Compliance in acquisition and restructuring of real estate intermediary firms

In a bid to access the capital markets, certain well-known real estate intermediary firms, such as Qfang.com and 5i5j.com, have taken the lead in dipping into the arena through acquisitions/restructurings. They see acquisitions/restructurings as important means for access to capital markets for their obvious speed, convenience and efficiency. From the cases of Qfang.com and 5i5j.com, which our law firm handled, it is evident that real estate intermediary firms are characterized by such industry features as numerous outlets, large personnel turnover, multi-headed industry regulations, etc. Against a rapid change in the landscape and continuous tightening in industry regulations, if a real estate intermediary firm wants to gain access to the capital markets through an acquisition/restructuring, a common issue that cannot be ignored is whether its operations are compliant.

Common compliance issues

A majority of compliance issues that real estate intermediary firms face is the operations of their outlets. Among the more common issues are the following:

Site selection. Certain outlets only consider such commercial factors as location, foot traffic, etc, when selecting sites, while ignoring such issues of legality as to whether a real estate certificate has been secured for the property in question, whether the purpose thereof is commercial, whether the written consent of the original lessor has been secured for the sublease, etc. This results in the lease of real estate, the title to which, or purpose of which, is defective and, in the course of operations, facing such possibilities as being unable to secure a business licence or receiving fines from the administrative authority for the unlawful use of the real estate.

Zhou Tao is a partner and Yuan Yueyun is a salary partner at Grandway Law Offices