications to government authorities and the completion of transfer procedures. The “Urban Real Estate Management Law” and its accompanying “Interpretations” are designed to uphold the state’s land management order and to crack down on any unauthorized changes in the use of allocated land that would harm national interests. In this case, however, the transaction did not exceed the scope of the municipal government’s preferential policies nor undermine the objectives of national land management. The Municipal Government’s Office of Legal Affairs also replied in writing stating that, provided Ruidekang Company pays the land premium and the application is duly reviewed and approved, the land transfer procedures could be carried out. Therefore, the property sale involved in this case will not result in a loss of control over the state-owned allocated land or cause any damage to national interests.

It is evident that, provided the property development procedures are complete, the transfer is lawful, and the transaction has been approved by the government authorities, even if the transferred land was originally allocated without separate approval, as long as the parties involved subsequently pay the land premium, the transaction should be recognized as valid.