Building Leases in Japan - a brief description for foreign companies

The following is a basic description of building leases in Japan, for a foreign company which is considering entering the Japanese market, and the terms and conditions thereof.

1. Land Lease and Building Lease

a) In Japan, land and a building are legally separate properties. Therefore, two types of leases are possible in order to lease real estate to launch or open a new office or store in Japan. The first type is where a tenant leases land from a landowner and constructs a building to be owned by the tenant. The second is where the tenant leases a building (or a part of the building) from a building owner. Typically, the latter type of lease is more popular because the initial investment is lower. Recently, this is even more the case due to increased construction costs in Japan.

b) The Act on Land and Building Leases (the “Act”) applies to both types of lease. This Act aims at the protection of tenants which are comparatively in a vulnerable position in the lease market compared to landlords, and therefore, there are many provisions in the Act which a landlord cannot be exempted from even if the tenant agrees. We describe the details of the Act in the respective sections below or articles which we will upload in the future. Please note that the Act does not apply to land leases which are not intended to be in conjunction with building ownership, e.g., land lease for a parking lot.

c) The following is the trend of basic terms and conditions of building leases, which make up the majority of real estate leases of commercial tenants in Japan who need to lease with respect to buildings (including a part of a building) in Japan.

To read the article, please click here.