Recently, foreign investors who have invested in Japanese apartments have been widely reported in the Japanese media for offering to increase rents by more than 100% to tenants. This has caused Japanese society to become wary of foreign investors and has raised concerns in the Diet.
It is regrettable that the actions of a few unscrupulous foreign investors are leading to general hostility towards foreign investors. To help foreign investors avoid unnecessary friction when investing in Japanese real estate, we have outlined the key legal points regarding basic real estate transactions in Japan below:
- The buyer who acquires ownership of an apartment must succeed to the lease agreement between the seller and the tenant.
- Regarding inherited rent increases, Japanese tenants are strongly protected by the Land and Building Lease Act, say “Shakuchi-Shakka Ho” in Jpanese, a special law to the Civil Code. An increase requires ‘just cause’, and if the tenant’s consent cannot be obtained, the matter must be referred to the court for a decision. This differs significantly from many other countries, including the United States.
Similarly, under Japanese law, land and the buildings standing on it are separate objects of ownership and can belong to different owners. Suppose that A owns a piece of land and B has established a leasehold right on that land and built a building on it. If A sells the land to C, who becomes the new landowner, the building owner B can assert the leasehold right against the new landowner C.
Japanese lawyers refer to this as ‘a sale does not break a contract’, thanks to the Land and Building Lease Act.
Hope this guidance is supportive.
(10 July 2025; revised 12 July 2025)