Japanese Real Estate Law 1 (General Overview) | Articles

Real Estate Registration System

In Japan, to ensure the safety and smoothness of real estate transactions, the physical conditions and rights associated with real estate are recorded in the real estate registry and stored at the Legal Affairs Bureau, where they are publicly disclosed.
There are two types of real estate registries: the land registry and the building registry, each distinguished and created for each plot of land and each building.
The physical conditions of real estate that are registered include the location, land number, type of land use, and land area for land; and the location, building number, type, structure, and floor area for buildings. This information allows one to know the location and objective shape of the property. Under such a registration system, acquisitions, losses, and changes of property rights in real estate cannot be asserted against third parties unless they are registered according to the Real Property Registration Act (Civil Code Article 177).

Regulations on Acquisition of Real Estate by Non-Residents of Japan

Under the Foreign Exchange and Foreign Trade Act (FEFTA), when non-residents of Japan acquire real estate or related rights (such as leasehold rights) in Japan, they must submit a “Report on the Acquisition of Real Estate or Related Rights in Japan” to the Minister of Finance through the Bank of Japan within 20 days after the acquisition (FEFTA Article 55, Paragraph 3, Item 8).
Non-residents of Japan include individuals and corporations not residing in Japan, regardless of nationality, thus including not only foreign citizens but also Japanese citizens not residing in Japan. The reporting obligation applies to both purchases and acquisitions through inheritance or bequests. Reports can be submitted either in writing or online.

Sales Agreement

A sales agreement is established by the seller promising to transfer property rights to the buyer, who in turn promises to pay the agreed price (Civil Code Article 555).
If the delivered object does not conform to the contract in terms of type, quality, or quantity (contractual non-conformity), it is considered a breach of obligations under the sales agreement (Civil Code Articles 562 to 564). In this case, the buyer has legal remedies against the seller, including the right to demand fulfillment, demand a reduction in price, claim compensation for damages, or cancel the contract.
Contractual non-conformity regarding quality means that the delivered item lacks the quality or performance that was anticipated in the contract. What was anticipated by the parties is a matter of contract interpretation. The evaluation of whether the quality or performance is “lacking” is made at the time of delivery.
Contractual non-conformity can include not only material defects (like leaks) but also environmental defects (such as obstruction of sunlight or views by the purchased apartments) and psychological defects (like past suicides in the purchased residential building).

Lease Agreement

A lease agreement is established when the lessor promises to allow the lessee to use and profit from a property, and the lessee promises to pay rent and return the property at the end of the agreement (Civil Code Article 601).
The maximum duration of a lease agreement is limited to 50 years; if a longer period is agreed upon, it is shortened to 50 years (Civil Code Article 604, Paragraph 1). The Civil Code does not set a minimum duration for leases, which could put lessees, who are often less negotiating-powerful than lessors, at risk of having their social life foundations threatened by short-term contracts set by lessors. Therefore, the Act on Land and Building Leases sets minimum periods (in the case of land leases) and restricts the circumstances under which renewals can be refused (in the case of land and building leases) to protect lessees.
The Act on Land and Building Leases is a special law under the Civil Code’s provisions on land and building leasing. In such contractual relationships, The Act on Land and Building Leases takes precedence over the civil code. The term “land leasehold right” as used in the Act on Land and Building Leases refers to the right of superficies or the right to lease land for the purpose of owning a building. These rights do not apply to land leased for purposes like parking, nor to minimal structures like sheds used as storage.
The minimum duration for land leasehold rights is 30 years, with a minimum of 20 years for renewals, followed by a minimum of 10 years for subsequent periods (Act on Land and Building Leases Articles 3 and 4).
The term “building lease” as used in the Act on Land and Building Leases refers to all cases of leasing a ‘building.’ The law does not consider the size, structure, or purpose of the building, nor does it concern the objective of using the building for profit. The law does not distinguish between business and residential leases
For building leases, there are contracts with specified terms and those without. If the term of a lease with a specified duration is set at less than one year, for the protection of the lessee, it is treated as having no specified term (Act on Land and Building Leases Articles Article 29, Paragraph 1).
Additionally, while the Civil Code sets a 50-year maximum duration for lease agreements, the law has abolished this limit, allowing building leases to exceed 50 years (Act on Land and Building Leases Article 29, Paragraph 2).
The Act on Land and Building Leases includes a provision for “statutory renewal,” which assumes automatic renewal of the lease agreement after the expiration of its term under certain conditions to protect leaseholders and building tenants. In land leases, the land lessor must have justifiable grounds to refuse renewal. Additionally, in building leases, whether there is a specified duration or not, the building lessor must have justifiable grounds to refuse renewal or propose termination of the lease agreement.
The existence of justifiable grounds is determined by considering several factors: (1) the necessity for either the lessee (including the sub-lessee) or lessor to use the leased land or building for the intended purposes of the lease, (2) the history of the lease of the said land or building, (3) the usage conditions and current state of the said land or building, (4) the presence and amount of eviction compensation, and all other relevant circumstances (Act on Land and Building Leases Articles 6 and 28).