Land and a building are each treated as separate real property in Japan.
Land rights are roughly divided into “Ownership” and “Land Lease Rights”.
In Japan, conveyance of land is generally the transfer in “Ownership”.
Ownership of real property means unlimited possession, and it means its permanent possession.
“Land Lease Rights ” is set up when obtaining use of the land from its landowner and building your own building on it. It means a “Right to borrow land”.
The cost of “Land Lease Rights” is divided into two parts that together are “Up-front payment”, which is, firstly, to pay for purchasing the Land Lease Right, and also “Rent”, which is to be continually paid while renting the land.
Under the new Act on Land and Building Leases, there is a new regulation called “Fixed Term Land Lease Right”.(事業用定期借地権) This scheme is often used in a business purpose, because the term of the Land Lease Right is determined and the contract will end at the fixed deadline. In principle, when the land lease contract ends, the land surface should be cleared and returned to the landowner, and the lessee should undertake the cost of demolition of the building at his own cost.
This aims to construct and use buildings for business purposes, such as a road-side retail building, and the duration of this scheme is at least ten years or more but shorter than fifty years. A contract of this type shall be made by a notarial deed.
In Japan, a landowner has no obligation to register a Right of lease, so that it is common that a Right of lease is not registered at the Legal Affairs Bureau.
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