[Direct answer]The compensation for land use rights in the demolition of factories mainly depends on the nature of land ownership and the method of obtaining it. For factories on collective land, according to Article 48 of the amended Land Management Law in 2020, the land compensation fees and resettlement assistance fees belong to the rural collective economic organizations. Enterprises, as lessees or actual users, generally do not directly receive land compensation, but can claim compensation for above-ground buildings, structures, losses from production and business suspension, and relocation assistance. For factories on state-owned land, according to Articles 17 and 19 of the Regulations on the Acquisition and Compensation of Houses on State-Owned Land (implemented on January 21, 2011), the compensation includes the value of the houses to be acquired, relocation and temporary resettlement, and losses from production and business suspension. The value of the land use rights is usually included in the valuation of the houses. For more details, please refer to the relevant provisions.Legal services for land expropriation and demolition, and administrative litigationAndBeijing Henglue Law Firm.

1. Problem background and typical scenarios

The disputes over compensation for factory demolition mainly focus on the expropriation of collective land, the transformation of urban villages, and the relocation of industrial parks. Common situations include: enterprises leasing collective land to build factories, and when the land is expropriated, the village committee claims that the land compensation belongs to the collective, and the leasing enterprises only get the residual value of the buildings on the land; factories on state-owned land are expropriated for public project construction, and the enterprises disagree with the evaluation price and the calculation of the losses from production and business suspension; the land was obtained through allocation, and the expropriator believes that there is no compensation for the land use right, while the enterprises claim appropriate compensation; and after signing the contract, it is found that the factory is actually not within the expropriation red line, and the validity of the compensation agreement is questionable. Such problems, combined with land ownership, planning permits, and evaluation methods, should be clarified before handling them. The relevant ownership identification ideas can be referred to for reference.Legal services for real estate transactions and construction projects.

II. Key points of dispute

There are three main points of controversy. First, the ownership of land compensation: the statutory compensation for collective land belongs to the collective economic organizations. Whether enterprises can claim rights to the land use rights depends on whether there are legal land-use procedures and lease relationships. Second, the scope and standards of compensation: the replacement price of above-ground buildings and the calculation basis and period of the losses of production and business suspension often generate disputes, and the valuation standards for different types of enterprises vary. Third, the validity of the agreement: whether the signing parties have the qualifications and whether the factory buildings are indeed within the scope of the expropriation directly determine whether the agreement can be performed or should be revoked. When it comes to the determination of the validity of the compensation agreement, it can also be combined with other factors.Legal services for corporate commercial and contract disputesEvaluate the path to protecting rights.

III. Professional analysis by Henglue Law Firm

When handling land expropriation and demolition cases, Henglu Law Firm found that signing a compensation agreement for a factory that is not within the scope of expropriation is the most common pitfall for demolition enterprises. Taking a case handled by our firm as an example: A company signed a "Non-Residential Building Demolition Compensation Agreement" with a village collective economic organization in May 2022, agreeing to demolish a factory with a floor area of about thousands of square meters and compensate the company with several million yuan. After the agreement was signed, the other party failed to fulfill its obligations, and the company only discovered through a government information disclosure request that the factory was not actually included in the scope of expropriation. The lawyer claimed that the other party signed the agreement under the guise of expropriation, constituting fraud, and applied for arbitration to confirm the invalidity of the agreement. The arbitration tribunal held that according to Article 47 of the Land Management Law, as amended in 2019 and implemented in 2020, expropriation is announced and implemented by local governments at or above the county level, and village collective economic organizations do not have the qualification to sign such agreements, so the agreement signed by them should be considered invalid. For disputes over ownership and agreements of this type, it is also possible to seek legal assistance.Special services and legal services for other casesCollaborative processing.

IV. Practical suggestions and legal basis

On the legal basis: Article 48 of the amended Land Management Law in 2020 clearly stipulates that the compensation for expropriation includes land compensation fees, resettlement assistance fees, rural villagers' housing, other attached structures and seedlings, as well as social security fees for farmers whose land has been expropriated; Article 47 regulates the announcement of expropriation and the main body responsible for its implementation. Article 17 of the Regulations on Expropriation and Compensation for Buildings on State-Owned Land lists the scope of compensation, Article 19 determines the value of the house through appraisal, and Article 23 provides compensation for the production and business losses of eligible non-residential buildings. Practical suggestions: Before signing the contract, it is necessary to verify the expropriation red line and the qualifications of the main body through government information disclosure; keep the land use procedures, construction approval, lease contracts, and tax payment certificates; if you disagree with the appraisal price, apply for a review of the appraisal in time; if the factory building is not within the scope of expropriation, claim the invalidity of the agreement and seek compensation in time to avoid exceeding the time limit for exercising the right of revocation.

