Selling a Tenanted Property in Japan: Tenant Rights and Buyer Expectations

This article is part of the Zagdim Japan property series. It explains how to sell a rented property in Japan, what rights the tenant keeps, and how the lease passes to the buyer. It is written for owners living overseas whose Japanese property is currently let to a tenant and who are considering a sale. For the overall sale process, taxes and remittance, see the main article “Think About Your Exit Before Buying Japanese Property”.

You can sell with the tenant in place. In Japan this is called a tenanted resale (オーナーチェンジ, “owner change”). The lease does not end because the property is sold. The buyer becomes the new landlord, the obligation to return the security deposit passes to the buyer as well, and, as the rules currently stand, a buyer who later wants the property back must follow the same legal procedure you would.

What Gets in the Way When You Sell a Property With a Tenant?

The first decision for the owner is whether to ask the tenant to move out before selling or to sell with the tenant in place. After that come a series of details: whether a change of landlord needs the tenant’s consent, what to do with the deposit you are holding, whether a contract with a master-lease (サブリース) operator or a management company goes with the property, and whether the buyer can move in themselves. If you live overseas, it is worth understanding these rules before you approach an agent.

The Short Answer: What Happens When You Sell With the Tenant In Place?

A lease under which the tenant has already moved in remains valid against the buyer after the sale. The buyer takes over the landlord’s position (賃貸人たる地位) and does not need the tenant’s consent. The obligation to return the security deposit (敷金) also passes to the buyer. The buyer must complete the registration of the transfer of ownership (所有権の移転の登記) before they can assert their position as the new landlord against the tenant, for example to collect rent.

As the rules currently stand, the sale of the property is not in itself a reason for an ordinary lease to end. A buyer who wants the property back is subject to the same notice periods and the same requirement of a justifiable reason (正当の事由) as you are. A validly formed fixed-term lease (定期建物賃貸借), by contrast, can end when its term expires. In other words, the buyer is buying an income-producing property (収益物件) that is still collecting rent, and takes over the rights and the restrictions of the lease together.

Which Rights and Obligations Pass to the Buyer?

The Landlord’s Position: No Tenant Consent Needed

Under the Act on Land and Building Leases (借地借家法), a building lease is effective against anyone who later acquires the building even if the lease is not registered, as long as the building has been delivered to the tenant for use. This is one of the ways a lease acquires the status of being enforceable against third parties (対抗要件).

Under the Civil Code (民法), when a lease that has this status is in place and the property is sold, the landlord’s position passes to the buyer. Even where a lease does not have this status, you and the buyer can agree to transfer the landlord’s position to the buyer. Neither case requires the tenant’s consent.

Before Registration, the Buyer Cannot Yet Assert Their Position Against the Tenant

After the landlord’s position has passed, the buyer must complete the registration of the transfer of ownership before they can claim to be the landlord against the tenant, for example by asking the tenant to pay rent to them.

The law also provides one exception. If you and the buyer agree that the landlord’s position stays with you and that the buyer will lease the property back to you, the landlord’s position does not pass to the buyer. When that arrangement later ends, the landlord’s position then passes to the buyer.

The Security Deposit: The Buyer Returns It

A security deposit (敷金) is money a tenant gives the landlord to secure monetary debts arising from the lease, such as rent, regardless of what the contract calls it. When the landlord’s position passes to the buyer, the obligation to return the deposit passes to the buyer, as does the obligation to reimburse costs the tenant is entitled to claim from the landlord under the Civil Code.

The landlord’s duty to return the deposit arises when the lease has ended and the property has been handed back, or when the tenant lawfully transfers the leasehold. The amount returned is the deposit less any money the tenant still owes under the lease.

The law does not say how the deposit you are holding should be settled between you and the buyer. That is agreed in the sale contract, so read that clause carefully before signing.

Withholding on Rent: After a Change of Landlord, It Depends on the Buyer

If you are a non-resident under the Income Tax Act and you let out your Japanese property, a tenant who pays the rent within Japan must in principle withhold 20.42% when paying. An individual who rents the property for their own or a relative’s residence does not have to withhold. After the sale the rent goes to the buyer, and whether withholding applies then depends on the identity of the new landlord.

Can the Buyer Ask the Tenant to Leave?

