When the dragon meets the lion: In the third in EG’s series, Martha Grekos compares the very different planning systems in China and the UK
Over the past few years we have seen China’s role as an investor evolve from making indirect investments through sovereign wealth funds to Chinese businesses now becoming co-funders, co-developers and co-contractors in major UK development and infrastructure projects.
As both countries learn from each other, it is beneficial to be aware of the comparisons and contrasts between the UK and Chinese planning systems.
Planning in China
Since 2008, the Chinese urban planning system consists of two tiers: the master plan, which outlines the general land use pattern of a city, and the detailed plan, which deals with the areas that face immediate development or are specified in the masterplan. The detailed plan is composed of the detailed development control plan and the urban design and parcel-based detailed construction plan. The evaluation and implementation of such plans is normally of secondary consideration.
Land in China is either state-owned or collectively owned, depending on the location. Land in the urban areas of a city is state-owned. Land in the rural areas of a city and all rural land is owned by the collectives, which are generally unincorporated groups of workers in a village or town.
Land cannot be owned by individuals, enterprises and other organisations. However, the right to use land can be granted to, or otherwise acquired by, these individuals, enterprises or organisations, and they are permitted to hold, lease and develop such land on that basis.
Land rights
Land use right (“LUR”) is the right to use a piece of land in China for a term of years in accordance with a set of conditions of use. LURs are initially acquired either by “compensatory” grant from the government or “allocation” by the government without payment of land premium. Compensatory LURs may, subject to certain conditions, be transferred to subsequent owners. Allocated LURs cannot be transferred, assigned or let. Since only compensatory LURs can be freely transferred in law, such LURs, together with any property erected upon the land, are considered to constitute real estate from an investor’s perspective.
The land administration bureau administers the government-owned land by entering into land grant contracts with individual land users for the issue of LURs for a parcel of land. LUR owners are obliged to strictly observe the land use conditions prescribed in the land grant contract, including plot ratio, site coverage, height restrictions, planning parameters, development restrictions and time limits for commencement and completion of the construction work. A land parcel that remains idle after the prescribed commencement date of development may be subject to idle land fines, or even re-entry by the government without compensation.
The LUR owner and the users and occupiers of the land use rights are required to use the land pursuant to the purpose designated by the government. In the case of compensatory LURs, the designated purpose of the land is set out
in the LUR grant contract. LUR owners and users shall not change the purpose without the prior consent of the land and planning authorities. Unauthorised change of the designated purpose may result in re-entry by the government without compensation.
Permits and certificates
Generally speaking, the following permits and certificates are required for a real estate construction development project in China:
- LUR certificate, issued by the local land administration bureau;
- construction land planning permit, issued by the local planning bureau;
- construction project planning permit, issued by the planning bureau at the province or municipality level;
- construction engineering commencement permit, issued by the construction bureau at the provincial or municipal level; and
- sale (pre-sale) permit, which is only needed when a developer intends to sell commercial housing (residential or industrial purpose).
As all of these permits are regulated by local regulations and guidelines, the timing for obtaining permission varies between cities. However, the construction project planning permit must be issued within 15 days of receipt of the application if it meets the required conditions.
Prior to obtaining the various governmental permits and certificates, the developer must have obtained a feasibility report for the project, complete with detailed planning design parameters and renderings, and put down adequate development funds. Then, the relevant application forms and documents need to be submitted to the department in charge of issuing the permit. In approving the applications, the department will work and consult with other municipal authorities overseeing land use, planning and other governmental functions.
Also, before land is granted or allocated explicitly for real estate development, the land administration bureau will have to provide a written opinion on the nature, scale and development terms of the development project; the conditions of the urban planning design; the requirements in respect of construction of infrastructure and public works; the definition of title after the infrastructure has been constructed; and resettlement in connection with the project.
This written opinion will serve as one of the premises for the grant or allocation of LURs.
If the owner wants to change the land use specified in the LUR grant contract, consent must be obtained from the grantor and the urban planning administration of the municipality or county. An agreement on the alteration of the contract for the grant of LURs or a new contract for the grant of LURs must be signed and the fee for the grant of LURs must be adjusted accordingly.
Third party rights
Third parties do not have a right to object to official permissions for the development or carrying on of a designated use of real estate. If the land where development is to take place currently has residents on it, the government will have to requisition the buildings and compensate the residents under law. In such a scenario, the residents may be able to indirectly object to the development by applying for an administrative review of, or filing an administrative lawsuit against, the decision to requisition the building.
An applicant does have the right of appeal against a relevant authority’s decision in respect of an application for permission for development for the carrying on of a designated use. If the decision is an administrative decision, there is a right to apply for administrative review of the relevant authority’s decision to refuse the permits within 60 days of the refusal. Depending on the level of the authority making the decision, the application for administrative review is made to the appropriate local department. If the applicant is still unhappy with the decision of the review, an appeal can be made to a people’s court equipped with the facilities of an administrative adjudication division.
Planning in the UK
Most new buildings, major alterations to existing buildings and significant changes to the use of a building or piece of land need planning permission from the local planning authority (“LPA”).
There are two main sorts of planning application, full and outline, usually on standard application forms. Full applications require complete details of the proposed development, including access, layout and design. Outline applications need less detail, and are used first to find out whether a development is acceptable in principle. There are also definitions of types of development that are permitted without the need for a planning application and defined “use classes” where change of use within a class is normally permitted.
Anyone can make a planning application, even for land that they do not own. If a developer wishes to submit a planning application, the relevant information required and the correct fee must be submitted to the LPA so it can validate and process the application. For certain proposals developers will also have to consult with residents and affected groups before making an application to the LPA, and show how those comments were taken into account in the scheme proposals.
