Tips to minimize lawyer fee in JP real estate investment deals

One of the difficulties for non-Japanese investors who are about to tap Japan market is appointing the right and capable lawyer. Actually, from my point of view, finding and instructing lawyers in Japan is the threshold to separate winners from losers in terms of investment projects.

Furthermore, legal fee occupies the large amount of the deal cost and inappropriate lawyer causes you to pay for the huge amount of waste. Therefore, in this article, I would like to introduce six solutions to reduce the legal cost while maintaining the professionality of legal part. Each one has its own pros and cons and I would like to share my opinions with you for you to develop your own approach of how to reduce the legal cost.

 

１. Gyosei-shoshi Lawyer

Who are Gyosei-shoshi?

In Japan, there are several certifications of lawyers and Gyosei-shoshi is one of them. Their specialized area are preparation and submission of official application documents such as construction permission, obtaining business licenses and establishing legal entity. For instance, establishing legal entity would cost 1,000 to 2,000 USD, depending on the case.

Pros?

1)Cost efficiency: Obviously, it’s far cheap than appointing global lawyers.

2)Speed, Quick and fast process, established relation with public authorities

3)Strength in specific areas such as building/development permission application and business license application

Cons?

1)Limited coverage: labor administrative issues, successions, and detailed real estate contracts are out of their scope.

2)Low quality of communication skills: especially for overseas client, say, only one out of ten can speak “acceptable” English.

3)Spot support: as their scope is limited, for large scale of investment, non-stop service covering pre-acquisition to disposal phase can not be expected to Gyosei Shoshi lawyers.

How to use?: Combination with lawyers. Some Gyosei-shoshi lawyers are quite knowledgeable and well-experienced, so pre-discussion on legal agreements can be done with Gyosei-shoshi and quasi completed draft can be developed with him/her. Lawyer can review that draft before signing off. This allows you to reduce the cost.

2. Global Consutant

Who are global consultants?

Among many consultants, those who have enough international experiences may be the candidates of that kind of consultant for the first investors to Japan. After Lehman brothers’ clash in 2008, real estate players got independent, self-employed consultants. Through “linked in” or major headhunters should have the list.

 

Pros?

• Flexibility: compared with lawyers, consultant service area is more flexible. For instance, assuming a residential development project, assembling, planning, community consent, building permission, construction management, leasing and value-ups, clients can flexibly ask their opinion. On the other hand, lawyers specialized area seems to be rather narrowed down, eg, structuring after completion or community consent.
• Cost efficiency: investors can appoint consultants by monthly fee or project base analysis and support. In any case, instructing consultancy would be less costly than appointing lawyers for all the process.

 

Cons?

• Continuity Risk: all the information and driving initiative may be concentrated on that consultancy whom clients appoint. Thus, under the contingency, clients may lose control or have difficulty in management of players collaboration.
• Spot service: majority of consultancy has their own parts to be specialized and one-stop full service would be hard to expect.

3. Temporal Internal Lawyers

Who are temporal lawyers?

Lawyers who can work flexibly to commit client’s workload while belonging to a law farm. Since the legal regulation change in 1990, the number of lawyers has been increasing and more competition has appeared. More variety in lawyers’ background has been seen and more customized contracts can be arranged.

Pros?

• Professionality: highly professional skills and knowledge can be delivered to clients.
• Efficiency: in a limited time flame, clients can complete the project.

Cons:

• Cost: to retain a lawyer in house may be a little bit costly.
• Communication restriction: many of available lawyers are not good at communication in English and therefore, proper interpreter or other consultant’s involvement should be considered.
• PI: A few lawyers purchase so called professional indemnity insurance which are required under global standards.

4. Overseas Resources

Who are temporary lawyers?

Women who have experience in legal area but living in other countries after their marriage, or former diplomats who are living in overseas countries can speak English, know well Japanese market practice and provide supports to international clients.

 

Pros?

• Cost: due to the little administrative cost, they can provide their business at reasonable cost
• Flexible communication: they are good at business communication in English and make clients comfortable in business discussion.

Cons?

• Limited on-site support: negotiation with local authority, other local players, communities, they can’t provide on site support.
• Outdated market practice: the longer they live in other countries, the less they got familiar with JP market practice.
• Less possibility of long term support: for the large size project, requiring long term, providing remote service looks difficult although the new normal changes our work environment.

5. JP lawyers via Zoom & Chromn translation

This looks similar to No. 3, and with zoom interaction and Google translation provided by Chromn more and more lawyers can provide their service, creating a market competition and client would be able to have a satisfactory service within the their budget.

Pros?

• Flexibility: you may expect “anytime anything” type service
• Cost & effect optimization: via combination of several professional works, clients can realize the best design of professional services.

Cons?

• Low translation quality: Google translation has improved but not yet in the highly professional areas.
• Arrangement skill required: arranger who know well the available resources or some system by which we can build up the best combination of professionals like matching application or platform would be needed for investor to select the best ones.

6.Retired/ female compliance officers

Who are they? Compliance officers or legal professionals who used to work for international companies but have some blank due to leave or retirement are interested in getting involved in actual deals.

Pros?

• Cost: their retaining fee may not be high, the budget of the initial investment can be lower than expected
• Relatively high quality: they have relevant experiences and are well connected in the industry.

Cons ?

• Rehabilitation needed: given the blank, some warming up may be needed.
• Commitment restriction: due to some health issue or work-life balance, their full-commitment towards legal assignment may not be expected.
• Communication restriction: compliance or legal department is considered as middle-back office and their communication skills in English sometimes are not excellent.

 

Recommendations

Under the initial market entrance stage, the combination of adoption of one of above one to three would efficiently reduce the project cost. Under new normal, more options from four to six may worth considering. As the investment stage grows, clients can switch to professional lawyers spot use, so that they can manage the cost most efficient way.

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