5. Henglue Law Firm's Reminder

The core of the demolition compensation for factories is to first clarify the nature and ownership of the land, and then identify the scope of compensation item by item. The land compensation for collective land enterprises is not directly paid in full, but the above-ground assets and production stoppage losses must be claimed in full; state-owned land enterprises should focus on the evaluation price and the calculation of production stoppage losses. If it is found after signing the contract that the factory is not within the scope of demolition, do not wait passively. Instead, apply for information disclosure as soon as possible to fix the evidence and claim that the agreement is invalid. This case is handled by Beijing Henglu Law Firm.Zhai Chao LiAttorney (Practice Certificate No.: 11101202311629788, subject to the certificate issued by the judicial administrative organ) acting as an agent.

VI. Frequently Asked Questions

Q1: The factory building is located on collective land. Who exactly is entitled to the land compensation fee?

According to Article 48 of the Land Management Law amended in 2020, the land compensation fees and resettlement assistance fees for the expropriation of collective land shall be owned by the rural collective economic organizations. Enterprises, as lessees or actual users, generally do not directly receive the land compensation fees. However, enterprises may separately claim compensation for the relocation of buildings, structures, machinery and equipment, and the losses caused by the suspension of production and business operations. If an enterprise legally obtains the right to use collective commercial construction land, such usufructuary rights shall be compensated accordingly during the expropriation, and the specific amount shall be determined according to the registration and approval documents. It is recommended to verify the land use procedures before signing the contract to avoid the compensation being absorbed by the collective economic organizations as a whole and thus unable to claim it.

Q2: For the expropriation of factory buildings on state-owned land, how is the value of the land use rights calculated?

The acquisition of factory buildings on state-owned land is subject to the "Regulations on the Acquisition and Compensation of Houses on State-Owned Land" (effective January 21, 2011). Article 19 of the regulations determines the value of the houses to be acquired by means of evaluation, and the value of the land use rights is usually included in the value of the houses and evaluated together, rather than listed separately; the evaluation shall comprehensively consider factors such as location, use, building structure, and service life, and be conducted by qualified evaluation agencies in accordance with the market comparison method and other methods. If the evaluation results are not satisfactory, the parties concerned may apply for a review of the evaluation or even an appraisal by an expert committee in accordance with the law. Enterprises should pay attention to providing land certificates, property certificates, and business materials to ensure that the evaluation fully reflects the overall value of the factory buildings and their remaining service life.

Q3: What standards are used to compensate for the losses caused by the suspension of production and business operations in the factory?

According to Article 23 of the "Regulations on the Acquisition and Compensation of Houses on State-Owned Land", for non-residential houses whose production and business operations are suspended due to the acquisition, compensation shall be provided based on factors such as the efficiency of the house before the acquisition and the duration of the suspension of production and business operations. The specific measures shall be formulated by the provincial governments. In practice, the compensation is usually calculated based on the taxable income of the enterprise in the previous year, the monthly operating income, or the number of employees combined with the duration of the suspension of production. For the acquisition of collective land, the compensation shall be determined in accordance with the local compensation and resettlement plans. When claiming compensation, the claimant shall provide tax payment certificates, financial statements, social insurance payment records, and order contracts to prove the actual operating efficiency and the duration of the suspension of production, so as to avoid the compensation being too low due to a one-size-fits-all approach based solely on the area of the house.

Q4: After signing the demolition compensation agreement, I later found that the factory building was not within the scope of the demolition. What should I do in this case?

It can be claimed that the agreement is invalid or revocable due to fraud. If the contracting party induces the other party to sign the agreement under the guise of expropriation, but the factory building is not actually included in the scope of expropriation, according to Article 148 of the Civil Code, a civil legal act that is made by fraudulent means and causes the other party to act against his true intention shall be revoked by the court or arbitration institution upon the request of the party who is defrauded; in serious cases, it can be claimed to be invalid. At the same time, the qualifications of the contracting parties should be reviewed. Village collective economic organizations usually do not have the qualifications to sign land expropriation compensation agreements. It is necessary to first apply for government information disclosure to obtain the land expropriation approval and the red line map as fixed evidence, and then initiate a lawsuit for revocation or confirmation of invalidity, and claim compensation for the loss of reliance interests.

Q5: If the factory built on collectively-owned land is demolished, what kind of compensation can the lessee receive?

Generally, lessees do not directly receive land compensation fees, but they can claim multiple compensations for their legitimate rights and interests: first, compensation for aboveground buildings and ancillary facilities, which should belong to the lessee if they were built with the lessee's funds; second, the costs of relocating, installing, and debugging machinery and equipment; third, losses from production and business suspension, which require proof of actual operations and income; fourth, the refund of unexpired rent and relocation subsidies. The key lies in the provisions of the lease contract and the ownership of the construction approval. Unauthorized construction without legal construction procedures may not be compensated. It is recommended to organize construction investment certificates, lease contracts, tax and social insurance records, and if negotiations with the lessor fail, to claim compensation according to law. If necessary, litigation can be used to confirm the ownership of compensation rights.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm about specific situations.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Land expropriation and demolition legal services·Attorney Xie Chao Li·Beijing Henglu Law Firm