Landlords: Should you choose a fixed-term or ordinary rental lease?
If you are planning to purchase an investment property in Japan, it is important to understand the key differences between the two types of rental leases available so that you can choose the one that best meets your requirements.
There are typically two types of rental agreements in Japan - fixed-term and ordinary. A fixed-term lease requires the tenant to vacate the property at the end of the rental term, while an ordinary lease can be renewed by the tenant indefinitely. Ordinary leases tend to be more in favour of the tenant, while fixed-term leases are more in favour of the landlord.
If you are planning to sell your property in a few years, or move into it yourself, a fixed-term lease ensures that your property will be vacant when you need it to be.
Although the fixed-term lease system has been around since 2000, it is not widely used. A survey by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) in 2014 found that just 3.2% of lease agreements had fixed-terms. A search on rental listing site Chintai.net shows that approximately 3.6% of rental listings in Tokyo’s 23 wards are for fixed-term leases. In Minato ward, the figure is higher with 7.9% of listings for fixed-term leases.
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