Q: Jane, who is planning to establish her own company, has found an office space in Tokyo. The lease agreement for the office given by the real estate agent says the lease period will be two years. Jane asked the real estate agent to make the lease period longer, but the realtor said, ''Don't worry. In Japan, you can use the office as long as you like, regardless of what is written in the contract." Is this true?

A: That is basically correct. I would say that Jane should feel safe in accepting the two-year contract

Q: Could you be more specific about how tenants are protected in this country?

A: Under the Land Lease and louse House Lease Law, the landlord of a house - for both residential and business use - must show a justifiable reason when he or she refuses to renew the lease. The conditions applied by the courts to determine a justifiable reason are stringent and the landlord's desire to use the house for his or. her residential purposes alone would not usually satisfy the conditions. The court would often order the landlord to pay a substantial amount of money to the tenant to supplement the justifiable reason.
Q: I understand. But separate from her business lease agreement, Jane seems to have a problem with her housing lease. She rented a small room for her residence in the suburbs of Tokyo a few years ago. She recently received a letter from the real estate agent representing the owner of the room. A new agreement for the room was enclosed.
The old lease agreement for the room is to expire in a couple of months. She remembers that, at the time of the last renewal of the lease two years ago, she only signed a piece of paper saying that the previous lease would be extended under the same conditions and did not sign a new lease agreement. The enclosed agreement she just received is written in Japanese and is a teiki shakka (fixed--period housing) agreement. Should she sign this agreement?
A: No, she should not.
Q: What's wrong with the contract?
A: As I mentioned earlier, the Land Lease and House Lease Law protects the tenant. Such protection was needed and welcomed by tenants, who had difficulties finding houses for rent during a time of bad housing conditions, especially in the metropolitan areas. From the standpoint of landlords, the system means that once they lease their properties, it would be practically impossible to have their tenants leave their properties even after their lease expires. Therefore, the system has naturally discouraged prospective landlords from building houses and apartments for rental purposes. This has created a shortage in the supply of rental properties.
In order to overcome this situation, a new law amending the Land Lease and House Lease Law was enacted and came into effect March 1, 2000. Separate from the conventional house lease requiring justifiable reason to terminate, a fixed-period house-lease system has been introduced.
Q: How does the system work?
A: Under this fixed-period lease, the landlord and tenant will agree upon a certain lease period and the tenant must unconditionally vacate the house upon expiration of the lease. It is not necessary for the landlord to show any justifiable reason for nonrenewal of the lease. But the landlord must give six months notice prior to the expiration of the lease. The fixed-period lease system does not affect house-lease agreements that took effect before March 1, 2000. Even if an old lease agreement expires after March 1, 2000, a justifiable reason is required in order not to renew such agreement.
Q: What happens if Jane should sign the fixed-period house lease agreement instead of renewing the old lease agreement.
A: The law amending the Land Lease and House Lease Law explicitly provides that in the case of a residential house, for the time being, the parties may not agree upon a fixed-period lease to replace a conventional house lease. The purpose is to protect the tenants who unintentionally give up their vested rights under the conventional lease, Please note that the above exception does not apply to lease of a house for business purposes.
The author, Jun Norisugi, is a practicing lawyer at Norisugi & Associates and specializes in international business affairs.
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