Shopkeepers alongside the Nakamise shopping street, a 250 meters long souvenir shop-lined pedestrian mall leading to Sensoji temple in Tokyo, are reeling after being hit with a potential 16-fold increase in store rents. In September, Sensoji temple informed the tenants of plans to increase the rent from the current level of 15,000 Yen per month for a 10 square meter shop to a new rent of 250,000 Yen per month, making it in line with market rents for the neighborhood and ending years of subsidized rents that had been offered by the previous landlord – the Tokyo metropolitan government.
Some shopkeepers are concerned that they may be forced to close and worry that the street will lose its character if shops are replaced with larger franchise-type stores that can afford to pay a higher rent.
Nakamise is one of Japan’s oldest shopping streets with origins dating back to the late 1600s and early 1700s. The land under these shops was originally owned by Sensoji but confiscated by the national government in 1872. In 1885, the Tokyo metropolitan government, after ordering the removal of the previous shops, built rows of red-brick shops. The land underneath these buildings was returned to Sensoji’s possession in 1912, but the buildings remained under the ownership and management of the Tokyo government. The brick buildings were destroyed in the 1923 earthquake, and replaced with concrete buildings in 1925. These concrete shops are still standing today. The interiors were completely destroyed during air-raids in WWII but later restored by shopkeepers.
In July 2017, Tokyo agreed to sell the buildings to Sensoji for 20 million Yen, making Sensoji the full owner of the land and buildings. Up until now, Tokyo had been leasing the land from Sensoji for free, and receiving 25 million Yen per year in rent from shopkeepers.
In Japan buildings and land have two separate titles and it is possible in some cases for a building to be owned by someone other than the landowner, resulting in a leasehold-type situation, although the majority of properties include ownership of both the building and land.
Is this legal?
A landlord can seek an increase in rent if it is lower than current market conditions. Conversely, a decrease in rent can also be sought by either party if the rent is too high for the current market.
An article in the Act on Land and Building Leases indicates that if taxes, land or building prices rise to a point where the current rent is considered cheap, the landlord can request an increase in rent, even if no provision has been included in the rental contract.
If the tenant does not abide by the requested increase, the landlord needs to enter into mediation with the tenant. If they still do not agree after mediation, the landlord will need to file a law suit. At that point, the courthouse will decide on the fair rent. In many cases, the fair rent is usually a mid-way point between the current rent and the market rent.
Bengoshi Doctor News, November 2, 2017.
The Asahi Shimbun, November 4, 2017.