For foreigners to lease the real estate from Japanese owners

Sometimes for foreigners to lease up a good properties in Japan, we have to consider the following potential issue .

the followings are the options to be considered.

1 Security Deposit

First option that I come up with is submitting sufficient security deposit. Say, almost equal to the rent for the leasing period, say 12 months or even 24 months, depending on the property size, type and location. This would reduce owners’ concern in leasing to non-Japanese. It is worth trying to push the owner representative to discuss this condition with the owner.

2  Individual or institutional additional guarantor

In any lease, generally speaking the guarantor is required. To make the owner feel more comfortable, additional guarantor, individual or institutional, may be added to convince the owner that this leasing contract is no harm for them.

3  Prepare the premium

Some owner may consider this kind of torelant treatment can be converted into a sort of risk management cost, which implies a sort of risk premium. Some premium rental value has to be paid by the tenant.

4  Better conditions

Not only the premium but also proposing some favorable conditions like longer lease term, automatic rent increase option, or the tenant can pay the property tax on behalf of the owner, sort of quasi triple net condition might be able to provide some incentives to the owner.

There are various types of owners, even though the current generation are reluctant, the next generation-children-would feel comfortable when their future cash flow is secured. Next generation seems to be more flexible in doing business with non-Japanese counterpart.

5 Master Lease

Another solution is arranging the master lease. Foreigners can invite a master lessee for this lease transaction. Some real estate companies or brokers may be interested in doing this kind of business. There are several real estate companies in Japan whose sponsors are non-Japanese or second or third generation of immigrants. We feel that those companies are interested in taking the master lessor position depending on the property size/ base rent. First the maser lessee can be found among the network of the non-Japanese company, who wishes to lease up and if there is no candidate, this can be expanded into more professional network.

To sum up the approaches to be taken are as follows:

For each option, non-Japanese may follow Japanese traditional market practice, say respect owners, bringing small gift for the first meeting, etc. I do hope this may work to make them feel mor comfortable.

Further queries or doubts, please email to ytomizuka@abrilsjp.com

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