An Analysis of the Legal Nature of Land Management Rights under the Separation of Three Rights

In line with farmers' wish to retain their contract rights and transfer their management rights, achieving the parallel separation of contract rights and management rights is a major innovation in China's agricultural land system. This year's No. 1 Central Document proposed defining the rights relationships among rural land collective ownership, farmers' contract rights, and land management rights, which requires first defining the legal nature and powers of each of the three rights, and land management rights, as a newly created independent form of right, especially need to be defined in a timely manner.

Land management rights are a right that becomes independent of contract rights only under transfer conditions

Generally speaking, land contractual management rights are the rights of contracting farmers, as members of the collective economic organization, to possess, use, profit from, and transfer contracted land. They may engage in agricultural production and operation on the land themselves, or transfer it to a third party to engage in agricultural production and operation.

In the absence of transfer, the contracting farmer enjoys land contract rights and land management rights as a “combined whole”; at this time, as a member of the collective economic organization, they enjoy the contract right embodied in “membership rights,” and as the actual operator of the contracted land, they also enjoy the management right to possess and use the land. From a legal perspective, the contracting farmer's land rights mainly include the above two rights, and “land contractual management rights” better encompass them, and can be understood as the “coupling” of contract rights and management rights. In other words, for the contracting farmer, these rights all belong to them, so as long as it does not involve the contracting farmer “disposing” of their own agricultural land rights, there is no need to draw a very clear distinction between contract rights and management rights down to the last detail.

In the case of transfer (mainly leasing), the third-party operator, through a contract, within a certain period, by paying rent to the original contractor as consideration, “borrows” the contractor's powers to possess and use the land to engage in agricultural production and operation, and obtains corresponding returns. In legal terms, this is actually a land debt-credit relationship in which the transferor and the third-party operator use land use as the main subject matter through a lease contract, and does not involve the separation of land contractual management rights themselves. However, in order to better define and protect the respective agricultural land rights of the contracting farmer and the third-party operator, and also to facilitate farmers' understanding and acceptance, the contracting farmer's land contractual management rights can be “divided into two”: land contract rights and land management rights. The contracting farmer “leases” (not completely or thoroughly transferring or handing over) the land management rights to the third-party operator, who obtains the corresponding rights, while the former retains the contract rights.

To a certain extent, from the very first day of agricultural land transfer, the transferee (third-party operator) begins the gestation and maturing of its own rights, and in fact becomes a form of right that needs to be independent, because more and more third-party operators are beginning to assert their own land rights and hope to receive policy support and legal protection.

The nature of land management rights is a creditor's right, not a real right

So, is the nature of land management rights a creditor's right or a real right? The following analysis examines five aspects: opposability, duration, transferability, content of rights, and consideration.

First, in terms of opposability, a real right is an exclusive right of dominion over a thing and can be asserted against third parties, while a creditor's right is a claim against a person and cannot be asserted against third parties. Land management rights are obtained when the transferee (third-party operator), through a contract, requests the transferor to “give” it the land management rights; this is a legal relationship between the transferor and the transferee, and generally cannot be asserted against third parties.

Second, in terms of duration, real rights are based on the principle of long-term existence, while creditor's rights depend on the agreement of the parties because of the contract, and can be one year, five years, ten years, or even longer. Judging from land management right transfer contracts in various places, some are for three years, some for ten years, and some until the end of the second round of contracting, mainly depending on the agreement of both parties.

Third, in terms of transferability, real rights are based on the principle of being transferable, while lease creditor's rights cannot be transferred without the lessor's consent. At present, the re-transfer of land management rights requires the written consent of the issuing party and the contracting farmer, and cannot be re-transferred at will.

Fourth, in terms of the content of rights, the holder of a real right “possesses” the powers of possession, use, and profit, while the creditor merely “borrows” the relevant powers of the real right holder within a certain period (the real-right powers of possession, use, and so on still belong to the real right holder), with the specific content determined by the contract. In other words, the original powers of use and profit under the real right are not truly transferred or given to the lessee. Through a land management right transfer contract, the transferee merely “borrows” the transferor's powers to possess and use the land, and returns these powers to the transferor after the contract expires, without obtaining real-right powers.

