How much does it cost to terminate a lease agreement in Japan?

Are you going to enter into a lease agreement in Japan ? In that case, you should know necessary cost to terminate a lease agreement in Japan.

You will start an English language class in Japan and rent a small office space. The room area is 20 square meters (215.28 square feet).

 It may not be easy to find an suitable office space for you. At last you have found a suitable one. You are ready to sign a lease contract paper (Chintaishaku Keiyakusho=賃貸借契約書）.

When the landlord and real estate broker make a Lease Agreement paper, they have consulted with their familiar lawyer. So, the content of the Lease Agreement will be legal, enforceable once you agree with it.

So, what you can do is that at least you understand the content of Lease Agreement before you sign it.

Typical Lease Agreement in Japan

When you rent an office space in Japan, you need to pay a deposit (Hoshokin = 保証金).

If the amount of monthly rent is 99,000 yen (Including Consumption tax. In the case of residence, Consumption tax is not required), the amount of deposit may be 360,000 yen (99,000 yen * 4) or more.

If you fail to pay the monthly rental fee, the landlord will seize the 360,000 yen.

If you terminate the Lease Agreement and the landlord is willing to refund 360,000 yen to you, you can receive it within 2 months.

If you hope to terminate, Break the Lease Agreement, you need to inform the landlord three months in advance.

At the time you sign the Lease Agreement, you will use your personal name (though you hoped to use your company name). Otherwise, landlord will not rent it out to you.

Then, after you have paid monthly rental fee for several months, the landlord may allow you to change the name of the renter from you to your company.

In that time, landlord will charge you fee of 99,000 yen.

The rate of late payment charge is 14.6% per year.

You can not transfer, sell the right to lease = right to rent (賃借権）to other person.

Assumed that your company enters into a Lease Agreement (You are 100% shareholder of the company). Then you transfer 51% of your share to other person. 

Such transaction is included in transfer of the right to lease. So, it is a breach of Lease Agreement.

Then when you have breached Lease Agreement, landlord can terminate Lease Agreement and charge you 594,000 yen (99,000 * 6) as a penalty.

Restration to Original State (Genjo Kaifuku=原状回復)

In the case you break the Lease Agreement, you will leave the office space and return it to landlord. In that case, you need to restore the office space to original state, situation.

Then, when you return the office space to the landlord, he will request you to return the office space to original state.
(“”Original State”” = the state when you have started to using it)

The Lease Agreement stipulates that the landlord can use his familiar contractor to clean, repair the office space.

According to the Lease Agreement, you will need to accept the amount charged by the contractor.

If you can not accept it, you will try to collect evidence.

What you can do when you start your business in Japan ?

When you (as a renter) sign the Lease Agreement, you will read through the content of Lease Agreement carefully. 

And if you do not hope to take a such risk, you will choose other options. 

You may purchase an small office space in rural area or apply for shared office space (wework etc.).

On the other hand, you will become a landlord and find your tenant and use typical lease contract paper and use your familiar contractor.

By the way, when I terminated a Lease Agreement of office space （rental period is less than 10 months and room area is 20 square meters. I did not make a meal in it. So, I used it very cleanly. But I was charged 405,000 yen as by the contractor hired by the landlord) 

 If you hope to start a business without renting an office space in Japan, could you send me an email ? 

akiyama (a) japan-law-tax.com