JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada
The rent and other terms of a general lease are oth - erwise freely negotiable and not regulated or subject
negotiate an increase or decrease in the rent for the next three to five years. Aside from a contractual rent review, the Land Lease and Building Lease Law entitles either party to a lease to demand that the rent be increased or decreased in response to market conditions. If the parties cannot come to an agreement, a court may order an adjust - ment after considering the following: • any change in tax or other liabilities imposed on the leased real estate (or the underlying land in the case of a building lease); • the value of the leased real estate (or the underly - ing land in the case of a building lease) and other relevant economic conditions; and • rents in neighbouring areas. If the lessor and tenant specifically agree not to increase the rent for a certain period, the lessor can - not exercise its right to demand an increase in the rent but, with respect to a land lease and a general building lease, the tenant cannot be deprived of the right to demand a decrease in the rent, even if it has explicitly agreed not to exercise that right under the lease. However, a different rule applies to a fixed-term build - ing lease, under which the lessor and the tenant may exclude the application of the rule on rent adjustment by setting out express provisions on rent revisions. 6.6 Determination of New Rent Please see 6.5 Rent Variation . 6.7 Payment of VAT Consumption tax (equivalent to VAT) is payable on rent from building leases other than residential leases. The rent on land leases is exempt from consumption tax. 6.8 Costs Payable by a Tenant at the Start of a Lease Typical costs payable by a tenant at the start of a lease include a deposit (often calculated as a multiple of the monthly rent, depending on the type of lease and the real estate), brokerage fees, insurance premiums and other expenses, such as key replacement. In addition, it is market practice for the tenant to pay a renewal
to a voluntary code. Fixed Term Lease
The tenant may be deprived of protections and rights under a land lease, in which the land tenant has the right to request that the landlord purchase the build - ing upon termination of the land lease, and the lessor must have a justifiable reason to refuse a renewal of the lease. The tenant may also be deprived of the right to demand that the rent be decreased in response to market conditions and the right not to be deprived of the right to demand a decrease in the rent even if they explicitly agree not to exercise that right and the right to require the lessor to have a justifiable reason The initial term of a land lease for owning a building is required by law to be at least 30 years and typically ranges from 30 to 50 years, except for a “Category 3 fixed term land lease”. Building leases are typically for a much shorter term. Office space leases are often for a short term (most commonly two to five years), while building leases for retail or commercial facilities tend to be longer, for ten to 20 years. to refuse a renewal of the lease. 6.4 Typical Terms of a Lease The maintenance and repair of the premises actu - ally occupied by the tenant are typically the tenant’s responsibility. However, if certain renovation works are required by the tenant before it can start using the premises, the allocation of the responsibility and the cost for these works is negotiated before entering into the lease agreement. The monthly payment is the most common payment term. 6.5 Rent Variation Lease agreements usually schedule a regular rent review, which is conducted every three to five years in many cases. During a rent review, the parties will
372 CHAMBERS.COM
Powered by FlippingBook