Depending on the circumstances of the parties involved in a commercial lease agreement, the name of the tenant on the lease can vary where a wholly foreign owned enterprise is leasing the property.

Choosing who to name as the tenant is a significant issue and — as is typical for so much else in China — different cities require different procedures. The following two (2) approaches are typically followed in China for the tenant of a wholly foreign owned enterprise ("WFOE") to be: Specify the U.S. (or other foreign country) parent company as the tenant on the lease, or specify the WFOE as the tenant.

Determining how to proceed regarding the named tenant requires input from the local government authorities who will approve the WFOE. If your lease does not handle the lessee issue properly, the government generally will not approve your WFOE and/or you will end up having to incur all sorts of additional landlord and contracting costs.

Read the article here.

Takeaway:

• Check with local government authorities before naming the parties to a commercial lease agreement in China.