In Japan, it is common and legally permitted for an estate agent to represent both purchaser and seller in real estate sales transaction. It is called “Dual Agency”.
When an estate agent deals with a real estate sales transaction under the Dual Agency system, the agent can obtain a brokerage fee from both the purchaser and seller, so that many such cases can be seen, especially as major estate agencies positively try to establish a transaction of this type.
The strength of Dual Agency is that both purchaser and seller can expect quick response and a grasp of details concerning the property because only one estate agent is being consulted about the real estate sale transaction and a purchaser can get more detailed information than if two estate agents dealt with the case.
However, a drawback of Dual Agency is that an estate agent might push a seller to reduce the price of their property to make sure quickly of securing the large brokerage fee revenue from both purchaser and seller on the conclusion of the sales contract. It might be an unfavourable transaction for a seller.
It is also common that a Shihoshoshi lawyer, the transactional lawyer for a real estate transaction represents both purchaser and seller and an estate agent generally specifies a particular Shihoshoshi lawyer for the transaction. It is called “Dual Lawyer”.
In some cases, a special clause, such as “the seller should be represented by a designated Shihoshoshi lawyer, specified by the seller or the estate agent for the procedure for transfer of the ownership” is written on sales and purchase agreement. If there is no special clause about a designated Shihoshoshi lawyer in the sales and purchase agreement, it is likely a buyer can choose any lawyer for the procedure for transfer of the ownership. Generally speaking, especially in Tokyo, a buyer pays all the costs of the procedure for transfer of the ownership for the real estate sales transaction. Because of that, a buyer can choose which lawyer to consult for the transaction.
In Japan, property transaction will take effect only to the extent of the parties’ intention, which means property registration follows the principle of contract registration.
Property registration mainly includes change of ownership registration. A purchaser needs to register their right in order to assert such a right to a third party but the registration is not indefeasible as it can be altered or cancelled, unlike registration systems in some countries, such as the Torrens system.
A registered owner might not always be the true owner, and accordingly an investigation of rights is necessary before acquisition. This procedure is conducted by an estate agent and Shihoshoshi Lawyer.
The reason of this system is that registration officers have their power only over preparing documents basis and do not undertake a substantive screening review but they are given the power of formal review of the submitted registration documents and power of precise review on their authenticity.
Buildings in Japan gradually depreciate over time. Their depreciation rates vary between the types of structures and properties. In Japan, the lifespan of a building is statutorily determined by the Ministry of Finance, and residential buildings in Japan normally last between 20 and 47 years (Japanese only; https://elaws.e-gov.go.jp/document?lawid=340M50000040015), which is relatively much shorter than the ones in the Western countries. Many detached residential properties are demolished and redeveloped at a suitable time. However, exceeding the statutory lifespan of a building doesn’t mean a building is not suitable for living. In particular, apartment blocks built in the 1990’s and 2000’s can be remodelled and refurbished.
Renovation and refurbishment of those apartments and housings not only contributes to making a property a home, but is also vital for a healthy and happy life. Additionally, the price of a renovating a property is generally lower than that of building a new one.
In the case that the purpose of buying real property is residential, the property would be for their family and business environment. In the case of an investment option, it is a possible scenario that an investor wants to gain rental income by renting the purchased property and profit on its sale by anticipating further price increases.
Finding real property is time consuming, because there are many suitable properties. In addition, there are many steps based on unique Japanese business customs, especially regarding real property procedures. Supporting international clients would be a business opportunity for an estate agent.
司法書士堀明子 – HORIakiko –
司法書士 / ビジネスコンサルタント / ライフ・コーチ
Shiho-shoshi Lawyer / Business consultant / Life coach
When considering real property transaction, it is critical to identify a good estate agent. Initially, it is wise to have a personal recommendation, such as family, friends and colleagues. if there is someone reliable with enough knowledge about real property, it is useful to ask that person, too. In addition, collecting information from the internet is also effective nowadays.
In Japan, as to an estate agent’s license, there are two types of licenses: one is the license approved by the prefecture governor and the other is the license approved by The Minister of Land, Infrastructure, Transport and Tourism (MLIT).
The license approved by the prefecture governor is issued when the estate agent runs its business in one prefecture only. On the contrary, the license approved by MLIT is issued when they run its real property business across several prefectures.
