Fake divorces: The way round China’s home restrictions

Saturday, May 15, 2010

BEIJING - More and more Chinese couples are registering for “fake” divorces, after they discovered a loophole in the country’s housing policy that prohibits married people from buying a second home.

The Chinese government recently imposed restrictions on a family purchasing a second home in a bid to curb any rise in property prices.

In April, the cabinet ordered banks to raise the down payment for a family to buy a second home to a minimum 50 percent of the value from the earlier 40 percent, with a mortgage rate at 1.1 times the benchmark interest rate.

Many couples are now planning on getting a “fake” divorce to cleverly beat the government’s restrictions on second-home purchases.

The new policy allows first-home buyers to pay only a minimum of 30 percent of the property price as down payment.

Li Guoliang, 42, is planning to “divorce” his wife, in an effort to buy a second home.A divorce could reduce the couple’s down payment by 140,000 yuan ($20,505) and mortgage payments by 100,000 yuan, said Li, who is considering buying a 720,000-yuan second home in Changsha, capital of Hunan province.

“After we get divorced, my wife will claim our house, so that I can apply for a mortgage as a first-home buyer since I don’t have a house under my name. And we will remarry after that,” Li was quoted as saying by Global Times.

The couple said they got the idea from a real estate agency.

“Such a ‘fake’ divorce may save the second-home buyer hundreds of thousands of yuan. So, why not do it?” said Chen Ping, a real estate agent in Changsha.

Meanwhile, Li Yi, a lawyer with Tenghui Law Office in Chongqing, said: “In the two weeks after the new rules were introduced, I received 16 clients hoping to get a favourable loan by getting a divorce.”

“It’s people’s choice to get married or divorced. We have no right to interfere, no matter what reason they did it for,” an official with the marriage registration office in Changsha city civil administration department was quoted as saying.

Although such a “fake divorce” itself doesn’t break any laws, people should be aware of the potential risks, Feng Kun, a lawyer, said. “What if your spouse changes his or her mind and refuses to remarry? It would be a big blow.”

There is no concept of “fake divorce” in the eyes of the law. Once divorced, the division of property on the divorce agreement is legally binding, Feng said.

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