Fifth, in terms of consideration, a real right does not take consideration as an essential element, while a lease creditor's right naturally takes consideration as an element. While obtaining land management rights, the transferee needs to pay considerable land rent as consideration.

In summary, we believe that the nature of land management rights is a creditor's right, not a real right. This conforms to the “one thing, one right” principle of real rights, namely that only one real right with the same content can be established over one thing. Since land contractual management rights are already usufructuary rights, land management rights cannot then be established as a real right, and this is legislatively feasible. However, as protection for actual cultivators is emphasized in the future, the real-right attributes of land management rights can be strengthened, but their creditor's right “base color” and essence will not change.

The real-rightization of land management rights is a common practice in many countries, but at present it should not be emphasized too early or too quickly

From international experience, transforming lease rights similar to land management rights from creditor's rights into real rights is a common practice in many countries. Generally, because of the dominant position of ownership, the status of the lessee (that is, the lease right) appears relatively fragile. Considering that the fragility of lease rights may obstruct social production progress and stability of life, legislation in various countries has also worked hard to strengthen the lessee's status and promote the real-rightization of lease rights. In particular, the emergency measures formulated by various countries during World War II promoted this tendency toward real-rightization.

Although the postwar economic situation tended to stabilize and various countries gradually abolished emergency measures legislation, the real-rightization of lease rights, as the core part of such legislation, has taken root in the civil law of various countries as a permanent institution. It can be said that the real-rightization of immovable property lease rights, giving the lessee's powers in the debt relationship created by contract the effect of real rights, is a common tendency among countries. In particular, there are almost no exceptions to the two points of granting lease rights opposability and restraining the lessor's right to terminate freely. Germany specifically regulates “agricultural land usufructuary leases” and works to strengthen the lessee's status. Japan long ago enacted special laws such as the Land Lease Act and the House Lease Act, treating lease rights (land lease rights and house lease rights) as real rights. In this way, the rights of both parties to the lease, especially the lessee, have been effectively protected.

At present, calls for the real-rightization of land management rights have begun to appear in China. It should be said that this has a certain rationality, because it is conducive to the stability of land management rights and to confidence and enthusiasm for investment in agricultural production. In the long run, the real-rightization of land management rights is also an inevitable trend. But special attention should be paid to the fact that an important precondition for the above real-rightization of lease rights is that ownership is in an absolutely dominant and strong position. If the lessor's ownership (contract right) is not in an absolutely dominant and strong position, then granting the lessee's lease right (management right) real-right characteristics can easily challenge and infringe upon the former.

From China's practice, work such as the confirmation, registration, and certification of land contractual management rights and the standardization of land management right transfer behavior is still being advanced. Farmers' contract (management) rights have not yet received full and effective protection, and are the priority object of protection. While they have not yet been solidified and put in place, it is not appropriate to emphasize the real-rightization characteristics of land management rights too early or too quickly. On the whole, for a fairly long period in the future, the nature of China's land management rights should be defined as a creditor's right. The time for the real-rightization of land management rights has not yet arrived, and it must be advanced steadily and in an orderly manner, with sufficient historical patience. Of course, this does not mean that land management rights should not be protected. Next, as protection for actual cultivators is emphasized, the focus should be on controlling excessively rapid increases in land management right rents, truly implementing the tilt of newly added agricultural subsidies toward new agricultural entities, stabilizing actual cultivators' economic expectations, and enabling them to obtain reasonable income from agricultural production and operation.

In the final analysis, defining the nature of land management rights is fundamentally about gradually finding a rights “balance point” between contract rights and management rights in the future, so that each has clear rights and obligations and neither encroaches on the other. It must be clearly recognized that excessively protecting either party will cause the balance of rights between the two to become “unbalanced,” thereby affecting the psychological expectations and stability of the other party. In particular, excessive protection of the lessee will give the lessor a sense of psychological unease that “the leased land will be difficult to take back,” and thus they will be unwilling to lease out transferred land. This phenomenon was once especially prominent in Japan, and is worth summarizing and learning from.