Shanghai legislates on letting: the Housing Leasing Regulations, part one

1. The rules on group renting

The most striking provision of the Regulations is undoubtedly the express ban on using a dwelling for group renting.

Group renting means dividing a bare flat into separate rooms, fitting them out roughly and then letting them cheaply to a large number of people.

The Regulations provide that a dwelling let as housing must not, in breach of the rules, be used for group renting.

The text of the provisions

Article 15 A dwelling let as housing shall comply with the following requirements:

...

(3) the smallest letting unit is a room as originally designed, or as converted with the approval of the relevant department;

(4) kitchens, bathrooms, balconies, storage rooms and other space not intended for living may not be let separately as living accommodation;

(5) the number of occupants of each room and the floor area per person comply with the relevant municipal rules;

...

It is prohibited to use a dwelling for group renting in breach of items (3) to (5) of the preceding paragraph.

The municipal rules referred to are those in the 2014 Implementation Opinion on Strengthening the Comprehensive Management of Rented Housing in Residential Compounds of This Municipality, jointly issued by ten bodies including the Shanghai Housing Support and Building Administration Bureau, the Shanghai High People's Court, the Shanghai Urban Management and Law Enforcement Bureau, the Shanghai Public Security Bureau and the Shanghai Justice Bureau. Part three of the Opinion sets out the detail:

1. a room originally designed as living space is divided or built over and then let, or is let by the bed;

2. space originally designed as a kitchen, bathroom, balcony or basement store is let for people to live in;

3. the floor area per occupant of a let room is less than 5 square metres;

4. more than two people occupy each let room, other than persons between whom there is a legal duty of support, maintenance or dependency.

In addition, the Measures of Shanghai Municipality for the Administration of the Lease of Residential Housing, as revised in 2021, fix the smallest letting unit:

A residential dwelling let as housing shall be let by the room, a room as originally designed as living space being the smallest unit; it may not be divided or built over and let, nor let by the bed.

Space originally designed as a kitchen, bathroom, balcony, basement store or the like may not be let for people to live in.

The counterpart of group renting is flat-sharing.

Whereas group renting is prohibited by law, flat-sharing means that a tenant rents one room in a flat of several rooms, the other rooms being rented by others, and the tenants share the rent of the whole. Flat-sharing not only reduces the cost to each tenant but goes a long way to preventing housing from being wasted, and in cities with large populations it is the rational choice. The law also protects the lawful rights of both sides to a flat-sharing arrangement.

2. Liability for group renting

Compared with what went before, the Regulations set out in detail the liability for using a dwelling for group renting, so that penalties will in future rest on a clear legal basis.

The text of the provisions

Article 52 Where a dwelling is let as housing in breach of the relevant rules, contrary to paragraphs 2 and 3 of Article 15 of these Regulations, the district housing department shall order correction within a time limit and impose a fine of not less than RMB 10,000 and not more than RMB 50,000; where the breach is not corrected within that time, a fine of not less than RMB 50,000 and not more than RMB 200,000 shall be imposed.

3. Supervision tightened

In recent years long-term rental flats have collapsed, and sublandlords have disappeared with tenants' money, again and again. To curb this, the Regulations tighten supervision of housing rental companies, of real estate agencies and of individual sublandlords.

01

Individual sublandlords

Sublandlords

As to individual sublandlords, the Regulations provide that a person who, for profit, sublets the prescribed number of dwellings must register as a market entity in accordance with law. This should reduce the practice of sublandlords vanishing with the money while the information stays opaque, to the harm of tenants and of the original landlords.

02

Management of practitioners

The Regulations set out in more detail the supervision of housing rental companies and real estate agencies. As to the people who work in them, they establish a system under which practitioners work under their real names, and require the company or agency to obtain a practice information card for each of them.

03

Supervision of company funds

The Regulations also tighten supervision of the funds of rental companies. In response to the repeated collapse of long-term rental flats, they require a company that rents dwellings from individuals in order to sublet them to open, as prescribed, a dedicated escrow account for rental transaction funds with a commercial bank. Rent collected from a tenant more than three months in advance, and any deposit exceeding one month's rent, must be paid into that account.

04

Online platforms

As to the flood of false listings online, the Regulations require that where a listing is published through an online platform, the operator of the platform verify the materials submitted by the person publishing it and keep a record on file. Where false materials are supplied and the operator fails to take the necessary steps, such as deleting or blocking the listing in good time, the operator bears joint liability.

4. Subsidised rental housing

To ease the shortage of suitable housing on the rental market and to help new arrivals in the city, young people and other particular groups with their housing difficulties, the state and Shanghai have put effort into subsidised rental housing, and the Regulations devote a chapter to it.

Under the Regulations, subsidised rental housing is to be concentrated in places where demand is greatest and where life and transport are convenient: the new towns and other areas that people are moving into, university districts, industrial and commercial centres, and the areas around metro stations.