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Introduction:

• The basic information about real estate transactions in Japan, from the legal aspects to practical matters, is explained in this book. The rules regarding real estate transactions in Japan have unique aspects that differ from other countries. With this book, even general readers who are not legal professionals can easily get an overview of the key legal and practical issues related to real estate transactions in Japan.
• It is a useful handbook for a variety of readers, including those looking to buy a residence in Japan for the purpose of owning a second house or relocating, companies considering establishing a business base in Japan, and consulting firms or agents that introduce Japanese real estate to foreigners.
• The authors are lawyers who have been engaged in legal practice related to real estate transactions in Japan for over a decade and operate the website “Legal Advise Japan”, providing legal services to clients outside of Japan.

Chapter 1 Introduction

Chapter 2 Legal System for Real Estate in Japan

A. General Flow of Purchasing Real Estate in Japan

1. Seller’s Request to Real Estate Agent
2. Property Search by Buyer
3. Purchase Offer by the Buyer
4. Communication of Intention to Sell from Seller
5. Conclusion of Sales Agreement and Important Matters Explanation
6. Payment of Price and Title Registration
7. Payment of Compensation to Real Estate Agent

Chapter 4  The Parties Involved in Real Estate Transactions

A. Introduction
B. Seller

1. Owner of Real Estate
2. Co-owners of Real Estate
3. Owner of a Building on Leased Land
4. Trust Beneficiary
5. Person Without Rights to the Real Estate
6. Seller Qualifications

a. Principle
b. Real Estate Sales as a Business
c. Corporations

C. Buyer

1. Principle
2. Individuals or Corporations with Foreign Nationality
3. Multiple Buyers

D. Representatives of the Seller and/or Buyer
E. Landowner
F. Lessee of the Land or Building
G. Real Estate Agent

1. The Role of Real Estate Agents in Japanese Real Estate Transactions
2. Licensing System
3. Real Estate Consulting Firms Without a License
4. Characteristics
5. Precautions

H. Judicial Scriveners
I. Lawyers
J. Surveyor
K. Tax Accountant

Chapter 5  Identification of the Real Estate Subject to the Transaction

A. Land

1. Address of the Land
2. Area of the Land
3. Boundaries of the Land

a. Obligation to Clarify Land Boundaries
b. Types of Land Boundaries
c. Methods of Clarifying Land Boundaries
d. Confirmation of Boundaries with Public Land
e. Encroachment
f. Disputes Regarding Boundaries
g. Procedures for Resolving Boundary Disputes

B. Buildings

1. Identification of Buildings
2. Types of Buildings

Chapter 6  Real Estate Sales Agreement

A. Real Estate Sales Agreement in Japan
B. What is a Sales Agreement?
C. When and How a Sales Agreement Formed
D. Problems with Discontinuing Agreement Negotiations
E. Documents Made with Agreement

1. Written Sales Agreement
2. Written Offer / Offer Certificate and Acceptance Letter
3. Important Matters Explanation Document

a. What is an Important Matters Explanation Document?
b. Obligation to deliver an important matters explanation document
c. Contents of Important Matters Explanation Document
d. How to Verify the Contents
e. Property Condition Report

Chapter 7  Payment of Sales Price

A. Timing and Method of Sales Price Payment

1. Timing of Sales Price Payment
2. Payment Methods for Sales Price

a. General Payment Methods
b. Points of Attention When Foreign Individuals or Corporations are Involved in Transactions

B. Earnest Money, etc.

1. Types of Earnest Money

a. Earnest Money as a Means to Cancel the Sales Agreement
b. Earnest Money Serving as a Predetermined Amount for Damages
c. Earnest Money as Additional Claim Beyond Ordinary Damages
d. Earnest Money Solely as Evidence of Sales Agreement Formation

2. Upper Limit of the Earnest Money Amount
3. Period for Termination by Earnest Money
4. Application of the Earnest Money to the Sales Price
5. Intent Money