A buyer who takes over an ordinary lease and wants the property back must give notice of non-renewal between one year and six months before the term ends, or give notice of termination and wait six months, and in both cases a justifiable reason is required. Offering a payment to help the tenant move (立退料) is only one of the factors in judging whether a justifiable reason exists (details are in the main article). A buyer who plans to live in the property should factor this period in.

Fixed-Term Leases: Valid Ones End When the Term Expires

A fixed-term lease is a lease agreed not to be renewed and to end when its term expires. To be validly formed it must meet two conditions:

• Written contract: It must be concluded in writing, such as a notarized document (公正証書). A contract concluded by electromagnetic record is treated as written.
• Advance explanation: Before the contract is signed, the landlord must give the tenant a separate document stating that the lease will not be renewed and will end when the term expires, and must explain it. With the tenant’s consent this can be provided electronically. Without this explanation, the no-renewal agreement is invalid.

For a fixed-term lease with a term of one year or more, the landlord must notify the tenant between one year and six months before the term ends that the lease will end on expiry. If notice is not given within that window, the landlord cannot rely on expiry against the tenant. If notice is given after that window, the landlord can assert that the lease has ended six months after the date of notice.

The tenant also has a right to terminate. For a residential fixed-term lease with a floor area under 200 square meters, if the tenant can no longer make the home their base of living because of unavoidable circumstances such as a job transfer, medical treatment or caring for a relative, the tenant can apply to terminate, and the lease ends one month after the application. Special terms that go against these notice and termination rules to the tenant’s disadvantage are invalid.

A buyer who takes over a validly formed fixed-term lease can end it at expiry by following the procedure above. Whether a lease is ordinary or fixed-term depends on the contract itself and on whether the advance explanation was given, not just on what the contract is called.

**Example: Mr. Chang, an owner living in Kaohsiung**

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Mr. Chang owns an apartment in Fukuoka with a floor area under 200 square meters. It is let on a fixed-term lease that expires on March 31, 2028. He plans to sell with the tenant in place in early 2027, and the buyer wants to use the apartment after expiry.

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If the lease was concluded in writing, and the explanatory document was delivered and the explanation given before signing, the buyer can notify the tenant between one year and six months before expiry (from the end of March 2027 to the end of September 2027), and the lease ends on expiry. If the advance explanation was not given, the no-renewal agreement is invalid. Before expiry, if the tenant can no longer live there because of unavoidable reasons such as a job transfer, the tenant can apply to terminate, and the lease ends one month later.

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What he should do: before the sale, find the lease and the explanatory document delivered in advance, and hand them to the agent so the buyer can check them.

Does a Master Lease or Management Contract Go With the Property?

A master lease and a management entrustment are two different contracts, and each is handled differently after a sale.

Master lease (サブリース): A master-lease operator rents the property from you and sublets it. The contract between you and the operator is called a master lease contract (マスターリース契約). If the property is sold during the contract term and the landlord’s position passes to the buyer, the buyer takes over the master lease on the same terms. Once the operator knows the landlord has changed, it should promptly give the buyer a document that explains the contents of the contract. This is a recommendation in the guidelines of the Ministry of Land, Infrastructure, Transport and Tourism, not a legal obligation.

A master lease is itself protected by the Act on Land and Building Leases. Even if the contract contains a clause allowing the owner to terminate midway, the owner still needs a justifiable reason to terminate, and the same applies if the owner refuses to renew. A buyer who takes over and wants to end the master lease is bound by the same limit.

Management entrustment (管理受託契約): Here the management of a rental home is entrusted to a management company, and the operator does not sublet the property. Whether the management contract goes with the property after a sale depends on whether it contains a special clause that the client’s position is taken over by the new landlord:

• If it does, and the buyer takes over on the same terms, the management company should promptly give the buyer a document setting out the contract terms.
• If it does not, the entrustment with the buyer is treated as a new contract. The management company must give the buyer a fresh explanation of important matters (重要事項説明) and hand over the document required at the time of contracting.

Before selling, you can dig out the management contract to check this clause and agree with the management company how the handover will work.

Recover the Property First, or Sell With the Tenant?

If you want to sell with vacant possession, you can negotiate a move-out with the tenant, or proceed through the notice periods and justifiable-reason requirement described above; an individual case should be discussed with a specialist. A payment made to a tenant to move out for the sake of a sale can be treated as a transfer expense (譲渡費用) when calculating the capital gain on the sale (譲渡所得), and deducted from the sale price. If you sell with the tenant in place, there is no such expense.

