An agent’s disclosure obligations regarding stigmatised properties

Under Article 47 Item 1 of Japan’s Real Estate Brokerage Act, agents are prohibited from intentionally failing to disclose any matters relating to the building that may have a serious affect on the client’s decision to proceed with the transaction.

This means that real estate agents are obligated to notify clients of defects to a property, such as suicide, murder or other unnatural deaths, but only if the agent is aware of these defects at the time. There may be times when an agent is unaware, in which case they cannot be held liable. This can occur if the landlord or seller was purposely withholding this information from the agent, or if there was an unnatural death or murder that was not reported to the property owner or management company. The owner of the property, however, may be held responsible even if they were unaware of the defect.

What constitutes a defect is up to the court to decide, since there are no specific legal definitions with regards to time, type of incident and so on. The court’s decision regarding the severity of the defect can depend on a range of factors, including the location of the incident, events surrounding the incident, how much time has passed, the intended of use of the property, and characteristics of the area.

Examples of past court rulings:

  • An apartment was found to have a slight defect as a former occupant attempted a drug overdose within the apartment before being taken to hospital where they passed away several weeks later.
  • Land was considered to have a defect after the occupant of a house (since demolished) had committed suicide in the property over 8 years ago. The house had been demolished and the property was sold as vacant land, but the buyer was awarded 5% of the purchase price as restitution for the defect that was withheld.
  • A buyer was able to successfully cancel a contract of sale for land after it was found that the seller and their real estate agent failed to disclose that one of the former landowners had committed suicide in the house that once stood on the land. The incident occurred 50 years ago and the house had since been demolished. The court cited the relative closeness of the farming community as a reason for the long duration of the defect.

Agents have to rely on information disclosed by the property owner or management company as it is impossible for real estate agents to accurately investigate the history of a building on their own. Many management companies have a clause in their disclosure documentation to eliminate their responsibility, while a police station will not provide this information either.

One popular site that lists buildings with reported unnatural deaths is Oshimaland (http://www.oshimaland.co.jp/).  This site angered more than a few landlords who did not want this information in the public domain, including some who have unsuccessfully tried to sue the website owner. It is important to remember that not all incidents are reported on the site, and it may not be 100% accurate at all times.

Criminal stigmas

Agents may also be obligated to inform clients if there any known criminal organisations have offices in the nearby neighbourhood, however there is no clear definition for proximity. Some suggest a 500 meters radius, but this is not strictly defined. In some locations, Roppongi and Akasaka for example, there are several known offices, which are within 500 meters of thousands of households.

While the police may keep data on registered criminal groups and their office locations, this data is not made public and the police will not disclose this information to realtors for fear of ‘damaging property values’. A call to the police station to check an address will result in the agent being told to ‘google it’.