In the UK, development also has to be compatible with European Union obligations, as incorporated into UK law, such as the Environmental Impact Assessment Directive, which provides for a procedure to be followed for certain types of proposed development.
Application decisions
Once the LPA has received a planning application it will publicise the proposal. The specific publicity requirements will depend on the type of application. The formal consultation period will normally last for 21 days. Anyone may comment on a planning application during this period.
Whether planning permission is granted or not will depend on whether the application is in line with the national and local policies unless other strong planning reasons or material considerations dictate otherwise. In the UK, the planning system is “plan-led”.
The decision may be taken either by the LPA’s planning committee, made up of elected councillors, or by a planning officer through delegated powers. LPAs normally have a set of criteria, based on the size and nature of development, to decide whether a decision will be delegated, or if the planning application should be considered at committee. When the decision is taken by the committee, councillors will hear the recommendations from planning officers, and the applicant and/or those objecting to the application may be able to register to speak at the meeting. The planning committee agenda and reports are generally made available to the public to view five working days before the date of the meeting.
As an alternative to refusing an application, LPAs may grant permission, subject to conditions, or might set out obligations (such as agreements under section 106 of the Town and Country Planning Act 1990) that would make the development acceptable. In England and Wales, since April 2010, there is also a new system of funding infrastructure through planning charges that the LPA can ask developers to pay for most new building projects, known as the community infrastructure levy.
An LPA usually has up to eight weeks to make a decision on minor applications and up to 13 weeks for major development, unless an application is subject to an environmental impact assessment, in which case a 16-week limit applies.
Appeals
Appeals against refusal are made to the Planning Inspectorate. They are dealt with by written representations, a hearing or a public inquiry. Members of the public can speak at hearings and inquiries. Only the person who made the planning application has the right to appeal to the Planning Inspectorate. If they are not happy with the appeal decision, they have the right to challenge it by review through the court. Appeals by third parties can only be made to the court by applying for a judicial review.
Planning appeals can be “recovered” from the Planning Inspectorate by the secretary of state for communities and local government to make his own determination, if the case raises particular issues that justify a ministerial decision. The secretary of state also has the call-in power to take over particular planning applications rather than letting the LPA decide.
Special considerations
There is a separate National Planning Policy Framework and legislation for nationally significant infrastructure projects (“NSIPs”), such as power stations and major transport schemes. A series of national policy statements set out national policy on different types of NSIPs. There are thresholds above which certain types of infrastructure development are deemed to be nationally significant and will be examined as NSIPs.
The Planning Inspectorate is responsible for the administration of applications for NSIPs. A project application will be examined by the planning inspectorate and a recommendation will be made to the relevant secretary of state, who will make the final decision. The process is timetabled to take approximately 12-15 months from the time that the application is officially accepted.
Be aware of the differences
UK-China relationships will grow over the next decade. The two countries have recently committed to building a global comprehensive strategic partnership, including co-operating on economic development on some projects and investments that form part of major initiatives, such as the national infrastructure plan and the so-called northern powerhouse.
An understanding of both planning systems is therefore vital to appreciate the differences between them and the challenges that can arise in obtaining planning permission for major development projects in the UK.
Differences at a glance
| UK PLANNING SYSTEM | CHINESE PLANNING SYSTEM |
|---|---|
| “Plan-led” system. Heavy focus on whether application is in line with national and local policies unless other material considerations dictate otherwise | “Plan-led” system in some major cities since 2008. Evaluation and implementation is a secondary consideration |
| EU legislation and case law impacts upon planning law* | N/A |
| Anyone can make a planning application, even for land that they do not own | Land use right owners can only make such an application for their specific land parcel(s) |
| Local planning authority (“LPA”) is responsible for determining planning applications within its area. The Planning Inspectorate is responsible for the administration of applications for nationally significant infrastructure projects (“NSIPs”) | There is a hierarchy of government departments responsible for planning and construction |
| Statutory time limits of eight weeks to make a decision on minor applications, 13 weeks for major development, and 16 weeks if an application is subject to an EIA | Timing for obtaining planning permission varies between cities |
| Prior to application, a developer must have consulted residents and affected groups and show how those comments were taken into account in scheme proposals | Prior to application, a developer must have obtained a feasibility report for the project, complete with detailed planning design parameters and renderings, and put down development funds |
| In order to apply, a developer must submit relevant information required with the correct fee to the LPA so it can validate and process the application | In order to apply, relevant application forms and required documents need to be submitted to the department in charge of issuing the permit |
| Once the application is validated, the LPA will publicise proposal for 21 days. Anyone may comment during this period | Once an application is received, the department in charge will work and consult with other municipal authorities. The public is not consulted |
| Section 106 agreements and community infrastructure levy may apply | N/A |
| Applicants have a right of appeal to the Planning Inspectorate: within six months from the date on the decision notice, or from the expiry of the period which the LPA had to determine the application | If a decision is an administrative decision, the applicant has a right to apply for administrative review of the relevant authority’s decision to refuse permits within 60 days of the refusal |
| Third parties can appeal against an LPA’s decision by way of judicial review, within six weeks of grant of planning permission | Third parties do not have right to object to official permissions for development or carrying on of a designated use of real estate |
| There is a separate planning policy framework and legislation for NSIPs | N/A |
*In addition, Wales, Scotland and Northern Ireland each has its own planning system devolved from central government
Martha Grekos is a partner and head of planning and infrastructure at Irwin Mitchell
