JAPAN Law and Practice Contributed by: Eriko Ozawa, Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
1. General 1.1 Main Sources of Law
have somewhat stalled due to the rising cost of materials and labour. Security token offerings, a new type of real estate fund, have also been increasing over the past few years and will attract more attention going forward. For more information on market trends, see our Chambers article Japan: An Introduction to Real Estate. 1.3 Proposals for Reform New legislation concerning real estate trans - actions for national security purposes became effective on 20 September 2022. The Act on Investigation and Regulation on Use of Prop - erties in the vicinity of Significant Facilities and Border Remote Islands will authorise the Japa - nese government to: • designate Close Monitoring Areas and Enhanced Close Monitoring Areas; • investigate persons using the properties located within such areas and the use of such properties; and • issue recommendations and orders to take remedial measures if such persons are found to be disturbing the functions of Significant Facilities, such as defence facilities and sensitive infrastructure, and Border Remote Islands, or if there is an evident threat that such persons will do so. In addition, parties to a real estate purchase agreement will be required to submit a notice of certain prescribed matters (eg, identity of the parties and purpose of use) prior to the execu - tion of the agreement if the real estate is located within the Enhanced Close Monitoring Area.
The Civil Code provides the general legal frame - work for real property and real estate transac - tions, including ownership, co-ownership, superficies, easement and security interests, and for sale and purchase and leasing transac - tions. In addition to the Civil Code, the Law on Unit Ownership of Buildings governs unit ownership ( kubun shoyu ken ) and the relationship among the unit owners of a multi-unit building, while the Land Lease and Building Lease Law applies to leases of buildings and leasehold interests or superficies in land for the purposes of owning a building on a parcel of land. Since this law was enacted to enhance protection of the tenant’s interest, some provisions are mandatory and cannot be circumvented by the parties to a land lease or building lease. Also, there are court rul - ings relating to land leases and building leases which have established legal doctrines that gen - erally restrict the lessor’s rights and protect the tenants. 1.2 Main Market Trends and Deals The Japanese real estate market has been active of late, especially attracting attention from abroad due to low interest rates and the depre - ciation of the yen. In 2023, there have been sev - eral large-scale transactions where hotel assets were sold to foreign real estate funds, indicating the strong appetite of foreign funds for Japa - nese hotels and the recent trend of traditional Japanese companies turning to asset-light strat - egies. Another trend is rising inflation stimulat - ing investments in inflation-resistant real estate, such as residential, hotel, and retail properties. In contrast, new large-scare development projects
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