Most investors who buy Japanese real estate rent the unit out afterward to earn a return, which makes understanding Japan’s rental law important. This article walks through the laws governing rentals in Japan, analyzing the rights and obligations between landlord and tenant, to help landlords better understand their own position.
The Act on Land and Building Leases
Japan’s rental-related law is called the “Act on Land and Building Leases” (借地借家法). Its provisions set out special rules on the renewal and effect of rights such as land leases, rights of superficies, and building lease contracts. The part covering building rentals is the “shakuya” (借家) section. “Building rental” here refers to renting out a generally complete unit; if you are only renting out one room of a home, or renting for a short, defined period (such as hotel-style stays), or lending the space for free, those situations are not governed by the Act on Land and Building Leases.
Changing Lease Terms and Renewal
If a lease has a fixed term and a tenant wants to move out, or a landlord wants to change the lease terms, notice must be given to the other party between one year and six months before the term expires — otherwise it will not be treated as an agreed renewal. That said, if the landlord proposes new lease terms and the tenant raises no objection and keeps using the building after the term expires, this is treated as a new agreement to renew on the new terms. Likewise, if neither party raises any request to end the lease or change terms by the time the term expires, the lease is treated as renewed on the same terms as before. Under the Act on Land and Building Leases, a landlord may refuse renewal only where a “legitimate reason” is found; courts weigh the landlord’s and tenant’s need for the property together with the prior course of the tenancy, the building’s condition and usage, and whether the landlord has offered a relocation payment. The landlord’s own need is the most common and central factor, but the law does not limit legitimate reason to that factor alone. As a result, a new owner of the unit must also honor the lease the previous landlord signed and cannot use that sale as grounds to refuse the tenant’s renewal.
The Right to Request a Rent Increase or Decrease
In Japan, both tenant and landlord have the right to request a rent increase or decrease — but only in specific circumstances: for example, where the unit’s rent level diverges clearly from comparable nearby units, where tax or other burdens have increased or decreased, or where there has been a significant shift in economic conditions. If either side does not agree to the requested increase or decrease, the party on the receiving end of the request may continue performing the lease at the original rent until a ruling is issued, after which the difference is settled — paid back or refunded — with 10% annual interest, adjusting for any over- or under-payment.
The Right to Request Purchase of Fixtures
This refers to a fixture, fitting, or piece of equipment added with the landlord’s consent; when the lease ends or the tenant moves out, the tenant can require the landlord to buy that addition at market price, and the same applies in reverse. For example, if a tenant did not want a bed and, with the landlord’s consent, installed tatami mats instead, the tenant can later require the landlord to purchase those tatami mats at market price when moving out.
Conclusion
In short, Japanese law operates on a “presumption of renewal”: unless either the landlord or the tenant raises a request to end the lease, the lease is treated as renewed by default, automatically continuing on the previous terms. We recommend thoroughly understanding a lease’s terms and the tenant’s basic circumstances before buying a new unit or listing one for rent, so as not to affect future returns.
Source: Japan Act on Land and Building Leases
https://elaws.e-gov.go.jp/document?lawid=403AC0000000090
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