If you decide to sell with the tenant, watch the standard clauses of the sale contract. A typical sale contract provides that the seller must remove burdens that hinder the buyer’s exercise of ownership, such as mortgages and leasehold rights, before delivering the property and registering the transfer. A sale with the tenant assumes the tenant continues to lease the property, so the lease is not among the burdens to be removed. It is advisable to state in the sale contract that the sale is made subject to the existing lease, to avoid a conflict with such clauses.

What Can You Prepare Before Selling?

There is no official rule on which documents a seller must hand the buyer when selling with a tenant. The items below are suggested preparations to help you answer questions from the buyer or agent; what is actually required depends on the agent and the sale contract:

1. The lease: Confirm whether it is an ordinary lease or a fixed-term lease. For a fixed-term lease, also find the explanatory document delivered in advance.
2. Lease term, expiry date and renewal record: The buyer will use these to judge when they might recover the property.
3. Amount of the security deposit and the record of receipt: The buyer takes over the obligation to return it, and the way it is settled goes into the sale contract.
4. Current rent and the tenant’s payment history: The buyer is taking over this rental income.
5. Master lease or management entrustment contract: Check whether it contains a succession clause, and look at the contract term and termination clauses.
6. Arrangements for notifying the tenant after transfer: The law does not require the tenant to be notified, but the buyer can assert their position against the tenant only after registration is complete. It is advisable to agree with the buyer who will tell the tenant, and when, about the new way of paying rent.

Statements to Think Twice About

• “Once the property is sold, the tenant has to move out.” Not correct. As the rules currently stand, an ordinary lease does not end because of a sale, and a buyer who wants the property back must also follow the notice period and have a justifiable reason.
• “A change of landlord needs the tenant’s consent first.” It does not. The transfer of the landlord’s position to the buyer does not require the tenant’s consent.
• “Once the contract is signed, the buyer can collect rent from the tenant.” The buyer must complete the registration of the transfer of ownership before they can assert their position against the tenant.
• “If you pay a moving-out payment, the tenant has to leave.” The payment is only one factor in judging whether there is a justifiable reason.
• “The contract says fixed-term, so you can take the property back at expiry.” It also depends on whether the contract was made in writing and whether the advance explanation was given.

How to Work Out Your Next Step

1. Confirm the type of lease and its expiry date. For a fixed-term lease, confirm that the written contract and the advance explanation are both in order.
2. Decide whether to sell with the tenant or to recover the property first. If you want to recover it, build the notice period and the time needed to negotiate a move-out into your sale plan.
3. If there is a master lease or a management entrustment, check whether the buyer will take the contract over and whether you need to talk to the operator first.
4. If you sell with the tenant, put the deposit settlement and “the sale is made subject to the existing lease” into the sale contract.

How a buyer prices a property with a tenant in place, and what yield they use to assess it, is not set out or tabulated in the official materials this article draws on. It depends on the individual property, the lease terms and the buyer. Whether to sell with the tenant or to recover the property first depends on your lease type, its expiry date and your management arrangements.

Sale of the building part of a rental property is subject to consumption tax as of September 2026. Whether tax actually has to be paid depends on conditions such as whether taxable sales in the year before last were JPY 10 million or less and whether the seller is registered as a qualified invoice issuer (適格請求書発行事業者); please confirm with a tax accountant (税理士). This and the calculation of capital gain are covered in the article “What Taxes Do You Pay When You Sell Japanese Property?”. The steps of a sale are covered in “How Do You Sell Property in Japan?”, how easy a property is to sell in “Is It Easy to Exit the Japanese Second-Hand Market?”, and how to send sale proceeds out of Japan in “How Do You Remit Sale Proceeds Out of Japan?”.

FAQ: Selling a Tenanted Property in Japan

Do I need to notify the tenant before selling a rented Japanese property?

The law does not require the tenant’s consent before the sale, and the provisions reviewed for this article do not state an obligation to notify the tenant. However, the buyer can assert that they are the new landlord only after completing the registration of the transfer of ownership, so it is advisable to agree with the buyer who will tell the tenant, and when, about the new way of paying rent.

Who returns the tenant’s security deposit?