There are brackets and numbers on their license number, which indicates the length of their working history. The license should be renewed every 5 years. When it is one in brackets, it means the agent has been running their business less than 5 years.
When a purchase agreement is formed, the brokerage fee for an estate agent is generally the sale price multiplied by 3% plus JPN 60,000 plus consumption tax of 10 %, but it might be negotiable.
Land Lease Rights have lower asset value than ownership, and it is commonly traded at around 60 to 70% of the market price as ownership in residential areas. The necessary expenses for a Land Lease Right are up-front payment as the purchase price, a contract renewal fee, a reconstruction consent fee, a change of condition consent fee and change of name consent fee due to inheritance or sale. Additionally, “Monthly rent” which a lessee pays on a regular basis while renting land is also required. The parties have discussed in advance about the conditions applying when selling the land lease, because the acceptance of the landowner will be needed at the time of sale and a name change consent fee will be charged.
Under the current Act on Land and Building Leases, there is a regulation called “Fixed Term Land Lease Right”. (定期借地権) In this regulation, the term of the Land Lease Right is determined and the contract will end at the fixed deadline, which there is no extension of the contract. In this scheme, 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 their own cost.
However, the parties can agree with the special provisions for building transfer if the contract is agreed for thirty years or more. In this clause, a landowner promises to buy the building on the land that is the object of the Land Lease Right, which shall be transferred to the landowner for a reasonable price after the day that thirty years or more have passed since the contract was established. Land Lease Right will cease at the time of purchase.
Legal advice in connection with a lease agreement is essential, including drafting and preparing preliminary agreements.
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.
Because of the situation of the Tokyo Olympics, the news about Japan is in the spotlight from time to time. In my opinion, the system of Japan is still old-fashioned and hierarchical. We, Japanese people are generally reluctant to accept changes, partly because Japan has a long and interesting history, and it respects tradition and hierarchy in a good way. However, because of this attitude, a change is unlikely to occur without external pressure, such as foreign pressure. For example, it is said that the Japanese recession, the so-called economic bubble burst started with the Plaza Accord agreement among the G-5 nations in 1985. Also, national isolation policy was abandoned when the US navy, so-called the Black Ships, arrived in Yokosuka in 1853.
The recent two news items below also still reflects this attitude.
In this blog, I don’t intend to make a comment about this traditional attitude as this tradition has deeply fixed in people’s minds. All I can do is to carry on my career professionally and show my strength regardless of the difficult situation.
Jitsuin (実印) Jitsuin is the official stamp for an individual, and is registered at the local council where an individual person resides. After the registration is completed, a certificate is issued. The certificate is called a seal certificate (印鑑証明書), and is used to prove to third parties that an individual legally affirms a certain action.
General practice in Japan If a relative has a seal and the seal certificate of their family member, the relative is regarded as having rightful agency for the family member in undertaking the action.
Article 761 of the Japanese Civil Code states below. (Joint and Several Liability for Debts incurred for Household Necessities) If one party to a marriage engages in a legal process with a third party regarding everyday household matters, the other party shall be jointly and severally liable for debts that arise from that act; provided that this shall not apply if prior notice is given to the third party to the effect that the other party will not assume such liability.
However, the recent trend of judicial precedents is inclined to the view that it is no longer possible to say that a transaction has been concluded only because the relatives possess a registered seal and a seal certificate in a case arising from an act of agency between relatives.
In the case of acts between a husband and wife or a parent and child, the person in charge of the transaction is obliged to exercise a greater degree of care in their legal deed by investigating the existence of the right of representation and confirming the intention of the person concerned.
As a rule in business, it is necessary to confirm the intentions of the parties involved in a transaction of real property and the creation of a mortgage or other security.
The examples below are other cases in which a lawyer and other third parties in charge should confirm the intentions of the target person.
1) In the event of the property owner’s death. ➡ The heirs will need to discuss the division of assets, and a lawyer should confirm who is a legal heir.
2) The owner of the real property is a legal entity. ➡ The intention of the representative director of the organisation should be confirmed.
3) The owner of the real property is an elderly person. ➡ The court might need to be involved in the process of appointing a guardian.
4) The ownership of the real property is jointly owned. ➡ All owners needed to be confirmed.
