Before you go ahead and invest in a property in Japan, it is important for you to become familiar with the laws of the real estate industry, where most regulations are in favor of the tenant. It is hence important for you to be aware how to manage the lease agreement and its termination thereof considering if you want to get back the property for own use or sell the property in the future.
There are two basic forms of rental agreements in Japan, each with their individual set of rules and regulations. The first kind is the ORDINARY rental agreement which can be renewed for as along the tenant is regular with his rent payments and in compliance with the contractual terms. The second kind is the FIXED TERM agreement which is usually drawn for a period of 2-5 years without any renewal.
The tenant can choose to end an ordinary lease agreement by giving a month’s notice in advance, but you, as landlord cannot, irrespective of your potential reasons behind the termination.
If the agreement does not have a contracted term or renewal date, you can provide an advance notice of at least 6 months before the end of the contract with your confirmed intention of not renewing the lease. You should have legitimate reasons behind non-renewal.
Under the fixed-term lease agreement, you need to provide an advance notice of 6-12 months before the end of the lease, failing which the lease will be renewed automatically as an ordinary, renewable lease.
The key considerations that back legitimate reasons of terminating a lease agreement can be -
What is the reason behind the termination of lease from the landlord’s end? Is it unavoidable? Does the landlord have any alternative options of residence? An expat cannot be eligible for this termination.
What has been the situation re the terms & conditions and duration of the lease? What additional charges would the tenant be liable to pay as key money or renewal fee, has there ever been a default on rent, or any other violations through the duration of the lease, and/or any other factors that may be instrumental in leading to termination;
What is the present condition of the property, has it been maintained well by the tenant or will require extensive repair work?
Is the landlord going to compensate the tenant in anyway in lieu of the early termination, which can be a complementing factor in ending the contract.
To sum up, basically landlords cannot terminate the lease or reject to renew the lease in ORDINARY lease agreement. If the tenant wants, he/she can rent the property for lifelong. If landlords want to get back their own property, they have to pay about 4~5months rental to the tenant to get agreement to move out. In FIXED TERM lease agreement landlords can get back their properties after lease is expired but has to follow the determined process to give tenant notice of intention of getting back the property. Usually FIXED TERM lease rental is lower than ORDINARY lease because FIXED TERM lease agreement is more landlord-favorable than ORDINARY lease.
KEYWORDS: breaking lease in Japan, renting in Japan