SPC: Is the lease term of 20 years + automatic renewal of the lease valid for 20 years stipulated in the lease contract?

Editor's note: This article is excerpted from the Q&A on Civil Trial Practice compiled by the First Division of Civil Trial of the Supreme People's Court (Law Publishing House, First Edition, July 2021).

Q: Is the agreement between the parties that the lease contract has a lease term of 20 years, and the automatic renewal agreement is valid for 20 years after expiration?

A: The lease period is the duration of the lease contract. Article 705 of the Civil Code stipulates: "The term of the lease shall not exceed 20 years. For more than twenty years, the excess part is invalid. At the expiration of the lease period, the parties may renew the lease contract; However, the agreed lease term shall not exceed twenty years from the date of renewal. "It follows that, unless otherwise specifically provided by law, the maximum period of a term lease contract shall not exceed 20 years. In practice, if the parties sign a lease contract stipulating a lease term of 20 years and automatically renew the lease for 20 years after expiration, the agreement on "automatic renewal of the lease for 20 years after expiration" should be found to be invalid.

The rationale for this is:

First of all, the lessor to the lessee in the lease contract transfer is only the right to use the income of the nature of the creditor's right, when the lease relationship is extinguished, the lessee should return the leased property to the lessor, if the lease contract is allowed to exist for too long, the general leased property will be exhausted, which will affect the return of the leased property, which is contrary to the original intention of the lease transaction. Secondly, the rights and obligations of the parties to the lease contract depend on the agreement between the parties, but the parties' ability to foresee is ultimately limited, and the strict adherence to the principle of the contract makes it extremely difficult to change the lease contract, limiting the maximum duration of the term lease contract, and helping the parties to the lease contract to adjust the conditions of the transaction in a timely manner. Finally, the parties to the lease contract stipulate a lease term of 20 years, and if the lease contract is intended to continue, the lease contract may be renewed before or at the expiration of the term of the term of the term lease, but the new term lease is still subject to a maximum term of 20 years. If, at the time of entering into a lease contract, the parties agreed in the contract to automatically renew for a period of 20 years after expiration, such an agreement is invalid because it is intended to circumvent the Civil Code's restriction on the maximum lease period of the lease contract.