In recent years, there have been a number of cases where people have been involved in real property fraud and have been awarded large sums of money in damages. The forgery of driving licences, passports and the registered seal certificates has become more sophisticated in recent years because of the advanced technology.
Verifying the identity of a client is not an easy task. The important thing is that no matter how much experience I have, I always need to go back to basics and carefully check the person’s identity and intention.
司法書士堀明子 – HORIakiko – 司法書士 / ビジネスコンサルタント / ライフ・コーチ Shiho-shoshi Lawyer / Business consultant / Life coach
Many people are involved in the purchase of real property. In this situation, it is crucial to check property information and an official corporate existence at the commencement of the transaction so that I apply online to the registration record on the website below.
Available only in Japanese but this Registration information service is a fee-based service that enables a user to check the official record about real property and corporate information online that the Legal Affairs Bureau has. This information cannot be used as an official certificate, but an estate agent and a lawyer check this information.
The information should be registered to be enforceable, but Japanese law recognises customary rights, such as the right for people to cross land, which may not be legally recorded (although they can be). In addition, historically, a landowner is likely reluctant to register their lease right, because they are afraid that the ownership of the land never returns from the lease holder. I will write about the lease right in Japan as a separate topic.
I, as a lawyer, fully recognise the importance of a contract and right, but there is a cultural background in Japan, such that harmony among people is regarded with greater respect than the contract itself, since ancient times. Regarding this subject, Kenzaburo Oe who received the Nobel Prize for literature mentioned it in “Japan,the ambiguous,and myself”.
Having said that, in the Western society, this attitude is regarded as a fault, because people rather postpone problem-solving and don’t show their attitude clearly. However, on the positive side, people are not caught up in prejudice and take the time to fit the situation in the correct environment, which leads to a flexible solution.
I believe these ideas come from the different philosophies, and neither has superiority. The registered information is inside the framework of Japanese administrative matters, but the system reflects culture in society.
In relation to boundaries, a buyer might expect to encounter an Important Disclosure Statement. The Important Disclosure Statement is the legal document that shows all the dimensions of the land that the buyer is buying.
The description on the Indication of Land listed on the cadastre (address, lot number, land classification and acreage) at the Legal Affairs Bureau must be accurate but accurate surveying techniques were not available in 1873-1881. Modern standards of land surveying arrived much later.
Accurate land surveying would have been expensive and the estate agent in charge may sell the buyer real property with a description of the dimensions on cadastre at the Legal Affairs Bureau.
However, the estate agent has a legal obligation to investigate the boundary, which includes to check boundary markers at the place where the real property is located, and make the boundary clear to the buyer before concluding a sales agreement.
If the fact that it is impossible to make it clear by the date is stated, the estate agent should provide the necessary advice.
In the case above, there are 2 options for the buyer.
One is that you draw a conclusion based on the price and dimensions stated on the record.
Another option is to pay the price tentatively at a time of conveyance and hold a survey at the cost of the seller or the buyer, and settle the difference in price between the areas. As the buyer, you can insist the seller should apply for the determined boundary, but the seller might decide not to sell the property.
In general, forest land and farmland are sold by the recorded dimensions as it is too large and too expensive for surveying but even residential land for sale may be sold by the recorded dimensions.
The first thing to recognise is that the transaction may contain a recorded description of the dimensions of the land.
I believe that a good lawyer should listen and give you clear information (verbal and written) to prevent the trouble from happening.
I hope the information is useful.
I will update every Monday.
For more information
Japanese business start-up consultant
Occasionally, people who cannot find their “Information for registration identification” are asking how they restore the document.
Information for registration identification is an important document that proves you have the ownership of the real property.
Unfortunately, it is not reissued at the Legal Affairs Bureau.
If there is a risk of theft, there is a procedure of invalidating the PIN code to let the Legal Affairs Bureau know.
However, even after invalidating the PIN code, Information for registration identification is not reissued. That is the system of Japan.
If the document are not found, strict identity verification is required when selling the real property, and the lawyer in charge of the sale will handle it to prove your identity, which normally incur an additional cost. The amount of the cost depends on the lawyer.
One of the best ways to store documents is at home in a safe or file box. If you don’t know which one is an important document, asking in person is the best thing to do.
I hope the information is useful.
I will update every Monday.
For more information
Japanese business start-up consultant