JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada
fee (a multiple of the monthly rent) for each renewal of the lease term. 6.9 Payment of Maintenance and Repair The maintenance and repair costs of common areas are paid by the building owner, primarily from the mon - ey paid by tenants as common area fees. 6.10 Payment of Utilities and Telecommunications Utilities and telecommunications serving a property occupied by several tenants are paid for by the build - ing owner, primarily from the money paid by tenants as common area fees. 6.11 Payment of Property Taxes The real estate taxes relating to rental property are the fixed asset tax ( kotei shisan zei) and the city planning tax ( toshi keikaku zei ), which are imposed on and paid by the owners of the real estate under Japanese law. However, in practice, we have seen parties making separate arrangements for these taxes. For example, in the case of a triple net lease, the tenant, rather than the building owner, usually bears the property taxes indirectly. 6.12 Insurance Issues A tenant typically pays for insurance covering dam - age caused by accidents occurring in the real estate and by fire and, in some cases, earthquake and flood. Conventional business interruption insurance did not cover rent payments or other costs in the event of business interruption due to the COVID-19 pandemic, but since the outbreak of COVID-19, a new type of insurance has emerged that covers damages result - ing from business interruption caused by pandemics. 6.13 Restrictions on the Use of Real Estate There may be contractual restrictions on how a tenant uses the real estate, restrictions on the use of com - mon areas and prohibitions on the handling of hazard - ous materials or explosives. 6.14 Tenant’s Ability to Alter and Improve Real Estate The extent to which, and the conditions under which, the tenant is permitted to alter or improve the real
estate are entirely up to the agreement between the lessor and the tenant. 6.15 Specific Regulations In principle, there are no specific regulations or laws that apply to leases of particular categories of real estate. 6.16 Effect of the Tenant’s Insolvency In the case of a bankruptcy procedure ( hasan tetsu- zuki ) or a corporate reorganisation procedure ( kaisha kousei tetsuzuki ), a bankruptcy trustee, or a debtor- in-possession in the case of a civil rehabilitation pro - cedure ( minji saisei tetsuzuki ), has a statutory right to determine whether to terminate the lease agreement or to continue the lease by performing its obligations. If the bankruptcy trustee of the tenant or the tenant as debtor-in-possession opts for the termination of the lease, the treatment of the unpaid rents depends on when the due date arose. Unpaid rents accruing before the commencement of the relevant insolvency procedure are treated, in principle, as general insol - vency claims and are therefore subject to the insol - vency procedure and subordinated to preferential claims, while rents that become due after the com - mencement of the insolvency procedure are paid from the insolvency estate in preference to other general insolvency claims and are not subject to the insol - vency procedure. If continuation of the lease is chosen instead, unpaid rents accruing before the commencement of the rel - evant insolvency procedure will be treated as general insolvency claims, although there is a different aca - demic view that treats these unpaid rents as prefer - ential claims. Furthermore, if the lease is continued, the rents that are due on or after the commencement of the relevant insolvency procedure are paid from the insolvency estate in preference to other general insolvency claims. In practice, lease agreements often provide for the lessor’s right to terminate the lease upon the com - mencement of an insolvency procedure on the part of the tenant. However, there are a few legal precedents that reject these contractual provisions and as such, their validity remains contested.
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