The buyer does. When the landlord’s position passes to the buyer, the obligation to return the deposit (敷金) passes with it. After the lease ends and the property is handed back, the buyer returns the deposit less any debts the tenant still owes. How the deposit you hold is settled with the buyer is set out in the sale contract.

Can the buyer take back a property let on a fixed-term lease when the term ends?

Yes, provided the fixed-term lease was validly formed: concluded in writing, with a written explanation of non-renewal delivered before signing. For a term of one year or more, the tenant must be notified between one year and six months before the term ends. If the advance explanation was not given, the no-renewal agreement is invalid.

Glossary

• Tenanted resale (オーナーチェンジ): A sale in which the tenant stays and the landlord changes to the buyer.
• Income-producing property (収益物件): A property that earns rent; in this article, a property sold with the tenant in place.
• Enforceable against third parties (対抗要件): The condition under which a lease can be asserted against a new owner. A building lease acquires it once the building is delivered to the tenant, even without registration.
• Security deposit (敷金): Money the tenant gives the landlord to secure rent and other debts.
• Justifiable reason (正当の事由): The reason the law requires a landlord to have when refusing renewal or terminating.
• Moving-out payment (立退料): A payment a landlord offers to induce a tenant to move; the legal term is a “financial benefit”.
• Fixed-term lease (定期建物賃貸借): A building lease made in writing, with advance explanation, that ends when its term expires.
• Master lease (サブリース): An arrangement in which an operator rents a property from the owner and sublets it.
• Management entrustment (管理受託契約): A contract in which the owner entrusts the management of a rental home to a management company.
• Transfer expense (譲渡費用): Selling costs deducted from the sale price when calculating the gain on a sale.

About the Information

• The information was checked as of September 30, 2026, and is based on the provisions of the Civil Code and the Act on Land and Building Leases, the Ministry of Land, Infrastructure, Transport and Tourism’s master-lease guidelines (revised March 31, 2023) and its FAQ on the Rental Housing Management Business Act (as of October 9, 2025), explanations from the National Tax Agency, and explanations from the Tokyo Metropolitan Government Housing Policy Headquarters. All sources are in Japanese; English names are translations by Zagdim.
• The following conclusions are drawn from official documents; none of them is stated in a single sentence in an official source:
• That a sale does not in itself end an ordinary lease, and that a buyer who wants to recover the property must also follow the notice periods and have a justifiable reason, is inferred from combining the provisions of the Act on Land and Building Leases and the Civil Code.
• That whether the tenant withholds after a change of landlord depends on the identity of the new landlord is inferred from the National Tax Agency’s explanation of renting “from non-residents and others”.
• On consumption tax for the sale of a building used for rental, the article states only the general rule on what is taxable and the exemption conditions; whether tax is actually due depends on individual conditions.
• That a sale contract provides for removal of burdens such as leasehold rights comes from the Tokyo Metropolitan Government Housing Policy Headquarters’ explanation of standard contract clauses. It is not a legal obligation, and individual cases follow the contract.
• That master-lease operators and management companies hand the contract terms to the new landlord in writing is worded as “should” in the official sources, not as an obligation. What the operator must do is give the important-matters explanation and hand over the document where a management entrustment has no succession clause.
• The official materials contain no offer price, yield or handover checklist for tenanted property; the preparation list in this article is a suggestion. One thing that may change: the name of the tax category for withholding on rent changes from 2027.

Have a question about this guide? Leave a comment below, or ask Zagdim directly.

Sources

• e-Gov法令検索－民法
• e-Gov法令検索－借地借家法
• 国土交通省－サブリース事業に係る適正な業務のためのガイドライン
• 国土交通省－賃貸住宅管理業法FAQ集
• 国税庁－タックスアンサー No.2880 非居住者等に不動産の賃借料を支払ったとき
• 国税庁－タックスアンサー No.3255 譲渡費用となるもの
• 国税庁－タックスアンサー No.3240 個人が事業用建物等を譲渡した場合の消費税
• 国税庁－タックスアンサー No.6501 納税義務の免除
• 東京都住宅政策本部－不動産取引の手引き９ 残金支払（決済）と引渡し

Important Notice

This article is a general summary of information and is not individual legal or tax advice. The information was checked as of September 30, 2026. Rules may change; please rely on the current announcements of the Japanese authorities and on your own lease and sale contract, and consult a lawyer, tax accountant or other professional where necessary.