C. Purchase Funds & Finance

Chapter 8  Transfer of Real Estate Ownership

A. Issues Related to Transfer of Ownership
B. Time of Transfer of Ownership
C. Delivery
D. Considerations for Real Estate with Security Interests
E. Title Registration Procedure
F. Method of Title Registration
G. Who Bears the Cost of Title Registration Procedure
H. Loss or Damage, Burden of Risk

1. What is Loss or Damage?
2. Liability in Case of Loss or Damage of Real Estate Before Delivery

Chapter 9  Seller’s Responsibilities

A. Overview of Seller’s Responsibilities
B. Duty to Explain the Real Estate to be Sold

1. Seller’s Explanation Duty
2. Specific Examples of The Seller’s Explanation Duty
3. Absence of Duty to Investigate

C. Liability for Non-Conformity (Defects) of the Property

1. Non-Conformity to the Contract (Defects)
2. Content of the Seller’s Liability for Non-Conformity to the Contract (Defects)
3. Period of the Seller’s Liability for Non-Conformity to the Contract (Defects)
4. Exceptions Where the Seller’s Liability cannot be Mitigated

Chapter 10  Responsibility of Real Estate Agents

A. Duty of Good Faith
B. Duty to Explain
C. Liability for Nonconformity to Contract

Chapter 11  Contract Breach

A. Enforcement of Contractual Obligations
B. Cancellation of the Sales Agreement
C. Damages

1. Right to Claim Damages
2. Liquidated Damages

a. Types of Liquidated Damages
b. Conditions for Claiming Liquidated Damages

Chapter 12  Taxes

A. Introduction
B. Taxes Related to Sales Procedures

1. Stamp Tax
2. Registration and License Tax
3. Consumption Tax

C. Taxes Incurred When Profit Arises from a Sale
D. Real Estate Acquisition Tax
E. Withholding Tax for Real Estate Acquisitions from Non-Residents or Foreign Corporations
F. Taxes Arising from Owning Real Estate

1. Fixed Assets Tax
2. City Planning Tax

Chapter 13  Other Contractual Terms and Special Provisions

A. Governing Law and Jurisdiction

1. Governing Law
2. Jurisdictional Court

B. Provisions for the Exclusion of Antisocial Forces
C. Financing Special Provisions
D. Other Special Provisions

Chapter 14  Termination of Contract

A. Reasons for Termination of Contract
B. Consensual Cancellation
C. Cancellation Before Maturity

Chapter 15  Disputes Related to Sales Agreements

A. Introduction
B. Unfair Termination of Contract Negotiations
C. Cancellation by Earnest Money
D. Seller’s Refusal to Deliver
E. Non-Payment of Purchase Price by the Buyer
F. Non-Conformity (Defects) of the Real Estate
G. Violation of Disclosure Obligations by the Seller or Real Estate Agent
H. Other Disputes Related to Sales Agreements

1. Fraudulent Sales Practices
2. Right of Way
3. Boundary Disputes
4. Consent Request for the Transfer of Buildings on Leased Land

Chapter 16  Template for Real Estate Sales Agreement

A. Template for Land Sales Agreement
B. Template for Land and Buildings Sales Agreement
C. Template for Building on Leased Land Sales Agreement

Chapter 17  Summary of the Important Matters Explanation Document

A. Introduction
B. Overview of the Important Matters Explanation (Buying and Selling / Exchange Transactions)

1. Example Format of the Overview Document for Important Matters Explanation
2. Simple English Translation

C. Overview of the Important Matters Explanation (Buying and Selling / Exchange Transactions of Sectional Ownership Buildings)

1. Example Format of the Overview Document for Important Matters Explanation
2. Simple English Translation

D. Important Matters Explanation Document (Buying and Selling / Exchange Transactions)

1. Example Format of the Important Matters Explanation Document
2. Simple English Translation

E. Important Matters Explanation Document (Buying and Selling / Exchange Transactions of Sectional Ownership Buildings)

1. Example Format of the Important Matters Explanation Document
2. Simple English Translation

Appendix: Excerpts of Relevant Acts

A. Civil Code
B. Real Estate Brokerage Act
C. Act on Land and Building Leases
D. Act on the Promotion of Quality Assurance in Residential Housing
E. Consumer Contract Act

About the Authors