The real estate trade can be stressful in any country.
The financial commitment is substantially large, the regulations and laws are complex
and the market risk is high. Average Japanese people share the same concern.
Another problem is a large part of consumers’ assumption that all estate agents, letting agents and
landlords are all regulated. In Japan, all the agents who actually arrange the real estate transactions
(including rental contract) must be licensed.
Engaging in the marketing activity to lure the investors without holding a license is against the
Building Lots and Buildings Transaction Business Law. If your consultant or agent do not hold
the license, your contract is not completely protected by the said law.
It would be treated more under civil law. But if your broker is licensed, they are regulated by the government
and thus your contract is eligible for more protection under the conditions set forth by the said law.
Nonetheless, there are some rogue agents or consultants who are not licensed in Japan.
For example, such rogue agents put up advertisements for properties on which they have not been
instructed to promote in an attempt to get a cut of the fees.
Choosing a property, whether it’s to buy or rent, is a huge financial commitment
and can be overwhelming, especially for first-timers and foreigners.
We almost always go with the agent attached to a property if we’re buying
It’s important to at least ask the question.
Before you sign the agents contract, please do not forget to ask
if your agent is licensed or not, which will give you peace of mind that you are protected by the law.
Ministry of Land, Infrastructure, Transport and Tourism（MLIT) is conducting the survey
regularly asking more than 1500 Japanese consumers about the real estate transactions.
The latest survey in 2017 shows that only 75% of consumers do feel
difficulty or anxiousness.
The majority of people do feel some sort of concern.
Reasons why “difficult” or “anxious” about real estate transactions are:
“It is difficult to judge the adequacy of real estate prices”: 44%
“It is hard to understand the flow of real estate transaction” : 40%
“Whether quality of real estate is good or bad” : 34%
“The contract is complicated” : 27%
“There are a lot of real estate agents and it is hard to select a good one : 26.0%
Unfortunately even if they are licensed, there are some shady agents.
I illustrated some issues you may encounter when dealing with real estate in Japan.
-Brokerage fee
(Q)
I was told by the real estate company that brokerage fee
shall be determined by law to be “sales price x 3% + 60,000 yen + consumption tax”. Is this correct ?
(A)
Brokerage commission is strictly regulated by the law
The law only stipulates the maximum rate the broker is allowed to charge.
In the case of a contract with a value pf the real estate exceeding 4 million yen, the calculation method will be
“value of the real “estate(trade price) × 3% + 60,000 yen + consumption tax” .
However, this is the upper limit for each deal, and in practice, the brokerage fee can be decided by agreement between the real estate company and the client within this upper limit.
The description of the real estate company “It is decided by law” is clearly erroneous.
Most actual transactions are based on the maximum rate but
the consumers always have room to negotiate.
-Cancellation of the contract
(Q)
I was charged a brokerage fee despite the canceling of my contract.
We have signed the sales contract for second home purchase but we found other property, we let go t
he down payment and canceled the contract. Nevertheless I was charged a brokerage fee.
(A)
If the contract is canceled due to the circumstances of the seller or the buyer, the real estate company can os legally allowed to charge brokerage
fee.
Since the purpose of the brokerage business is “to establish a contract”, even if the contract is canceled, if it is canceled by “the reason of the seller or the buyer”, it is considered that the real estate company can claim the fee.
In addition, the industry wide standard contract clause of the intermediation contract also stipulates that “when a contract is established, brokers can claim compensation.” Therefore, for example, when canceling due to reasons such as buying another property, a brokerage fee shall be charged.
According to the industry wide standard clause, it is stipulated that if the contract is canceled due to the failure of the securing the loan, the real estate company cannot claim compensation.
Therefore you must check the special clause of ‘loan’ in the contract to make sure such loan cancelling allowance is stipulated or not.
-Security of down payment
(Q)
After paying the down payment to the real estate company,
the real estate company went bankrupt.
We signed a sales contract with the seller’s agents for a condominium and paid down payment to the buyer’s agent.
The real estate company went bankrupt before delivery of the property.
Can we recoup the down payment ?
(A)
If you retain the written guarantee, the down payment could be recouped.
Building Lots and Buildings Transaction Business Act impose the obligation for the real estate company that is the seller to take preservative measures when receiving a down payment for certain amount of money.
Such measures will be a guarantee by the official guarantee company
or insurance.If such preservative measures are taken, even if you cannot receive the delivery of the property due to bankruptcy, you can have the down payment returned entirely by the guarantee company.
If it is preserved, a warranty certificate, insurance policy must be delivered from the real estate company to the buyer. If the warranty certificate cannot be obtained despite paying a down payment, the buyer can refuse to pay the down payment.
If the down payment exceeds the following amount, the real estate agents must legally take the action for the preservative measures.
Unfinished property: amount exceeding 5% or 10 million yen of the property value
Finished property : amount exceeds 10% or 10 million yen of the property value
-Delay of the delivery
(Q)
Delivery period of newly built houses slipped for 3 months.
I contracted a detached house for orders, but I received a message saying that delivery will be delayed for 3 months due to mistakes in material ordering. How should we respond?
(A)
You can request the contractor for delayed damages, such as rent generated by delays in delivery.
As in this case, the contractor is responsible if the contractor has the cause of delays in delivery. You can claim to the contractor according to the contents of “Delayed Damage in the case of Delayed Delivery” stipulated in the contract.
The rule of thumb for success is choosing a licensed and reputable agent.
Toshihiko Yamamoto
Real estate investing consultant and author.
Toshihiko is currently writing a book about the real estate investing in Japan
for foreign investors.
Founder of Yamamoto Property Advisory in Tokyo.
International property Investment consultant and licensed
real estate broker (Japan).
He serves the foreign companies and individuals to buy and sell
the real estates in Japan as well as own homes.
He holds a Bachelor’s degree in Economics from
Osaka Prefecture University in Japan
and a MBA from Bond University in Australia