When renting or buying a property in Japan you may have to pay brokerage fees, or agent fees, to your real estate agent. The brokerage fees are defined under the Real Estate Transaction Business Law. Under this law, real estate agents cannot charge commission in excess of those specified.
In most property transactions there are two agents – one who represents the landlord/seller and the other who represents the tenant/buyer. Each agent will charge a brokerage fee to their client.
Sometimes one agent will be lucky enough to represent both sides which means they are entitled to collect a commission from both parties. You might think you can avoid paying fees by contacting the seller’s agent directly, but they may end up charging you a fee as well.
Almost all private property owners in Japan will use a real estate agent to lease out or sell their home, so there are very few opportunities to contact the owner directly. This means brokerage fees are usually unavoidable for at least one party.
Brokerage = 1 month’s rent + tax
The current consumption tax in Japan is 8%. If the apartment rent is 100,000 Yen/month, the brokerage fee will be 108,000 Yen.
These days many rental agencies can offer properties with half or zero agent fees, so ask your agent about these deals.
Unlike a sales transaction, an agent in a rental transaction cannot receive a double-commission. At most, they can only receive 100% of the rent + tax (eg. they might charge the landlord half the commission and charge the remaining half to the tenant).
When to pay:
The brokerage fee is usually paid on the same day as the signing of the lease contract.
Buying and Selling:
Brokerage = 3% of the base price + 60,000 Yen + Consumption tax
What is the ‘base price’?
This is the final purchase price of the property excluding consumption tax. If the seller is a company, consumption tax will be applied to the building portion of the sale (consumption tax is never applied to land). The amount of value applied to the building portion is up to the seller to decide. If the seller is a private individual, no consumption tax is included in the property price.
A real estate brokerage company can only legally charge their commission on the base price.
For example, a company sells an apartment to a private individual for 100,000,000 Yen. This sale price includes consumption tax estimated at 5,000,000 Yen, which means the ‘base price’ of the sale is 95,000,000 Yen. The real estate agency acting as broker for the transaction can only charge their commission based on the 95,000,000 Yen ‘base price’, rather than the full 100,000,000 Yen sale price.
What is the 60,000 Yen for?
The quoted brokerage fee of 3% + 60,000 Yen (plus tax) is an easier way to explain the real calculation for brokerage fees which is as follows:
The first 2,000,000 Yen = 5% + tax
2,000,000 – 4,000,000 Yen = 4% + tax
Over 4,000,000 Yen = 3% + tax
For example, the brokerage on a property purchased for 50,000,000 Yen is broken down as follows:
2,000,000 Yen x 5% (+8% tax) = 108,000 Yen
2,000,000 Yen x 4% (+8% tax) = 86,400 Yen
46,000,000 Yen x 3% (+8% tax) = 1,490,400 Yen
Total Brokerage = 1,684,800 Yen
This is the same as 50,000,000 x 3% + 60,000 Yen + Tax
When to pay:
Brokerage is is either paid in full to the real estate agent on the same day you sign the closing documents for the property, or half may be paid at the time of signing the purchase contract with the remainder paid upon settlement. If a client does not pay their agent, the agent may sue them for the brokerage fee.
How to avoid or negotiate agent fees:
When buying or selling a house or apartment, it is a little more difficult to find places offering no-agent fees. Negotiating on the brokerage fees is not customary and not all agencies are prepared to lower their agent fees. If you do intend to negotiate, please check with the agent at the very beginning and do not waste their time by viewing properties over several months before telling them you do not want to pay their fees.
There are a small selection of agencies that advertise reduced or zero agent fees, although their services are usually only offered in Japanese. These agents will usually be collecting an agent fee from the seller, or they may be the seller themselves.
But beware, while you may be saving money on agency fees, if the agent is representing the seller, or is the seller, they may not be working in your best interests and you may end up paying more for the property than if you had used a buyer’s agent who negotiated more strongly on your behalf. Also, the properties that they can show you may be limited to properties on their books, which means you have a smaller selection to choose from and can miss out on good deals.
Developers selling properties directly cannot charge buyers brokerage fees. If you use an intermediary agent, however, you may have to pay that agent a commission.
Buying a house or apartment is a big decision and a very expensive one, so you want to make sure you find the right agent who can help you find the right property – not necessarily the person offering the cheapest agency fees.