The Great Chinese Divorce Fraud

Divorce rates are rising in China for many reasons, but one recently uncovered reason is found in a family which divorced 23-times in one month! The new Chinese divorce fraud is the hot ploy to avoid Chinese property laws and make money.

Chinese Divorce Fraud

23rd Time is a Charm

Unlike older generations who may have settled for an unhappy marriage, divorce is no longer socially taboo in China. That may have led to one family in the city of Lishui to take the new divorce fraud to extreme lengths, churning through 23 divorces and weddings in a month.

Divorce is becoming simpler in China. Couples can either register a divorce with the civil affairs authority, indicating they have agreed to go their separate ways, or they can sue for divorce through the courts, which can rule on custody of children and how to dispose of any assets.

In the first six months of this year, 1.85 million couples registered for divorce with the civil affairs authority alone, an increase of more than 10 per cent compared with the same period last year. Three decades ago, in 1986, 460,000 couples registered their divorces with the civil affairs authority. By 2016, that annual number had risen to 4.15 million.

However, the Lishui family was not divorcing for typical reasons. The Chinese government has limited each household to a maximum of two apartments. Other notable policies allow potential home buyers who don’t already own property to make much lower down payments as well as enjoy lower tax and mortgage rates.

The new divorce fraud was aimed at getting more money from the government and developers when the Lishui family house was demolished for a new development. Under the system, each member of the household would be entitled to 40 square meters of space in the new development.

In China though, the preponderance of fake divorces in any given city may indicate the failure of real estate policy at the local level.

Florida Divorce

I’ve written about no fault divorce before. No-fault laws are the result of trying to change the way divorces played out in court. In Florida no fault laws have reduced the number of feuding couples who felt the need to resort to distorted facts, lies, and the need to focus the trial on who did what to whom.

Florida abolished fault as grounds for filing a divorce. Gone are the days when you had to prove adultery, desertion or unreasonable behavior as in England.

The only ground you need to file for divorce in Florida is to prove your marriage is “irretrievably broken.” Additionally, the mental incapacity of one of the parties, where the party was adjudged incapacitated for the prior three year, is another avenue.

The Great Fraud of China

It all started with Mr. Pan, who lived in the house, remarrying his ex-wife, and allowing her to qualify for the compensation plan. Two weeks later, he divorced her and married his sister-in-law, adding her to the plan. On it went, with each new family member enlarging the amount of space to be awarded as compensation, until government authorities discovered the house suddenly was home to 13 people, and promptly arrested 11 of them.

While it’s an extreme case in property-obsessed China – where would-be home buyers have to navigate a shifting array of property curbs – it’s probably more understandable given home prices in Lishui have surged as much as 31% in the past two years.

According to the compensation policy, people living in the village slated for renovation — even those who were not property owners — would be given minimum compensation of one 40-square-meter apartment as long as their household registration, or hukou, had been filed within the village by April 10.

When interrogated by police, Pan’s father — who had been party to the sham marriages and divorces himself — said he had assumed the family’s actions were legitimate since they had not violated China’s marriage law. “In doing this, we were just trying to get more compensation.”

According to the chief marriage lawyer at Beijing Yingke Law Firm:

Just because a person is following one law doesn’t mean they’re not breaking another. The family used a legal avenue to achieve an illegal end. The marriage law doesn’t forbid marriages and divorces — but in this case, the family used marriages and divorces as a means of committing fraud. While they didn’t violate the marriage law, they acted against the criminal law.

In April of this year, home buying policies in select urban areas were further tightened. Now, regardless of whether a divorced person is buying their first or second property, banks will evaluate them based on both their property ownership status and mortgage records — meaning even if they have no property registered in their name, an apartment they’re hoping to purchase can still be considered a second home, subject to a higher down payment and mortgage rate, if they have made previous mortgage payments.

The Bloomberg article is here.

 

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