Ever noticed a sign like this placed on a vacant block of land? It’s there for a reason, and something a buyer would want to be extremely aware of.
Let’s say you own a house on leasehold land, but you are unable to register your leasehold rights on the land title (maybe the landowner won’t cooperate, and they are not legally required to). Buildings and land each have their own registration. Your registered ownership of the house would serve as proof of also having the leasehold rights to the land. But if your house is demolished, or even lost to fire, and de-registered, you would lose that proof. If a 3rd party purchased the land, you would lose your legal claim to the leasehold.
To prevent this from happening, the homeowner must put up a sign on the land in an easily visible location that indicates the date the building was destroyed, and the intent to rebuild. This gives them a 2-year window of protection under the Act on Land and Building Leases.
This could all be prevented if the leasehold right was registered on the land title, but the leasehold law does not require the landowner to cooperate with registration.
What if you are looking to buy land and want to make sure it has no leaseholders?
If you are looking to buy land and want to make sure it is free from any leasehold rights, just looking at the land registration documents may not be enough. Some leasehold rights do not have to be registered on the land register in order to be enforced. That’s why it is equally important to check the registration on any buildings on the land to see if the names match the landowner. It is also just as important to visit the land in person to check for any existing buildings and to make sure there are no signs posted like the one above.
There are investors who do purchase land that is leased out. This is called soko-chi (底地). It’s a lot cheaper than land without any encumbrances. The landowner would collect rent charged to the user of the land.
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